Liquor Store SWOT Analysis

In all economic climates, liquor stores tend to do very well. People love alcoholic beverages, and even during times of economic recession – many liquor stores experience an uptick in their overall revenues. These businesses typically have moderately low startup cost that range anywhere from $100,000 to $200,000 depending on how much inventory is going to be carried at the onset of operations. Given the economic stability of these businesses, most liquor stores are able to easily acquire the capital they need from a financial institution or private investor. While the gross margins from the sales of wine, beer, and liquor are somewhat on the lower end of things – the volume of sales typically makes up for this issue. Most liquor stores enjoy gross margins of 20% to 30% depending on the type of product being sold. These businesses tend to do well in highly trafficked retail areas. One of the other key strengths associated with the liquor stores at their tech typically able to generate sales from outside of their metropolitan area if they develop an e-commerce platform. For companies that specialize in specialty wines, this greatly assist with increasing the overall inventory turnover of the business.

For weaknesses, the biggest issue faced by any liquor store is that there are typically a number of other market agents. In almost every city and town there are a number of sources specialize in the sale of liquor, beer, and wine. As such, a liquor store entrepreneur needs to find ways to effectively differentiate their business from that of other companies in the market. This is commonly done for the development of gift baskets as well as through e-commerce sales. One of the other weaknesses associated with the liquor stores at the rental expense for these businesses can be somewhat high especially in a major market.

As it relates to opportunities, most liquor stores simply expand by establishing additional locations. In many instances, a liquor store entrepreneur may seek to acquire establish locations so that they been in business can benefit from economies of scale. This is primarily accomplished by being able to place larger orders for inventories which allows the gross margins of the business to be increased substantially. As stated above, many liquor stores especially those that specialize in the sale of wine will develop a gift basket program especially for holiday season sales. This can drastically boost the revenues of the business.

For threats, the biggest challenge faced by most liquor stores is to comply with all laws regarding the sale of alcohol. Most businesses have extensive security protocols in place to ensure that no one under the age of 21 is able to make a purchase. Additionally, this is a heavily competitive industry and owners of liquor stores must find ways to differentiate their location from those of other companies in the market. Economic recessions do have an ever so slight impact on overall revenues, but even during times of deleterious market conditions the demand for alcohol remains very strong.

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