Opening a liquor store is, in general, a sound business venture. According to Nielsen stats, liquor stores are typically recession-proof, and their products are in demand year-round.
However, if you want long term success, you have to start your liquor business right.
How do you open a liquor store for success? Financing is the most important factor. Liquor stores have relatively high start-up costs. Purchasing start-up inventory for a liquor store, for example, can run up to $100,000. Plus, you’ll have to account for staffing, licensing, leasing and technology costs.
The liquor market is also competitive. Before you sign a lease, conduct thorough market research to determine if there’s room in the market for a new liquor store in your neighborhood.
There are a lot of other factors to consider. But if you’re a wine connoisseur, or you’re researching small business opportunities, opening a liquor store can be a worthwhile endeavor. This guide counts down everything you need to know about owning a liquor store – including start-up costs, licensing requirements, and marketing ideas for a successful launch.
Table of Contents:
- Conducting Market Research
- Licensing Requirements
- Start-Up Costs
- Marketing for New Liquor Stores
- Technology Requirements
Conduct Market Research
Before you sign a lease or apply for licenses, make sure you know the answer to this question: Can the market support a new liquor store opening up?
If you live in a suburban or urban location, there’s a good chance other liquor store businesses already exist. However, your business can still offer an alternative and differentiate. You could:
- Be closer to your target audience
- Provide better variety and/or specialized product knowledge
- Offer better customer service and special promotions
- Better serve an underserved part of the market (e.g., you stock mid-range and high-end wines)
- Allow for online ordering or delivery
As you conduct market research, learn who your competitors are. You might even stop in for a visit to see what the in-store experience is like. Ultimately, your goal will be to clearly differentiate your liquor store from competitors.
Market Research: Questions to Ask
Before you open a liquor store, answer these questions:
What are the latest trends?
Successful liquor stores keep up with changes in customer demand. A new beverage category might grow in popularity – think hard seltzers 5 years ago – or customer expectations may change (e.g. more customers expect and want alcohol delivery).
Who’s your audience?
Learn about the demographic you serve. Is it mostly office workers? Or do you serve more college students? Your product mix will change based on demographics.
What do customers say?
Check out your competitor’s social profiles and reviews. This will give you insights into what’s working and what’s not.
Is the location right?
In addition to knowing where competitors are, you might also think about how much organic traffic you can expect, parking, if the storefront is noticeable, and accessibility.
If you assess the market and think it’s still a good idea, the next steps would be securing the correct licenses and exploring financing options.
Licensing for a New Liquor Store
Liquor stores are unique in their requirements for permits and licensing. This varies by city, state and locality.
First, think about how you’ll register the business. Options include:
- Sole Proprietorship: Owned and operated by a single individual, simple to set up, but personal assets are at risk for business liabilities.
- Partnership: Involves two or more individuals sharing ownership and liabilities, with variations in management structures and personal liability.
- Limited Liability Company (LLC): Offers liability protection for owners (members) while allowing flexibility in management and taxation, combining elements of corporations and partnerships.
- Corporation: Establishes a separate legal entity, shielding personal assets from business debts but involving complex formalities, distinct management (board of directors), and various tax advantages.
- S Corporation: A specific type of corporation allowing profits and losses to pass through to owners’ personal tax returns, avoiding double taxation with specific eligibility requirements based on shareholders.
Additional Permits and Licensing Requirements
Again, this will be dependent on your location. However, you might need to secure a business and liquor license (most important), as well as a federal alcohol license, zoning permit, health permit, sales tax permit, and employee training certifications like TIPS.
Costs to Open a Liquor Store
You need start-up capital to open a liquor store. How much depends on your location, the type of store you open, or if you’re purchasing an existing liquor store vs. starting new.
To open a new store, you should consider these costs:
- Inventory – Inventory is the largest start-up cost for a new liquor store. Typically, wholesale beer and wine are sold at 50% of retail. Therefore, to stock a small liquor store, you might invest $35,000, while a larger liquor store might run up to $100,000 or more.
- Store Upgrades – If the location needs renovations, you will need to pay for these costs. Commercial leases outline what upgrades are OK, as well as who is responsible for costs. Shelving and signage can cost between $5,000 and $20,000. Refrigeration units are also costly, and you’ll likely need a liquor store POS system.
- Licensing – Licensing costs for a new liquor store vary by state and locality. In New York State, retail liquor store licenses cost $1,500-$4,000, depending on location, along with a $200 licensing fee.
- Wages – You’ll want to account for your salary (if you’ll be running the store), as well as the salary of your employees. At a minimum, you should account for about $80,000 per year in wages.
- Insurance – Insurance costs for liquor stores average about $1,050 per year.
- Leasing Costs – In the U.S., retail spaces rent, on average, for about $18 / square foot per year. This varies significantly by location. You’ll likely need to pay a deposit on the lease, as well as first / last month’s rent. Rent for a 2,000-square-foot retail space would run $36,000 per year.
- Operating Expenses – You’ll also want to create a runway of operating expenses. If you estimate about $5,000 per month, which is a conservative estimate, that’s $60,000 for your first year.
Overall, the start-up costs for liquor stores are significant. At the high end, you would need more than $300,000 to finance your launch and first year.
Marketing Your Liquor Store’s Grand Opening
For long-term success, a strong marketing program will help you grow. However, it’s important that you promote your liquor store opening. Here are a few tips for getting started quickly:
Make your store noticeable from the street and use signage to promote your grand opening. In the store, a liquor store digital signage system can help you welcome customers, educate them about your products, or drive awareness of a loyalty program.
People still watch and read the news. Create a press release and send emails to local reporters. Share any press coverage on your social media pages.
Pro Tip. Give reporters an angle to work with (largest selection, specialty, etc.)
Connect with local groups and organizations. If you’ll offer local brews, you might connect with a homebrew group. If you’re specializing in wine, maybe you connect with a local wine appreciation club.
Build a strong online presence before you open a liquor store. Make sure customers know your hours, how to contact you, and key dates about your opening. Pin a post to the top of your feed with Grand Opening details.
You have a variety of options, from big investments into multi-channel campaigns to lower cost social campaigns. At a minimum, use ads to drive traffic to your grand opening.
Other options: Consider a giveaway, entertainment or a tasting at your grand opening. Give customers a reason to stop in and see your store. You can also use a giveaway or other promotion to collect emails or build your loyalty program.
Building the Technology Foundation
Managing day-to-day operations in a new liquor store will revolve around customer service, inventory monitoring, sales tracking, and meeting compliance requirements.
This is difficult to manage on your own. You’ll need several different tools to do it. However, the best liquor store POS systems offer an integrated solution, and provide you with all the tools you need to thrive. A liquor store POS system should include:
- Sales processing – Accept a variety of payment options and offer a smooth checkout experience for customers.
- Barcode scanning – Use POS-connected scanners to ring in items (or print your own barcodes for specialty products).
- CRM / Loyalty – Collect customer information at the register and offer rewards points for frequent shoppers. Once a customer is in your system, you can look them up using a phone number.
- Inventory tools – The best solution will include a robust liquor inventory management software This tool should help you manage ordering / replenishment, vendors, offer alerts for low-stock items, and help you identity slow-moving inventory.
- Age verification – Your liquor POS should include ID scanners at the register, offer ID scans with your barcode scanner, or offer an integrated digital wallet to verify customers. This process should be seamless.
Other tools you might need include digital signage and loyalty program software (which may integrate with your POS). This allows you to manage loyalty programs and digital signage schedules from a single login and build more reliable systems.
Start Your Liquor Business with FTx POS
FTx POS offers a software suite that’s built by retailers. We understand the unique challenges that businesses face. And we’ve developed the exact tools in our liquor store POS system to help you grow and meet today’s market demands.
Contact us today for a demo or to learn more about our all-in-one retail POS suite.
FAQs: Opening a Liquor Store
The profitability of your store depends on many factors. Your overhead costs, margins, and marketing efficiency, for example, can all affect profitability. However, in general, an established liquor store will turn a profit. One study found, on average, top-performing shops net 15% to 20% in annual profits, while the average is closer to 8%.
Liquor stores aren’t prone to seasonality, their inventories are long-lasting and stable, they may have low competition in the market, and there is a large built-in clientele. Not to mention, liquor stores benefit from strong advertising support from beverage manufacturers.
Beer, wine and liquor store sales are on the rise, peaking at $70 billion in 2022. The amount of profit you make each year will depend on your costs and sales efficiency. On average liquor stores earn about $300,000 to $1 million per year. In the early stages, they may break even. However, if you were to net 8% in profits, that would be $24,000-$80,000 in profits per year.
There are numerous solutions. But a few of the most common ways to increase liquor store sales include: Upselling and cross-selling (product bundles), loyalty programs, and an effective marketing program.