Do you want to start a profitable wine store? If YES, here is a detailed guide on how to start a wine store business with no money and no experience.
Starting a wine store can be an ideal way to become an entrepreneur and earn a steady income. People drink alcohol on a daily basis, and good wines in all situations. That same demand and industry inflexibility contributes to low a profit margin—which means you are not going to get rich with just one store.
Wine shops are usually run as physical retail stores, though some shops operate online. Although it is not impossible to run a wine shop exclusively online, it can be more difficult due to inconsistent state liquor laws. For instance, some states prohibit the importation of wine and liquor unless it is done through approved vendors and distribution channels.
How to Start a Wine Store Business – A Detailed Guide
Table of Content
- Industry Overview
- Market Feasibility and Research
- List of Niche ideas in the Industry
- Economic Analysis
- Buying a Franchise vs Starting a Wine Store from Scratch
- Possible Challenges and Threats of Starting a Wine Store
- Best Legal Entity for a Wine Store
- Catchy Business Name ideas for a Wine Store
- Insurance Policies
- List of Legal Documents for a Wine store
- Financing your Wine Store
- Choosing a Location for your Wine Store
- Technical and Manpower Requirements
- The Service Process Involved in Running a Wine Store
- Marketing ideas and Strategies for a Wine store
According to industry reports, the global Luxury Wines and Spirits Market was estimated at $812,108 million in 2015, and is projected to reach $1,122,578 million by 2022, aided by a CAGR of 4.8 percent during the forecast period 2014 – 2022.
The global luxury wines and spirits market is a premium consumer goods market that is mainly focused on consumer’s preference on quality than pricing. The products provided by industry businesses are high quality fermented wines and distilled spirits such as rum, vodka, and brandy. They are usually distinguished by their content of alcohol by volume (ABV) which usually varies from 3 to 40 percent in these products.
According to information, the consumption of luxury wines and spirits is generally associated with events of significance importance in the consumer’s life for instance celebrations, anniversaries, parties, social gatherings, and personal moments. Presently, the products offered by industry businesses are wines extracted from different fruits, for instance, grapes, apples, and pomegranate.
Whereas, products containing spirits includes distilled beverages such as vodka, whisky, and tequila. Coupled with the growing popularity of innovative drinks like cocktails, one can bring numerous combinations of spirits and juices. Experts analyze this market is generally driven by consumer satisfaction and fine quality of the products.
Also, the increase in disposable incomes has heightened consumption of these products as they are considered as status symbols. But, stringent government policies and regulations affect their sales and distribution in some countries. In addition, selective distribution of these products further limits their availability.
The wine segment of this industry is expected to witness the biggest growth during the forecast period, both in terms of value and volume as the market is driven by consumers who have inclination toward fine quality of product than premium pricing of the product.
Howbeit, providing fine-quality products is one of the major growth factors and opportunities for this market. As these products are mostly consumed during social gatherings like parties, they are expected to provide attractive opportunities for the manufacturers.
They also have comparatively less stringent rules and regulations as compared to distilled spirits. The current luxury wines and spirits market trends result in attractive profitable opportunities for market in developing economies such as Asia-Pacific and LAMEA.
Meanwhile, due to rapid urbanization and rise in disposable, income is expected to drive the market for luxury wines & spirits. However, markets such as North America and Europe have huge market share and have almost steady year-on-year growth.
Note that these market shares have less government restrictions on sales & distribution of alcoholic beverages; however, Asia-Pacific and LAMEA have the fastest growth and can yield better returns on investment. The LAMEA market is fast emerging luxury wines and spirits market.
Factors such as rapid urbanization and increase in disposable income in African countries are projected to grow the demand to consume luxury wines and spirits market.
Market Feasibility and Research
- Demographics and Psychographics
After you must have decided to sell wine at your chosen location, you need to take steps to put together a comprehensive business plan. The first thing is to perform your due diligence and research you market. Wine stores are pretty much neighborhood stores.
What sells in one neighborhood won’t necessarily sell in another. One crucial factor is the demographic and cultural makeup of the neighborhood itself. The more detailed the market analysis in your business plan, the more detailed your cost estimates can be.
Extensively consider factors like ethnicity, age, marital status, and income into account when you are performing your market research, because they all heavily influence drinking habits. Also note that this business is only ideal for individuals who are wine, craft beer, and liquor enthusiasts and aficionados.
Store hours may be dictated by state law and are generally not very flexible. However, store owners generally have flexible hours if they employ a staff. Also remember that almost all states in the US requires wine and liquor stores to ID customers for age verification. Since it is illegal to sell alcohol to anyone under the age of 21, wine stores must target adults as their ideal customers.
List of Niche ideas in the Industry
Successful wine stores all have one thing in common. They have a theme. Large wine sellers prefer to sell wine at a discount and appeal to a mass market. Other wine stores may choose to focus on wines from a specific region of the country.
But irrespective of the theme you choose, make sure you have little or no competition in your local area. A wine store business can be managed as a small or large-scale operation. Most chain stores operate by buying a high volume of inventory that they believe has mass market appeal.
Smaller wine shops more or less cater to connoisseurs who may be looking for specialty wines or particular vineyards. Note that it is not uncommon, for instance, for small wineries and wine stores to be family owned and operated.
These small wine stores and wineries are usually located next to or on vineyards and the wine is made in-house and sold in their store. To run this type of wine store, some business owners prefer to purchase a vineyard and learn how to run it.
Wine resellers, meanwhile, don’t need to be quite so involved. They may contract with wineries to sell their wine. Under this arrangement, the winery will usually sell the wine store their varietals and blended wines at special wholesale pricing for volume purchases. The reseller then marks up the bottles and sells them to the general public.
Level of Competition in the Wine Store Business
The ongoing liberalization of liquor laws is increasing competition internally and externally for stores that primarily sell alcoholic beverages. Additional alcohol retail licenses are making beer, wine and liquor more readily available to consumers. The added competition along with changing consumer sentiment is pressuring the general liquor industry to cut prices.
Meanwhile, no major companies dominate; in the US, individual states have different laws regulating liquor stores, complicating the ability to form national chains. Europe boosts of the highest proportion of drinkers and the highest levels of alcohol consumption per person in the world.
Off-premise alcohol consumption is growing massively at the expense of on premise drinking. Prices on off-premise alcohol are considerably lower than on premise prices with retailers, especially supermarkets, able to purchase large quantities of alcohol at lower prices through volume discounts.
Price differentials between countries — alcohol sold in France is significantly cheaper than alcohol sold in the uk — encourages cross-border shopping. In the united states, the general liquor industry includes about 34,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $54 billion.
Note that personal income, consumer tastes, and entertainment trends drive demand. The profitability of individual companies depends on effective marketing and competitive pricing.
Large companies offer wide selections and deep discounts, but small companies compete by offering specialized merchandise, providing superior customer service, or serving a local market. Note that the US industry is highly fragmented: the top 50 companies account for less than 25 percent of sales.
Wine stores make money by purchasing wine and other alcoholic beverages at wholesale or discount pricing and marketing them to customers. Customers are mostly charged a price per bottle and sometimes offered discounts based on volume purchases. Wine stores also sell alcohol-related paraphernalia, like wine stoppers, bottle openers, wine glasses, shot glasses, mixers, and other related items.
Most wine stores start out as owner-operated and stay that way forever. However, savvy entrepreneurs who want to expand always find it hard to operate without an administrative team with a background in accounting and bookkeeping. Profit margins on alcohol can be extremely thin due to wine being heavily regulated.
Salaries for store clerks are typically minimum wage. Management might make between $20,000 and $50,000 per year, while the owner may make $80,000 to $100,000 per year. Again, profit margins can be extremely thin on wine sales depending on the state you live in. But it is not unusual in the industry for wine stores to make 30 to 50 percent margin.
Buying a Franchise vs Starting a Wine Store from Scratch
You can choose to buy an established wine store, buy the franchise rights to open a store in your area or start a new independent wine store from scratch. There is no wrong answer to this question. Potential wine store owners must evaluate themselves and their resources before making this important decision.
If you are looking into buying a wine store instead of opening one on your own, you are going to need to find a wine store that is up for sale and in your price range. The better shape the business is in already, the higher the chance that you will be able to get a loan to buy the business.
Note that you have to consider the neighborhood where the business is, the location of the business and its facilities, the current business the wine store does, and what you can add to the business by buying it.
You will also want to consider why the current owner is selling. If he or she is simply retiring after a successful career, then you may easily take their place and make a profit. But, if they don’t make enough sales to cover the rent, you may want to think twice before putting your own money on the line.
Joining a wine shop franchise can be a good option for entrepreneurs who prefer to use a proven model rather than start from scratch. While joining one can mean slightly higher initial costs and less control, a quality franchise offers great benefits such as initial and ongoing support, marketing assistance, and brand recognition. Opening a wine store franchise typically requires $200,000-$500,000.
Possible Challenges and Threats of Starting a Wine Store
Starting a Wine store might seem easy but it takes careful planning to be able to succeed. This industry has so many obstacles and challenges. They may include;
- Inadequate funding
- Finding hood suppliers
- Tight industry regulation
- Choosing a suitable location
- Choosing a good and sellable theme
Best Legal Entity for a Wine Store
After you must have decided on a suitable location for your wine store, the next thing into register your business. To do so, you will need to decide on a business name and entity. You may choose to open your liquor store as a sole proprietorship or a general partnership.
However, while these types of business entities require the least amount of paperwork, they also won’t protect you in the case that your wine store runs into any legal trouble. For this level of protection, you need to choose a Limited Liability Company (LLC) or corporation.
Its advisable you consult with a business attorney or tax professional at this stage to ensure you are choosing the best entity for your business. Once you have decided, you will then register it with the state in which you will be operating. Again, this will likely be done with the secretary of state or chamber of commerce office.
Catchy Business Name ideas for a Wine Store
A wine store is a fun business to name, but you will need to make sure that the name you want for your wine store is available. In most states, you can check whether the name you want for your business is available online with the appropriate filing agency. The secretary of state frequently has a registry online where you can check the name status and register for the name.
You may also want to run a quick Google and U.S. Patent and Trademark search to make sure your name isn’t taken by another popular business. After all, if potential customers search for your business name online, you want your business to be the one they find. Below are few business names to consider;
- Purple Berries
- One Stop Wine Store
- Close Neighborhood
- Wine Zone
- Comfort Liquor
- Fawn Wine
It is very necessary you obtain business insurance for your wine store. Note that you will likely have millions of dollars of inventory in your store. If anything should happen to those bottles, you will want to make sure you are covered. Beyond standard business policies such as commercial property, general liability and Workers Compensation (if you plan to hire employees), you should also look into liquor liability insurance.
You will also have to understand what is covered and not already covered by existing policies. This will enable you get appropriate coverage to protect yourself against any exposures you may have. An independent insurance agent can help you make these determinations.
- General insurance
- Premises liability insurance
- Risk Insurance
- Payment protection insurance
- Workers compensation
- Overhead expense disability insurance
- Liquor liability insurance
Intellectual Property Protection
Although intellectual protection might not be a priority in this business, especially if you are not manufacturing your own wines, but to protect your business secrets and concepts, which includes business names and logos, it’s necessary you file for intellectual property protection, to make your store unique and free from copycats.
List of Legal Documents for a Wine store
The cost of liquor license varies by state and they can go well into the tens (or hundreds) of thousands of dollars. To add to the licensing headache, every city, county, and state has a different set of rules and laws.
Take your time to find out what you will need from the Alcohol and Tobacco Tax and Trade Bureau (TTB), the entity responsible for enforcing laws “regulating alcohol production, importation, and wholesale businesses.” You don’t want to risk getting your business shut down for having the wrong permits—or no permits at all. Get a business lawyer if you are feeling unsure about any of these steps.
Also, many localities will have restrictions on where alcohol can be sold, and it isn’t always easy to be sure you are abiding by state, county, and municipal laws. Indeed, the state and local laws governing the retail of alcohol and spirits are so inconsistent across jurisdictions that the best advice to give about licensing is to hire an attorney familiar with the local laws and let them guide you through the process.
Some jurisdictions also don’t allow sales on certain days and times, others don’t allow spirits to be sold with beer and wine. Some don’t allow any liquor sales at all. Often, the restrictions aren’t statewide, but counties and municipalities place additional restrictions on alcohol sales, which is why local assistance is important.
Financing your Wine Store
As a new business owner, it’s advisable you use as little financing for a start-up as possible. This rule applies to wine stores too, but since demand for alcohol is more or less fixed, many lenders will regard a wine store as an unusually safe investment.
Remember you have your trusty business plan that you can use to show potential investors, family and friends, and banks or alternative lenders, to show how you plan to get a return on any investment someone is willing to make. Early on in the business process, you might need to seek funding from loans from friends and family and maybe even crowdfunding.
Note that it can be hard to get funding from other, more traditional sources such as banks or online lenders when you are just starting out. But keep these sources in mind for once your business has been established for a year or two or you have strong business financials to show.
Choosing a Location for your Wine Store
Unless you are a big box store with a name like Wal-Mart or Lowe’s, where people swarm no matter the address, it makes a big difference exactly where you place your store. A wine store tends to attract upscale customers, so a farmers market in the industrial part of town might offer difficulties.
The profit margins on wine stores are low and demand is inelastic, meaning that it doesn’t change much over time. This simply means the success of your wine store is heavily dependent on its location.
If you open a store in a market that is already saturated, not only is your store unlikely to do well, but you are likely to eat into a local competitor’s bottom line as well. Just like we stated above, wine stores are more or less like other neighborhood stores. What sells in one neighborhood won’t necessarily sell in another.
Keep this in mind as you are scouting locations. Market saturation is heavily influenced by distance to competitors, but there are other factors at play. Another influential factor is the demographic and cultural makeup of the neighborhood itself.
Technical and Manpower Requirements
Have it in mind that buying your inventory is going to be your biggest expense. A well-stocked wine store will take up millions in inventory sitting on the shelves. Although there will be a temptation to try and compete with that, but you should resist. Adjust your initial inventory toward items which will sell quickly—the more you sell, the cheaper the cost to you—and then broaden your inventory later.
Also note that the price of alcohol is usually fixed by a distributor who has a monopoly on that particular brand (which is why the prices of alcohol are similar everywhere), so you are unlikely to be able to negotiate much on the price. Wine stores sometimes find it difficult to differentiate themselves from other stores. This can be, in part, due to government regulation of the industry.
However, a wine store can generally compete by marketing itself to a select market or implementing themed events. Most wine stores have their owners working in the store full time, especially in the beginning. Nonetheless, hiring an employee or two might help you operate more efficiently than you would otherwise be able to.
To be successful in the wine business, you will find a background in accounting helpful because of the thin margins in the industry. In many states, alcohol is tightly regulated, licensing is strict, and paperwork is plentiful. Some states do not even allow private ownership of wine stores, so wine stores are restricted to selling wine and beer.
So, business owners entering this industry need to be willing to deal with regulators and bureaucrats constantly. They also need good business sense and organizational skills to manage what can be, at times, a complex ordering and distribution process.
States also require stores to hold a liquor or alcohol license before they can sell or distribute alcohol. Wine stores charge their customers per bottle of wine or based on volume sales (e.g. case discounts). Pricing may be restricted by state. Fixed costs can include:
- Building lease: $25,000 – $50,000
- Administration: $20,000
- Salaries: $75,000 – $170,000
- Tastings: $2,000 – $6,000
- Inventory: $30,000 – $70,000
- Marketing: $4,000 – $32,000
Variable costs can include cost of goods sold (COGS) exceeding $190,000 in the first year.
The Service Process Involved in Running a Wine Store
Owners of wine stores are responsible for managing employees, ordering supplies, and managing day-to-day activities. Although it all depend on the size of the store, this might include servicing customers. Many wine stores offer wine flights (where a selection of wines are offered for sampling purposes) during select days of the week or month, which store owners typically host.
One crucial factor to assimilate when opening a wine store is to figure out where you are going to get your product at a price that allows you to earn a profit. You are going to need reliable vendors who are punctual and maintain high standards.
This supply line will be very important to the eventual success of your wine store because your reputation is only as good as your vendors allow it to be. When a prized bottle of wine is delivered to you a day late, foiling the birthday plans of your favorite customer, it is your reputation that suffers.
You should also have in mind a strong sense of the interior and exterior design of the shop. Perhaps even more than other types of business, a wine connoisseur want to feel a certain way when he enters his favorite wine store, so design and layout are quite important. Never neglect the appropriate insurance as well as accounting and management procedures.
Note that your market analysis is meant to give you a good idea of your customer base. With an idea of the composition of your customer base, you can create sales and cost projections based on buying habits and price points for items in your area.
Consider approaching wholesale distributors about their case prices and compare that expense with the local price point of popular brands. When that is combined with traffic estimates and overhead (including rent and labor costs), you can estimate costs and sales. Don’t neglect the impact of competitors on your sales.
Marketing ideas and Strategies for a Wine store
Costs for a small startup wine store can range from $50,000 to over $300,000. Your first year’s revenue may be negative, depending on your location. But with well organized marketing plans, you can reach break even faster than you expect. Below are foundational marketing tools to consider;
- Viral Marketing
By adding viral elements in a campaign for your store, you just have to cross your fingers and expect the best. Even with less control over whether or not your strategy goes viral, there are things you can do to groom your brand’s viral capacity. Social media and other online vehicles can seed a viral marketing campaign, but you will need to nurture their development through direct customer interaction as well as other techniques.
- Obey the Law
Selling to underage customers, even by mistake, can cost you thousands in fines and can even put your livelihood in jeopardy. Check identification diligently, and ask local law enforcement what you can do to make sure you don’t get fooled by a fake ID. You should also beware of criminals, as wine stores have often been targets of criminal activity. Although robberies of convenience and liquor stores have declined along with the use of cash, it can still be a concern.
- Marketing Ethics
Successful wine stores avoid marketing tactics that exploit their customers. Remember, if direct mail is part of your marketing mix, you have to ensure that your mailing list provider concurs to ethical standards in the collection of contact information. Premier vendors are safe bets since they have established themselves as reputable mailing list providers.
- Improve Your Business Sign
Good and effective signage offers your brand constant exposure in its geographic market. Even though wine stores are very different from retail businesses, signage can be used by any retail store to communicate the business value to customers. Visibility, branding elements and other considerations are all factors in the design and size of your operation’s business signage.
Also given the fact that signage in wine stores is unlike the signage for other types of businesses, avoid glossing it over as an afterthought. You can talk to a nearby business sign franchise company or an independent business sign company and see what they recommend.
Winning Competitors in the Wine Store Business
Although no major companies dominate, the competition in this industry is fierce. Don’t ever forget that having the expertise to carry out a business gives you a better chance of competing favorably. That is why you need to put in your best whenever you have the opportunity. You should be known for delivering excellent products and good customer services at all times. Note that this will boost your image and make your store renowned in the competitive wine industry.
Possible Ways to Increase Client Retention for a Wine store
Marketing is typically local advertising. In some states, advertising may be restricted. However, wine stores usually enjoy repeat and referral business from a loyal customer base. Focusing your time and energy on these individuals as opposed to always trying to find new customers can be a powerful way to supercharge revenue for your store. There are many ways to retain your customers and make them to always want to come back. These ways may include
- Satisfy your customers
- Patronage discount and coupons
- Loyalty and reward programs
- Help desks and support systems
- Customer feedback survey
- Light personalization
Boosting your Wine Store Brand Awareness and Increasing your Corporate identity
Just like it was stated above, running a lucrative wine store often involves growing and expanding the business. Identifying a niche or underserved market and focus your marketing plans. However, successful wine stores all have a theme.
Large wine sellers prefer to sell wine at a discount and appeal to a mass market. Other wine stores may choose to focus on wines from a specific region of the country. But irrespective of the theme you choose, make sure you have little or no competition in your local area. Below are few strategies to boost your store brand in the United States…
- Organize wine tastings or mixology classes
In this modern age, consumers are more educated than ever before, and they appreciate a good drink recipe or learning about a small, unknown winery. Try to use the educated consumer to your advantage.
Although this isn’t always an option due to local laws, if it is legal in your area, classes like these are a great way to keep consistent traffic inside the store. Even if you can’t hold wine tastings or mixology classes on the premises, you can get creative to accomplish the same goal, partnering with local restaurants or securing alternative spaces.
- Sponsor local events
Another way to excellently boost your brand is by sponsoring local events like festivals and concerts. Not only is it an opportunity to boost sales at that event, but you can offer promotions to get concert-goers back in your store to keep the sales going strong.
- Ask for promotional items from distributors
Note that most distributors will keep you stocked with new displays, swag, and signage. Make sure you keep it updated, because it will make your store seem fresh.
- Grow your online presence
Take your time to create a high quality, professional website, start an email list, and encourage your customers to post online reviews. Get active on social media and announce flash loss-leader specials (selling a product at a loss for a short amount of time to drive up traffic). Do whatever you can to boost your visibility and ingratiate yourself in the fabric of the community.
- Suggest food pairings
Suggesting food pairings to go along with beer, wine, and spirits can be a great way to cultivate an air of expertise, which will appeal to higher-end customers. You can even take this strategy one step further and sell some of the foods (like fruit, cured meat, or cheese) to go along with your beverages. Your customers will pay for the convenience.