In its recently published lists of the ten most and least profitable businesses to start, Forbes would seem to be lending truth to the old joke about “how to make a small fortune in the wine business.” On their list of the ten least profitable:
#3: Beverage Manufacturing, to include wineries and breweries. The main reason cited for the low profitability is competition.
#9: Beer, Wine and Liquor Retailers. The article cites the complications relating to state and local alcohol licenses and distribution laws and how much these laws tend to favor distributors over retailers.
Although not mentioned, many of the problems inherent to opening your own Ye Olde Wine Shoppe are almost certainly related to their #8 least profitable business, the broad category of “specialty retailers.” Certainly the pressures of nearby mega-retailers like Wal-Mart and Target (not to mention massive specialty chains like PetSmart and Barnes & Noble) have driven many a small niche retailer into the ground. In areas where more liberal alcohol distribution laws exist, the same threat holds true for wine retailers as well. A small liquor store can do well with low overhead and a good location for Saturday night purchases, but a wine shop may find itself in deep doo-doo if a Total Wine opens a mile away.
By the time shoppers realize just how lousy the megastore wine purchasing experience can often be, they may venture back to Ye Olde Wine Shoppe just in time to pick up some great buys on Burgundy during its “Going Out of Business Sale.”
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