Time for some more peeks behind the wine shop counter. It’s been nearly 15 years that I have been deeply involved in the independent retail side of this business. Over that time, I’ve become a go-to resource for people who are charmed and intrigued at the thought of opening a cute little wine shop of their own. From the outside, a shop looks simpler, and less cash-intensive than opening a restaurant and it seems kinder and gentler than dragging around a sales rep bag. And while both of these points are fairly true, wine shop life has its own quirks and tricks and rules of thumb. If it works for you, it can be a dream life and if it doesn’t, well, those four shop walls can get quite small, quite quickly.
So, with that in mind, I’ve started to round up some of my favorite questions. I’ll work into these columns on a semi-regular basis and try to keep them light enough that it makes sense for anyone looking for a glimpse of what it’s like to own a shop. And for those of you that are serious about it, this might not be the answer you want, but it’s probably the answer you need!
Dear Wine Shop Owner,
I’m thinking of opening a shop of my own sometime in the future. How do you decide which wines to stock? How do you deal with product mix? The total number of items to stock? Which items should I expect to be the most or least ordered?
Sincerely, Thinking About It
You might think I would launch right into an answer that touches on setting out your wine philosophy, your tasting process, maybe your decision-making criteria. Nope. When choosing what wines to stock, I started with my shop’s business plan – and how it’s being funded. When I opened my first shop in NYC it was tiny by design. It was self-funded, so I wanted to keep rent, payroll and working capital on the low side. I wanted a fast, low-cost build-out. I wanted to get customers – and their cash – flowing as quickly as possible. All this pointed to a shop with a small footprint – like 320 square feet worth of small.
That’s tiny. But this is New York, where an NYC license to sell wine and spirits costs $4,500 for three years. A wine-only license is less than $1,000 annually. And in other parts of the state, it’s even less. Other states are much more restrictive with their licenses, resulting in costs that can reach into the hundreds of thousands of dollars. Opening a 320 square foot shop isn’t quite so feasible if you’re out $500,000 for your license before you even open the door.
New York is also a state that gives every shop 30-day terms to start. As long as you don’t screw up (i.e. as long as you pay your bills when they are due), you have 30 days to sell your wine before you pay for it. In other states, where you have to hand over a check as soon as you receive it, the cash flow situation isn’t quite as dreamy. New York also has a wildly robust distributor network. Other states are rapidly catching up in terms of their distributor landscape, but New York still has incoming port-proximity and the resulting lower costs in its favor. Add to all this a regulatory structure that favors independent retail ownership and a price-filing system that keeps everyone reasonably honest – and this state is one of the best places to set up shop as a teeny, tiny retailers pedaling a quirky, boutique selection.
Okay, so now we can talk about the buying the wine, right? Nope. Not yet. Okay, maybe we can talk about wine a little bit – in very broad brushstrokes. Do you plan to be a regional specialist? Will you be focused on certain styles (hello natural wine shops!)? Will you be focused on bringing a diverse line up of winemakers to your shelves? Will you stock any big brands, at all, ever, or no way in hell? Do you see yourself as running a destination shop? Or will you be focused on your walk-in business?
That’s the fun, pie-in-the-sky dreaming stage. Once that’s done, put your pencil to paper (or more realistically, break out your Excel spreadsheets) and have some realistic conversations with yourself. Do the wines you want to sell—and the customers you want to sell them to—align with your start-up costs, cash flow situation, location and staffing plans? If you’re planning to open a natural wine shop in a hip Brooklyn neighborhood with ample, eager foot traffic, in a super cheap space with a DIY build-out and you’ll be the main operating employee, that probably makes sense. Opening a huge, gorgeous showcase shop employing a full-time staff from Day 1, selling allocated Burgundy and Champagne to collectors in that same neighborhood…well, maybe that’s not the best idea unless you have ample cash to burn – and a burning desire to deal with the logistics that will involve getting the wines to those collectors…because they probably aren’t coming to you (at least not at first.)
There are certainly ways to open and successfully run both of these shops…and all the kinds of shops in between – you just need to make sure that you have the investment capital and cash flow to support the business you’re hoping to build…during the building period.
Okay, now we can start to talk about wine, sort of. But first, a bit more on your customer and the service you want to offer them. My shop in New York City was in the middle of a wine shop hot spot. Within a few blocks there was Chambers Street Wine, deep into the Loire, Barolo, and the kickstarters of the natural wine movement; there was a shop that focused almost exclusively on collectors, phone sales, and wine dinners; and another shop that focused on the bigger brands, both low- and high-end. A customer could walk into my shop and if I didn’t have the exact brand or producer they were looking for – and I couldn’t convince them to try something similar – I could point them to another shop that did, no more than a five-minute walk away. I was able to specialize in lesser-known wineries and regions (at 320 square feet, I had to specialize) and still offer what felt like good, kind service.
When I helped open my family’s shop up in the wilds, where the Hudson Valley meets the Berkshires, I had to rethink that approach. To not stock something because it didn’t fit my specific ethos, especially when I clearly had room for it (that shop was close to 3,200 square feet, before we dropped a few walls and subdivided the space into storage and another rental unit), I was essentially telling people they had to drive 30 minutes to find what they were looking for. If the town had been bigger, if there had been a more big-brand-focused shop nearby, if I didn’t want to make sure the store wasn’t branded as being run by a snobby NYC-transplant, I might have handled it differently.
So, what did I do? (Now we’re talking about wine!!! Finally! Sort of….) I put together a very tightly edited selection of big brand items based on customer requests, deal structures, and cash flow considerations. Even with what felt like all the space in the world, there was no way I could carry a certain brand of white Zinfandel in a 1.5 Liter size, not if the deepest deal was a 75 case buy, tying up close to $3K worth of cash – and probably not selling through all those bottles for close to a year. This was also the case for Champagne, certain well-known spirits, and all sorts of big brand wines. The choice was: Buy the deepest deal and tie up tons of cash (not an option since I didn’t have tons of cash), or buy less and work on a smaller margin than other shops (so I didn’t look expensive, but to tie all that cash up and not even make my regular return on it? Not a good idea), or just take the full margin and look really expensive (not a good idea because then customers will think EVERYTHING in the shop is overpriced).
So, our conversations with the first batch of customers that walked through our door revolved around what they were looking for, what was the maximum they wanted to pay for it, and then after a quick bit of math, why I could potentially stock it or why my accountant would tell me it was a really terrible idea. To this day, there are still people roaming around Copake who can do a pricing analysis on a certain rum brand in their sleep. Some of them are still drinking that rum brand (but coming to me for their wine!) but many more have been turned onto other brands that don’t drain my cashflow quite as quickly.
Knowing your plan to talk to customers about the wine you don’t sell is perhaps just as important as talking about what you do sell. Knowing your limits is also important. A $10 Pinot Grigio, a Prosecco that hits $15, a buttery Chardonnay at $15, $25 and $30. Depending on where your shop is, these will be some of your most requested bottles. They certainly are at my shop. So, I sell them. And I work hard to make sure I’m selecting wines that offer great quality for that price point, ring a certain style bell, and allow me to buy from sales reps and companies I like. No, these aren’t the wines that drove me to love this industry and open a wine shop. And they probably don’t fit neatly into whatever my specific ethos is regarding farming, labor practices, etc., but as I mentioned above, selling them makes sense for my shop and the sort of service that I want to offer. And they pay the bills. Now, not every shop needs to do this. Not every shop wants to. But you’ll want to think about it before you open your doors.
Alright…so: Let’s finally talk about the wines you actually want to sell, the selections that made you want to open a shop in the first place. This is the fun part.
You have a budget for your opening buy and you have a certain number of shelf spaces to fill in your shop. For those shelf spaces, you decide your breakdown for red, white, orange, sparkling, and so on. You overlay the price points you want to hit, back into the cost based on your target margin, and start to populate a spreadsheet with your wish list of wines that are “must haves” and “want to haves.” Then, because you’re almost certainly going to want more wine than you can afford, you scale it back until you hit your target budget. If your budget allows for fewer wines that you have shelf space for, then welcome to the world of multiple faces per wine! It’s much easier to make a shop look full than it is to come up with additional cash once you’ve blown your budget.
That’s it. Easy, right?
(And you thought wine shops were all about, well, wine!)
