Businessman With Entrepreneur

Pros and Cons of Running a Liquor Store

Owning and running a liquor store can be one of the most stable business opportunities if you do it right. However, the liquor industry faces way more challenges than any other regular business, mostly because you need to abide by the state and federal laws and be legally compliant.

But the good news for any successful liquor business is that it comprises dedicated and hardworking employees who are highly motivated and have an excellent understanding of their business. Moreover, the workers at a liquor store are well-aware of the various pitfalls they might face, and hence, avoid all those obstacles in each of their activities.

If you have planned to run a liquor business, you are not just brave and confident, but you actually possess some unique skills and creative interests that are bound to take you further! While there are several challenges of running a liquor shop, it has way more advantages. So, here are some pros and cons of operating a liquor business you need to know.

The Good

1.    Low Competition

Due to the strict state and federal regulations, there is much lower competition among liquor businesses, which is why they make good sales throughout the year irrespective of the season.

As per the 21st Amendment, the US federal government has provided every American state with the rights to regulate and control the importation, distribution, promotion, and sale of alcohol within its borders. This means every American State has the power to exercise those rights as per their convenience.

However, almost all the states in the United States restrict the number of running and active liquor stores in a particular geographic location, especially in and around the smaller towns. It enables the state government to prevent the people from getting overtly tempted, which often results in serious health hazards and accidents. Additionally, this move is actually beneficial for the liquor store owner.

The good news is, once you get the liquor license, it is less likely that other liquor shops will be opening up nearby anytime soon. This is of the greatest advantage to liquor businesses, considering that there are very few businesses having such low competition in a specific location.

2.    Recession-Proof

Liquor businesses are recession proof. This means even if the nation’s economy takes a drastic turn, you can always manage to have enough sales due to high demand. People have the habit of turning to alcohol occasionally whenever they need to relax.

3.    Stable Inventory and Product Shelf-Life

Unlike grocery stores or bakeries, alcohol businesses enjoy the advantage of having an extended shelf-life for their products. This is because many liquors don’t have an expiry date, and in fact, some drinks need to be stored for long periods to offer customers an enhanced taste.

This also means you can have money to buy more drinks in large quantities without fearing about expiry dates. In fact, some liquor might be way more delicious if stored for long.

4.    Year-Round Demand

Be it a birthday or anniversary party or a performance celebration at work, Americans have always liked the idea of enjoying alcoholic events and get-togethers. Unlike many products, such as Halloween decorations or fireworks, alcohol is not seasonal.

Almost every other religious or national holiday means small parties and small groups celebrating their off-day from work with alcohol. Even if there is no one around, one can bring in a bottle of wine or whiskey, which becomes a lovely companion!

5.    You Can Do Well Without Advertising

Although it’s always a good idea to advertise and promote your products, especially if you have a new drink to launch, you can, however, still manage to do quite well without one. You don’t need to spend millions of dollars on advertising your liquor brand and your products, since customers will automatically know your presence.

So, instead of making unnecessary expenses in putting up banners and hoardings, you can focus on enhancing your customer experience. Hosting occasional events won’t be a bad idea though, in which you can distribute free samples of a new product to entice your customers to try more of your unique beverages.

The Bad

1.    High Inventory Costs and Initial Investments

The initial setup and real-estate costs are quite high, and so are the inventory management costs. If you don’t have a strong financial backup, you won’t be able to do your startup. Make sure you fund your business appropriately considering all the resources you need.

2.    Location Constraints

The fate of your liquor business depends largely upon the location you are serving. You must be aware of the potential licensing issues. Also, if you open your store near a competitor, you might face reduced traffic, which might force you to reconsider your prices if you are new to this industry.

Lowering your price charts also means reduced profitability, in which case you can consider selling other products like snacks, lottery tickets, tobacco, or recharge cards.

3.    Alcohol Distribution is Highly Regulated

As discussed above, the state has imposed some distribution restrictions over liquor businesses, especially on the total number of stores in a particular geographic area. Moreover, the Alcohol Control Board ruling over each US state has set some specific rules regarding the alcohol retail sales within their borders. New business owners might have difficulty abiding by these strict regulations.

4.    Owner Involvement is Necessary

One of the biggest downsides of running a liquor business is that the involvement of the owner is equally necessary as that of the employees. In fact, if you own an alcohol store, you will need to work really hard to bring in enough sales.

You need to work as long as your employees or even sometimes longer to make a good living. It is not a business that can earn you some passive income without proper involvement of the owner. Unlike other businesses, the profit margins associated with a liquor business can be low if the owners are not involved full-time.

However, if you have the passion and love engaging with new enthusiastic customers, you will love to explore the numerous possibilities the liquor industry has in store for you! So, go ahead and take the risks if you are confident and passionate, while also enjoying the benefits and cash you receive at the end of the day!

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