Buying an Off-Licence

The days of the traditional, local co-op off-licence, which seemed to be stocked entirely with Carling Black Label and Blue Nun, are over. Tastes have changed.

With consumption up 50% since 1970, the British spend more on alcohol now than ever before and are more inclined to pay extra for premium quality goods.

A bottle of fine wine alongside a meal, for example, is far more appreciated than a four-pack of cheap lager. Czech beers and Chilean Chardonnays now grace the independent retailer’s shelves.

Despite the sometimes overwhelming competition from supermarkets and the lure of a quick trip across the channel to bring home a van-load of cheap booze – a particular threat in the South East – independent off-licences in the right location, with a bit of business sense, continue to thrive.

This is partly because more people are choosing to drink at home. The combination of home cinema, for example, with stricter drink-and-drive legislation means that the temptation to keep the fridge well stocked is stronger than ever.

In-depth knowledge

Much like the bakery sector, for most off-licences to thrive they must position themselves as being one step above the supermarket sector. This usually means providing a wealth of customer service and specialist knowledge – superseding even off-licence chains such as Oddbins, Thresher and Wine Rack.

‘Bucket’ off-licences can still survive in more cosmopolitan, young professional or student areas, where fewer people have access to cars and impulse purchases are made on a regular basis.

This is also partly true in the centre of cities where proximity to offices can also provide you with everyday passing trade. However, you will have to stock a better quality of product to attract this sort of customer.

The vast majority of trade, however, will come from people ‘topping up’ the reserves they have bought elsewhere.

Location is everything

You may have already guessed that, as with most retail businesses, location is everything. As usual, it is also about making sure you stock the sort of products that suit the aspirations and wallets of the area.

In the case of off-licences, though, the proximity to other shops can be equally important.

Takeaways and video shops make fantastic bedfellows; people will often pop in to the off-licence and pick up some drinks after collecting a Chinese meal or choosing a video or DVD.

Pubs are not always poor neighbours either, as patrons may pop in to the ‘offy’ to pick up some supplies before heading off to a party.

Specialising in a particular product – such as top-notch wines or real ale – can allow you to draw custom from a far wider area, in much the same way that cheese shops can still compete with supermarket deli counters. You will need to have both knowledge and passion.

It is not all about the booze

Of course, off-licences do not just sell alcoholic drinks. Tobacco and snacks associated with drinking are omnipresent. Confectionery and soft drinks are also essential. As the line between convenience store and off-licence becomes blurred, some are extending their range, especially if they are the only such store in the area.

One other extra now becoming common is some sort of ‘party’ service: delivering drinks to the venue in addition to providing glass or tableware hire.

The bulk of the business cost in this sector will be the premises themselves, which will vary enormously. Busy high street locations will come at a premium, particularly in affluent areas.

The cost of stock is usually lower than in many comparable businesses, but if you choose to stock fine wines, malt whiskeys or champagnes this figure can soar. It is worth noting that the profit margins on such drinks are higher, sometimes representing well over a quarter of the retail price.

You also need to bear in mind that, particularly in poorer areas, off-licences are seen by insurers as prime candidates for theft, however, installing security measures such as CCTV can reduce premiums.

Good profit-to-turnover ratios

None of this detracts from the fact that profit-to-turnover ratios are higher than in many retail businesses. If you detest mornings but don’t mind evenings, the hours may suit too.

Being a ‘people person’ is important. In some communities, you will be a regular stop-off for a large section of the population. Given that most shopping will be done in the evening during people’s social time, you’ll have to enjoy chatting to and getting to know your customers.

This can be a bonus, as you can get to know their tastes, advise them and adjust your stock accordingly – it could be seen as the sociable way to keep ahead of the pack.