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How Does Liquor Pricing Work?

This post might land me a bit of hot water with other stores and suppliers, but so be it.  I've seen so many postings about pricing and availability lately (on message boards, Yelp reviews, comment fields, etc.) and I feel like some people don't really understand how it works, so I'm going to clear up some facts about how liquor store pricing works.

1) If you see a review on a website like John Hansell's WDJK and it says bottle price $50, that is based on an estimate.  It does not mean that every store pays the same wholesale and then sets their own retail.  Some stores may even PAY $50 wholesale for that same bottle, rather than offer it for that retail price.  Every state in the U.S. has a set of distributors that sets pricing, and even then, not every store is paying the same wholesale cost.  There are a variety of factors that establish what we pay (quantity for example) and based on what we pay I can then decide how much profit we can make.  Look at our price on Glenlivet 12 and then look at the East Coast.  Different distribution charging different prices. 

2) Because not everyone pays the same price, not everyone with higher prices is necessarily trying to rip off consumers.  Stores base their prices on what they NEED to make in order to stay in business.  If you're not moving quantity, you need higher prices.  If you're a store moving mass numbers, then you can get away with lower margins. 

3) Price matching - Not every store can compete with mass markets like Costco, therefore I don't carry Bombay Sapphire because I don't even want to try.  I'd have to buy 1000 cases to get their pricing.  I'm not going to do that.  However, I do match on some items just to stay competitive.  That means I make NOTHING by selling some products.  It's practically a wash, but it helps with internet buzz.

4) Using price as an advertising tool - some stores like to use their low prices on select items (like Lagavulin 16 for example) as a way to attract attention.  Because Lagavulin 16 is a widely distributed product, they assume people will search it on Google, spot them as the lowest price, and then look around for more booze as a result.  The store will make NOTHING on the initial purchase, but might snag a few bucks on the other items.  To me, this is like naming your company Aardvark Spirits so that you can be first in the phone book (assuming someone will call the first store they see).  However, people who are always searching for the lowest price will only shop with you if you ALWAYS have the lowest price.

5) How does K&L set pricing?  We like to be competitive, but we also have a business to run.  We pay our employees amazing wages, provide health care, are super attentive to customer service, pay for staff education, and go out of our way to include customers in this business of ours.  I can guarantee you that there is not another booze shop out there that treats its employees as well as K&L does.  Nevertheless, despite all of our expenses, our prices are usually among the cheapest in the nation.  We work hard to do this by getting good deals on products we think we can work with.  We do not sell everything available for this reason.  We pick our battles, so to speak.

6) There are some stores out there that offer low pricing but do not offer much else.  If price is the most important part of the equation, there are certainly stores that are willing to go less than us in the name of making a new customer. I like to think that our customers understand that shopping with us goes far beyond just a good value, but also friendship, loyality, and just a sense of good will.

-David Driscoll

Reader Comments (5)

I agree, lowest price is NOT everything. Selection and service will often overrule a price issue if you've been burnt.
You write:
We pay our employees amazing wages, provide health care, are super attentive to customer service, pay for staff education, and go out of our way to include customers in this business of ours. I can guarantee you that there is not another booze shop out there that treats its employees as well as K&L does.

This goes far in who I chose to shop with. I want to know that a firm's "human resources" are truly treated as a valuable resource. I also consider business ethics in other areas, as well. For instance, not buying anything from Nestle that I know of, due to the African child slavery issue in the cooca plantations--they're not sure it's something they should avoid. I am. Not buying Arco gas, as they are part of BP. I actually do look for firms of strong ethics & values beyond what they sell, and look for stores & restaurants where the turnover is very low, and the staffing ample.

Yet another reason to like youze guys.

May 11, 2011 | Unregistered CommenterA. Marina Fournier

I'm most annoyed by merchants--primarily on the East coast--that make up for low advertised prices with utterly stratospheric shipping charges. Or just screw people with price and shipping charges. Shipping charges on the retail end are a nebulous, sometimes predatory affair. Most customers have no idea some merchants continually dog carrier reps for cut rates whilst simultaneously bloating the customer's shipping charges in a persistent campaign to drive profit on the ass end of their sales. So if you ever see elaborately graphed-out shipping charge schematics utilizing bottle counts, dimension codes, weigh codes, and all variety of zone codes and color codes conflated to actual zip codes; your probably about to get screwed and should buy somewhere else.

May 12, 2011 | Unregistered CommenterRN

RN - That's interesting. So you're saying that some of the low prices by retailers mask the fact that their shipping charges are steep? What are some examples of what you've paid? I'm curious to compare it to what we charge.

May 12, 2011 | Unregistered CommenterDavid D

Ok, I'll bite:) Yes, shipping charges are a significant yet much less visible revenue platform for some merchants. And they're the best kind of revenue platform for the unscrupulous... easy money. I've seen $23-$28 single bottle shipping charges on $50-$60 bottles of liquor that typically sell for $70-to-$90, but there's no way I'd ever pay that (even if the total price is comparable to others) because it's misleading. I'd say K&L's policies and prices are quite fair and in line with your industry. But it's not just about having the best rates, it's about how those rate calculations are presented to customers. I'd much rather buy from someone whom charges everyone a reasonably flat fee per bottle, with uniformly generous cost reductions as bottle count increases, than a merchant who utilizes wildly subjective multi-tabled graphs (fabrications) presented as technical rational for their revenue stream disguised as shipping charges. Some merchants absolutely adore their shipping revenue. In another life I was in the shipping business, so I could (but won't) speak to the cutting floor reality of big merchant/carrier service negotiations. But based on that experience, I'd recommend customers know to scrutinized a merchant's shipping policies and calculation justifications just as rigorously (if not more rigorously) as the merchants product prices. Shipping policies and calculations quietly speak volumes about a merchant's character.

May 12, 2011 | Unregistered CommenterRN

Good for K&L on the health care and benefits package - another reason they get my business.

May 15, 2011 | Unregistered CommenterSamuel Muindi

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