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Liquor store feasibility based on location and current competition

• The feasibility of opening a retail liquor store adjacent to the new Safeway store on Horizon Dr. in Grand Junction, Colorado. Must take into consideration the population as well as the already present liquor stores and present and future populations. The area has multiple grocery stores and liquor stores. What would be reasonable expectations regarding gross sales and profit margins given the fact that there are larger liquor outlets within three miles of the proposed location of the new store on Horizon Dr. Most of the grocery stores in this area seem to have small liquor stores adjacent to them but I don"t know how successful they have been. This particular location has two small liquor stores located 3/4 of a mile in either direction.

• Answer:

  Hi 29apple-ga, I will be analyzing the scenario you have presented using the SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis method that is usually taken to consider the situation here, along with some web resources to fill in the demographic information for the location being considered. Let's first look at the location and the nuances associated with it: MAP: Here are two views of Horizon Dr. provided my MapQuest: http://www.mapquest.com/maps/map.adp?addtohistory=&country=US&address=Horizon+Drive&city=Grand+Junction&state=CO&zipcode=&historyid=&submit.x=52&submit.y=11 DEMOGRAPHICS: I went directly to the Grand Junction Economic Partnership website: http://www.gjep.org/gjma.cfm There are several important numbers here...here is a list of a few of them that will be important in the analysis: Population (Census July 2001 Estimate) 119,281 Median Age (CO DOLA 2002) 37.95 Labor Force (Colorado DOL, July Pre 2002) 62,207 Unemployment (Colorado DOL, July Pre 2002) 4.4% Median Income (CO Dept. Labor, 2001) $26,224 COL Index (ACCRA 2002 1st quarter) 99.1 Median Home Price (CO Assn. Realtors Q2 2002) $130,500 We will also need more information wth respect to liquor consumption in the area. I have found exactly the right stats for determining this - per capita ethanol consumption for individual states, census regions, and the entire US. There are displayed below for Colorado and the entire country for the last few years, but the hyperlink provides far more segments if you are interested: ---------------------------------------------------------------------------- | Per capita consumption | |---------------------------------------| State or other | All | U.S. decile for geographic area | Beer Wine Spirits beverages | all beverages ---------------------------------------------------------------------------- Colorado 1996 1.40 0.38 0.86 2.65 2 1995 1.48 0.35 0.80 2.63 2 1994 1.40 0.36 0.86 2.61 2 1993 1.42 0.37 0.88 2.67 2 1992 1.35 0.36 0.82 2.53 3 1991 1.40 0.35 0.87 2.63 3 1990 1.35 0.29 0.75 2.39 6 [Gallons of ethanol, based on population age 14 and older] http://alcoholism.about.com/library/nconsum03.htm This is an article describing how a petition to relax Sunday alcohol sales was not successful due to lack of support. This does give the impression that citizens of the area are not extremely supportive of extensive alcohol sales: http://denver.bizjournals.com/denver/stories/2002/07/29/daily38.html We now have quite a bit of data to consider, so let's move on to the analysis. If you are not familiar with SWOT analyses, this description sums it up nicely: "Quite simply, a SWOT Analysis is perhaps the most effective, and objective way for you to determine how capable your company/organisation is, when it comes to surviving ‘threats’ and capitilising on ‘opportunities’. It is essentially a review of the Strengths, Weaknesses, Opportunities and Threats as they relate to your business or organisation. Typically, a SWOT Analysis would be undertaken prior to the establishment of a business (during the business plan phase), or at any other time when a substantial/major expenditure may be required e.g. when deciding whether or not to expand the premises, or in the case of increasing your product range/line. Through a SWOT Analysis you will gain an increased understanding not only of your business/organisation, but an indication of any critical and remedial action necessary on your part." http://maxpages.com/parexcellence/Article_5 Since the whole basis behind a SWOT analysis is to weigh Pros vs. Cons in an organized and rational manner, the amount of risk you are willing, along with other undefined situational variables may lead two people presented with the same SWOT analysis to very different decisions. In an ideal situation, the group doing the analysis would have the opportunity to hold a consulting session with their clients, but since this is not feasible in this case, I will not make statements, but instead ask questions that you should answer to the best of your knowledge. These answers can then be classified as "good", "fair", or "poor". A "good" answer would be a reason to go ahead and open the store, and a "poor" answer would indicate a weakness in the situation. Questions: 1. Do you have experience in retail sales, particularly in the same industry? 2. Is there some "angle" you can use to differentiate your proposed operation from the different sources of competition? IF you introduce this difference, how easy will it be for your competitors to replicate it? 3. Do the other stores appear to be successful by placing themselves adjacent to grocery stores? Is there any reason to consider an alternate location? 4. Is there a large population that does NOT frequent Horizon Dr.? I realize that this is a major road, but that doesn't mean that everyone will gravitate towards it. There may be a significant segment of the population that currently has to go out of their way to get to a liquor store. 5. How popular is the new Safeway expected to be? 6. Are there any regulations or legal constraints that may hurt the sales or inflate the costs of this store? 7. What "types" of customers are you planning on catering to, if any? Do you expect a certain demographic of the population to visit your establishment? 8. How densely populated is the area centered at your prospective location at a radius of 3/8 miles? This includes most of the people who would now be closer to your store than the two smaller stores. 9. Is there a possibility of any other stores offering similar products coming into the viscinity in the short or long term? 10. How stable are the large outlets? The small outlets? If they are just getting by you are almost sure to have cashflow problems unless you differentiate your operation. 11. How would opening a different type of establishment (such as a bar or tavern) change the dynamic of the area? Is this a worthwhile proposition? 12. Are operating costs high now? Are they anticipated to significantly increase in the future? 13. Can approximately 120,000 people (not all of which are employed and of legal age) keep what will now be 5 liquor stores running successfully? I know we don't have per capita dollar sales available to us, but if you think a little bit about how much the average person spends on this class of product yearly and then multiply it out, you can get a crude estimate of the town's spending. So this would also be the revenues of all stores selling these products added up. Dividing by 5 assumes that all stores do the same amount of business, and since this doesn't make sense in this case it won't be the best direction to take. Nevertheless, you will have the size of the market more or less determined :) I also have some statements that I can classify based on the information I have available to me: PROS: 1. The population is fairly mature, meaning that a larger percentage of the population is legally able to purchase alcoholic products. 2. The large majority of these people are employed (fairly good employment rate). CONS: 1. Average income is quite low - this may lead to a lot of purchases that have small profit margins. 2. Home values are relatively low in general as well...same consequence as (1). 3. Possibly saturated market for this kind of store. 4. Alcohol consumption levels are not very high when compared to some other states....this is an indication of lifestyle choices. I hope this has given you some insight into the factors that should help guide your ultimate decision. As you can probably tell, I don't have nearly enough information to give you a conclusive answer. I know that your knowledge along with the resources that I've provided, in addition to the questions I've asked, will lead you in the direction of a definitive "yes" or "no". Remember that the list I've provided is by no means complete (although I tried to come as close as possible); I encourage you to ask and answer yourself other questions that you may stumble upon yourself that deal with factors not mentioned here. If you have any problems understanding the information listed above, please post a clarification and I will try to respond promptly :) Cheers! (note: this salutation not meant to be taken literally!) answerguru-ga