Liquor Store Business Overview

A liquor store sells alcoholic beverages, including wine, beer, and spirits, to retail customers. Before opening a liquor store, it’s important to understand that these businesses must follow strict state and local laws about when and how they can sell alcohol. Each state has different rules about licenses, hours they can be open, and what they can sell.

Here are the common ways people run liquor stores:

• Retail Only: A traditional liquor store focusing on walk-in retail sales, stocking a range of alcoholic beverages and related items like mixers, garnishes, and bar accessories.
• Specialty and Premium: A store specializing in high-end wines, craft beers, or rare spirits. These businesses often provide expert product knowledge and personalized recommendations to customers seeking specific or premium products.
• Convenience and Basic: A store offering a limited selection of popular brands and common items, often in convenient locations with extended hours. These stores typically focus on fast-moving inventory and competitive pricing.
• Hybrid Model: A combination store that includes both alcoholic beverages and complementary items like snacks, tobacco products, or basic groceries. This model aims to increase customer visits and average transaction value.
• Online and Delivery: A store that maintains both physical retail space and online ordering capabilities, offering local delivery or in-store pickup options. This model has gained popularity as consumer shopping habits have evolved.

Industry Summary

Liquor stores are classified under NAICS code 445320 (Beer, Wine, and Liquor Stores). This retail sector encompasses businesses that sell packaged alcoholic beverages for off-premises consumption. The industry began taking its current form after the repeal of Prohibition in 1933 when states established various regulatory frameworks for alcohol sales. Many states have modernized their laws in recent years to allow for expanded operating hours and delivery services.

Market Size: Annual sales in the U.S. liquor store industry reached $79.9 billion. The industry consists of 46,633 retail locations across the country. Total Wine & More leads the market as the largest specialty retailer, followed by BevMo! and ABC Fine Wine & Spirits. However, due to state-by-state regulations limiting chain expansion, even the largest companies control relatively small portions of the total market, with Total Wine & More holding approximately 10% market share.

Market Trends: The industry demonstrates steady growth with a projected annual increase of 2.9%. This growth reflects changing consumer preferences toward premium products and craft beverages. The sector has shown resilience during economic downturns, as alcohol sales typically remain stable regardless of economic conditions. Recent trends include increased demand for craft beers, premium spirits, and organic wines. The expansion of delivery services and online ordering has created new sales channels for retailers.

Target Market: Liquor stores serve a diverse customer base that varies by location, store type, and product selection. Understanding these customer segments helps store owners stock appropriate products and adjust their marketing strategies.

• Regular Consumers: These customers frequently purchase mainstream beer, wine, and spirits. They typically shop based on convenience and price, making smaller purchases multiple times per month.
• Premium Buyers: These customers seek high-end wines, craft spirits, and specialty beers. They spend more per visit and value product knowledge and selection over convenience.
• Special Event Shoppers: These customers make larger purchases for parties, weddings, and other celebrations. They often need assistance with selection and quantity planning, presenting opportunities for increased sales.
• Collectors and Enthusiasts: These buyers search for rare bottles, limited editions, and investment-grade spirits. They value expertise and relationships with store staff who can help locate specific items.
• Business Clients: These customers include restaurants, bars, and event planners, which make wholesale purchases where permitted by law. They require consistent inventory and competitive pricing.
• Convenience Shoppers: These customers often combine alcohol purchases with other shopping needs. They value location and quick service and typically purchase common brands in smaller quantities.

Also See: Ideas for Naming a Liquor Store

How much does it cost to start a liquor store?

Starting a liquor store could range from $75,000 to $350,000. The lower end represents a small neighborhood store with basic inventory, while the higher end includes extensive inventory and premium store design.

Here are the main costs to consider when starting a liquor store:

Initial Inventory ($50,000 – $250,000): Stock includes various spirits, wines, beers, and mixers. Starting inventory needs adequate variety across price points and categories. Relationships with distributors affect minimum orders and payment terms. Many stores start with a focused selection and expand based on customer demand.

Retail Space ($15,000 – $50,000): First and last month’s rent plus security deposit starts your lease. Renovations include shelving installation, lighting, and security measures. Store layout needs proper spacing for displays and storage areas. Cooling equipment for beer and wine requires specific electrical work.

Store Equipment ($8,000 – $35,000): Coolers, wine racks, shelving units, point-of-sale systems, and security equipment create an organized shopping experience. Security systems, cameras, and safes protect inventory and cash. Proper lighting highlights product displays.

Licenses and Permits ($2,000 – $15,000): Liquor licenses vary significantly by location and can be a major expense. Additional permits, bonds, and insurance requirements protect your business and comply with regulations.

These cost estimates are approximate, and actual expenses will vary based on your business model and scale of operations.

How profitable is a liquor store?

The profit a liquor store owner can make varies widely based on several factors, such as location, size of the store, and inventory selection. However, industry statistics can provide some insight into potential profitability.

Industry research shows that liquor stores operate on a gross margin of around 25-35%. This means that for every dollar in sales, the cost of the goods sold (COGS) is about 65-75 cents.

For example, if a store generates $1 million in sales, the COGS would be around $650,000 to $750,000. Subtracting COGS from total sales gives a gross profit of $250,000 to $350,000.

Other expenses, such as rent, utilities, salaries, insurance, etc., need to be deducted from this gross profit to calculate net profit. If these operating expenses amount to $150,000 annually, the net profit would be $100,000 to $200,000.

Of course, these are rough estimates. A liquor store’s actual profitability can vary based on a wide range of factors. It’s also important to note that these calculations don’t account for any debt service the business may have if the startup costs were financed.