While there are 17 control states where liquor sales are state-run, in most of the country, savvy entrepreneurs can open their own liquor stores. With the right operations strategies, owning a liquor store can be a profitable and rewarding business. In this post, we’ll take a closer look at the advantages of liquor store ownership, what you can expect to earn, and how to be successful.
Are Liquor Stores Profitable?
Ultimately, profitability depends on a lot of factors. Suppliers, customers, inventory, overhead costs, and other variables can either eat away at or improve your profits, but in general, liquor stores are profitable. As you think about different ways to mold your business model, keep in mind that high-end items provide the highest profit margin while more affordable products have lower profit margins.
According to one study that took a deep dive into liquor store ownership and operations, a successful shop should expect to net between 15% and 20% in annual profits. Stores that deal in a higher volume of products, such as warehouse and discount stores, will experience significantly smaller profit margins.
Why Liquor Store Ownership is Profitable
1. Recession-Proof
Alcohol is one of those few products that is considered inelastic, meaning that demand remains high no matter how the economy is doing. In fact, demand increases during economic downturns as people try to find ways to relax and reduce stress. Even when times are tough, liquor store ownership will provide a stable bottom line.
2. Year-Round Demand
Nearly every holiday and special event is celebrated with food and drinks. Whether it is the Fourth of July or New Year’s, there will always be a demand for alcohol. The popularity of certain products, such as spiked eggnog, will vary with the seasons, but overall sales will stay steady year-round.
3. Stable Inventory for Storage
Grocery stores and even restaurants have to use or sell their inventory before it spoils. Liquor and wine, on the other hand, can be safely stored for an extended period of time. There may be instances where you need to make sure certain products are stored in the right climate-controlled conditions, but by and large, your inventory can sit on the shelf without having to worry about waste.
Shelf stability also allows liquor retailers to plan ahead and keep large quantities of products on hand. For instance, you can stock up on popular winter products during the summer when you might have more of a surplus of cash. For example, peppermint schnapps can sit in storage all year and will be ready to sell for the holidays without affecting the taste or quality of the product.
4. Free Advertising
Beer, wine and spirits producers are already spending millions on advertising campaigns to bring attention to their products and generate sales. Meanwhile, liquor store owners can reap the benefits of these pre-existing ads campaigns without spending a dime. Best of all, if a customer enters your store as the result of a liquor ad, but decides they prefer one vodka brand over another, you still have the opportunity to sell them a bottle of their choice. All you have to do is make sure that people know about your store. This may be as easy as creating a website and social media presence. Just be sure to research any regulations in your state before you post online.
5. Low Competition
The 21st Amendment gives each state the power to regulate the distribution, importation and sale of alcohol in their jurisdiction. While every state handles this differently, it is common for states to limit the number of liquor stores per region. For consumers, this limits their access to alcohol, but for store owners, it means less competition in your area. Applying for and acquiring a liquor license is difficult, but once you have a green light to sell alcohol, you won’t have to worry about a lot of competition moving into your territory.
How Much Can a Liquor Store Owner Make?
As you might imagine, store earnings will vary depending on location. Stores located in a less populated area or state can expect to make around $70,000 per year. In more high-traffic areas, stores will make an average of between $100,000 and $150,000. That means that store owners in the U.S. will earn between $20,000 and $50,000 annually.
How Much Does it Cost to Open a Liquor Store?
One advantage of liquor store ownership is that there is an established business model to follow. However, there are still startup costs involved. Perhaps the biggest hurdle is acquiring a liquor license. State regulators don’t make it easy or cheap to obtain a license, so be prepared to jump through some hoops. For instance, the liquor license will be tied to the retail location, which means that you need to have a storefront before you get your license. This is different from other types of businesses that are able to secure the necessary licenses before investing in property. For this reason, some people choose to buy an existing liquor store business rather than building one from the ground up.
When all told, it will cost a minimum of $50,000 to $100,000 to open a liquor store. Here are a few of the major costs you will need to cover as a part of liquor store ownership:
- Inventory: Stocking shelves with a solid selection of beer, wine, and liquor can cost around $35,000.
- Renovations: Keep in mind that any retail space you find will require certain preparation. Even just adding shelving to store and display inventory can be costly and run upwards of $20,000.
- Insurance: From liability to worker’s compensation insurance, you can end up spending thousands to make sure you are properly covered.
Remember that these are just some of the major costs. There will be lots of other little expenses that will quickly add up over time.
Day-to-Day Store Operations
If you want to be a liquor store owner, be prepared to be on-call and hands-on. The business involves long hours, lots of cash exchange, and valuable inventory. It can be tempting to hand off a lot of the responsibilities to employees, but this can be a risky move. Your best bet is to be as involved in daily operations as possible and work to build trust with a select few before letting them handle important aspects of the business.
Tips for Running a Successful Liquor Store
Once you open your store and are able to get into a bit of a groove with daily operations, it is time to think about ways to maximize sales and profits. Here are a few tips to consider when trying to make your store a true success.
1. Stay on top of trends.
This means listening to your customers, maintaining good relationships with suppliers, and anticipating what products will be in demand.
2. Host informative events and tastings
People love to learn about fun concepts like creative flavor combinations or how spirits are produced. Hosting a liquor sampling event is a great way to get customers through the doors and market your business. You can also run promotions in conjunction with these events to increase sales.
3. Provide a selection of impulse buy products
These products can include store merchandise, party supplies, non-alcoholic beverages and mixers, bar materials and tools, and much more. Placing these items near the registers is an easy way to move products with a high-profit margin and improve your bottom line.
4. Create loyalty clubs
Liquor enthusiasts will be more than happy to sign up for customer loyalty clubs. Just make sure to remove any barriers to joining and make it easy for customers to sign up both in-store and online.
5. Include unique items in your inventory
Set yourself apart from the competition by offering unique products so that customers can discover new brands and flavors. Start by asking suppliers about some of their lesser-known items and order a small batch. If things go well, you can order in bulk.
6. Leverage proven pricing strategies
When adding a new product to your shelves, you’ll want to analyze the supply and demand of the market for that category, as well as the perceived value of that product. If you price your items too high, you may lose customers, while if you price it too low, you will start eating away at your profits. To learn more about the markup of liquor prices in privately owned liquor stores visit
Margin vs. Markup: Calculating Both for Your Alcohol Brand
As with any business endeavor, liquor store ownership comes with some unique challenges. While there may be hurdles to jump when acquiring a liquor license and long hours of work, it can also be a rewarding, stable, and profitable business. The key is to closely manage daily operations and continue to look for new ways to engage with customers and stay ahead of trends
FAQs
Is owning a liquor store profitable?
In states where liquor sales aren’t controlled by the state, liquor store ownership can be a profitable career and business will remain stable even during economic downturns.
How much does it cost to open a liquor store?
Costs will vary according to a variety of factors, but in general, you can expect to spend a minimum of $50,000 to $100,000 to open a liquor store.
How much does a liquor store owner make a year in the USA?
In the United States, a liquor store owner can expect to make $20,000 to $50,000 annually.
What is involved in day-to-day liquor store operations?
Liquor stores are unique in that daily operations involve a lot of cash transactions, expensive inventory, and long hours. As an owner, you should be prepared to take a hands-on role in daily operations.
How do you run a successful liquor store business?
To be successful, you should stay on top of trends, offer unique products, host events and tastings, create a loyalty club, offer a selection of unique products, and encourage impulse buys.
