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.