Most successful liquor stores follow a simple formula: Focus on high-profit items. A liquor store that sells large quantities of low-profit items may still struggle to cover monthly expenses. The key to maintaining steady cash flow is therefore buying high-profit items in medium-sized quantities. But how are you supposed to do this if you aren’t sure what will sell? What about new items?
Much like jewelry stores and auto shops, it’s common for liquor stores to have nearly all of their operational funding tied up in inventory. A young liquor store might have to spend hundreds of thousands of dollars just to get a clear idea of demand, or pay vendors before paying themselves. Liquor stores are also seasonal, with the majority of their sales taking place during the holidays. Tumultuous revenue makes it difficult to purchase high-profit items, which are predictably more expensive. And the off-season is when distributors are most likely to offer discounts for bulk purchases.
By the end of the year, a liquor store is supposed to have turned its entire inventory at least eight times. To protect their already-sensitive profits, many stores buy multiple season’ worth of inventory or pay bills upfront; well ahead of due dates. As if this wasn’t challenging enough, maintaining high-profit inventory takes away money that could otherwise be spent on marketing or renovations.
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