How did you start your retail wine business?

Those of you who own retail wine shops - how were you able to start your business financially? I’m looking for advice and ideas on how to fund my dream of owning my own store someday. I have worked ITB in restaurants for the past 5 years, but would love to be my own boss and have a retail shop. I don’t like the idea of debt, and don’t have hundreds of thousands of dollars laying around, so I’m thinking the only way to get this off the ground would be to find investors. Have any of you started your business this way? Any words of wisdom from all of you who have done this would be greatly appreciated.

Are you thinking about a big store or a small, neighborhood shop? If you’re thinking about going big then an extraordinarily detailed business plan would be the first step to give you something to talk about with potential investors. If you envision something smaller then I think that might be a difficult sell, since most investors generally want to see a return on their investment and you’ll be lucky if you make enough to live on.

Obviously the goal is to be able to make a living, so would need something size wise to make that happen. I appreciate the feedback on the business plan, which I know to be essential. My city has a handful of really mediocre wine shops, mostly catering to the Napa lovers and mass produced plonk you can get anywhere. We want to open something with more of a niche - specializing in small, grower-producer wines; much of what is loved on this forum. I think there is a market for such a shop, as there are many wine lovers in Omaha and several great restaurant wine lists to cater to their tastes. Just not a really great wine shop…yet.

The biggest key is not sinking all your money into the store’s interior. I just consulted for a group that had about $75,000 to spend. They sunk $50,000 into making the store look great, and now they have very little money left over for actual inventory.

Get yourself about 2,000 square feet, a decent, easy to get to location (forget having to be on a trendy street etc - just make sure it’s easy to get in and out of). Buy yourself a $300 cash register and sink every penny into your inventory. You can easily make a go of it with $25,000 - $30,000 worth of inventory to start, and turn your profits into more inventory.

People could care less about pulling a bottle of wine from a fancy wine rack, they just want a great wine at a great price - in all categories.

I think this is great advice. There is definitely a subset of great wine shops in California that are no-frills but with great inventory. Some of them are even located in industrial warehouse spaces- i.e. Renegade Wines in Santa Barbara or Topline Wines in Glendale. Invest on inventory and contact management for email marketing…

Thanks for the advice. I’m sure it’s easy for people to get into decorating mode and forget where the money is made.

I think all of the advice above you should take with serious caution, especially the $300 cash register comment. Just a terrible idea.

I think a good POS is a must, from my experience working retail in the past. Need something that can track inventory, cost, easy to manage reporting, time tracking, etc. Also hopefully something that could sync with an online store at some point if we have a web store. Any suggestions on a good system?

We use Microsoft

If we were starting again I would give these guys a very hard look.

Where were you when we started our business in 2005? :astonished: Back then you could possibly have done alright until the recession hit and on line sales became so difficult for the little guy. I loved the business but wouldn’t do it again now.

I suppose I should qualify that to say that I wouldn’t do it in a large market. I DO think high quality, harder to find, small production wines will sell to a knowledgeable customer base that is willing to pay the price. One thing that I feel people underestimate is the difficulty of maintaining necessary profit margins with a customer base that can check competitive pricing on their cell phones. The best strategy there is to be selling wines in very limited distribution or those you are able to buy in deepest discount quantity. Just my humble opinion, but how I see it.

Joy,
We had a friend that was running a wine and cigar shop into the ground. We bought it all for 50K, probably double what it was really worth. We put 20k into inventory and started a basic website ourselves, which we updated a couple years later. I built many of our wine racks using wood wine boxes and built most of our displays. We also spent a few thousand on wood racks from Vigilant.

We found a POS system took up a lot time because of the range of products we have and how often they change in cost due to multiple distributors. (Back then cigars didn’t come with upc codes and you had to scan them from a binder by the register.) The ones we looked at were too inflexible or required adjustments via the cash register because of the way we do business. We keep our inventory and cost on the spreed sheet we upload to our website and use Quickbooks for all our accounting needs.

Parking, parking, parking. Did I mention parking. At our first location, we were in a shopping center. Parking wasn’t bad until it went upscale and put in a Whole Foods, Trader Joe’s and a restaurant two doors down. We couldn’t even park near our store, nor could our customers.

We moved to an empty carpet warehouse attached to a tire store with lots of parking. The build out to satisfy the city requirements and our vision of the new store approached 300K.

Peter is pretty much spot on about the business model. We carry some mainstream wines and a lot of small production and hard to get wines. Our walk in cigar sales pretty much pay the bills and if we had only been a wine store when we moved, (2008), I doubt we’d still be in business. Our location dictates some of the wines we carry. If walk in traffic is only familiar with popular mainstream wines, you have have some for them to fall back on if they are not receptive to suggestions or recommendations.

I will check them out. I like that they look Mac friendly, as I would prefer a Mac based or compatible system.

Thanks for sharing your experience. We do want to focus on limited production, hard to find (especially here) wines. When I was purchasing for restaurants, we did a huge chunk of our buying with direct imports, and thus almost no one else in town could get the wines we had on a regular basis. Wholesale pricing in Nebraska really sucks - it is close to retail for many wines found in large cities on either coast. Thankfully, we have a great customer base of wine lovers already built from working in the restaurant industry here for the past several years, so hopefully that will be a great start and we can build from there.

I couldn’t agree more on the parking tip. We ideally would like to offer delivery also, which would help if it were located in an area where parking was an issue. The plan is for it to be a joint wine shop but also with a specific specialty food side, which hopefully would be our bread and butter and drive traffic as well.

I appreciate everyone’s input so far - you all have given me lots to think about.

I’m in NYC. If you have a million bucks to start, you’re in good shape. First you have to pick a spot & sign a lease, because you can’t apply for a license w/o a leased space. If you’re smart you negotiate free/reduced rent the first 6mo while you’re applying for the license which you won’t necessarily get. You can start the buildout while you’re waiting if you are confident/brash. Then there’s the lawyer fees (you have to pay for a good liquor lawyer who can expedite your app and hope they also have friends on the board) and have your act together on the professional side. Be prepared to have everyone from churches & schools & community boards to oppose you unless you are connected. Purchasing an existing store mitigates these issues but be prepared to pay more for an existing license than if you were doing a new location, and you still might have to do space renovation. After that, plan for 250-500k starting inventory. That’s life in the big city.

And I thought CA was tough. NY is ridiculous. If Joy is successful, I may consider revisiting the city I was born in.

Nice to hear from a former Omahan! Fingers crossed on the successful part; I’m just at the beginning stages of planning, so it will be awhile before anything takes off. But you gotta start somewhere…

Joy, I know nothing of the market where you are, but some questions come to mind beyond some of the good advice you’ve already received (and I’m glad you think a solid POS system is important).

Does your state allow DTC shipments from out-of-state retailers? (this will affect the importance of the next issue)

How is the selection and pricing from your local wholesalers? If you don’t know, you should probably find out before you start putting too much time and money into this. I know in some places, there could be a lot more success for small retailers like what you want to be if the wholesalers were on board. Take New Hampshire, for instance. Terrible selection, too-high pricing, and strong competition from Maine and (especially) Massachusetts right near by. You won’t have the issue of competition from neighboring states, but you might not be able to get a lot of the wines you want to sell or sell them for reasonable prices. Even if you see some impressive restaurant lists, those restaurants might be taking your state’s entire allocation of some of those wines.

I have never owned a wine store. But I’ve worked in many, and seen ones that have prospered and ones that died. Here is my free advice (and we all know what free advice is worth): If I were to consider opening a shop that carried specialty items (hard to find, organics, etc.) I would start with some market research: Who are your potential customers? I can think of a couple shops that are successful because they have a solid database of customers. When they get a good deal on Barolo, for example, they use e-mail and/or the phone to contact customers who are looking for Piemonte wines. I can think of at least one place that often sells out specials before they’re even received. Does wonders for cash flow, and they don’t even have a mechanism for on-line purchases. Not suggesting this is easy, or “the answer.” But I’d never open a shop without first having at least some idea of who I’ll be selling to.

oops, I see that you addressed some of my questions before I posted. I guess you’ve got a handle on the pricing/availability issue. That’s good since I assumed the situation there would be as you described.

For all the retail shop owners or ITB’ers… I’m curious, what are some of the unexpected costs you see that a start-up may not anticipate?