WHY WINE & LIQUOR STORES FAIL EVENTUALLY

Author: Rodgers Olare

When people get hit by severe financial circumstances, they opt for business ventures that can help them maintain a stream of income for sustainable periods. However, a number of these business ideas normally fall-short of the sustainability targets of most investors.

Before putting money into a wine and spirit outlet, it is critical to carry out a proper assessment of the business as well as the industry in which you want to establish your business. Most investors have lost fortunes to these somewhat elusively lucrative businesses such as that of wines and spirits. Below are a few reasons why wines, spirit outlets and bars in Kenya eventually fail.

Photo credit. Saliquor.com

LICENSING

The Kenyan wine and liquor industry is a mystery with insurmountable licensing blockades in every aspect. Before one can enter into the wine and liquor retail or wholesale industry, there are a number of licensing that one must have. The number of licenses to be acquired by wine and liquor traders is the biggest impediment in this industry. Unlike in other markets where a trader needs a universal license to operate a business, the wines and liquor business demands that a trader must have series of licenses that define every activity they intend to be involved in. These licensing are hard to come by due to their high costs and bureaucratic measures that the government uses to limit such businesses. Without proper licenses, such businesses are deemed illegal and could be closed at any given moment.

OVERHEADS

Like in any business, the associated overheads for running a liquor store usually run high. These overheads include stock, rent, electricity, water, administrative and kickbacks to patrolling policemen. Liquor traders in the country are accustomed to evening levies that could sometimes go higher than 500 shillings a day, depending on the wrongs committed. Additionally, there are associated transportation costs for bringing in new stock every single day. Without proper cashflow, liquor traders might go out of businesses if they fail to keep up with the financial needs.

LOCATION

Location is a very critical component of a successful business strategy. nevertheless, the location of a liquor store must target a stream of customers capable of buying a sustainable amounts of wine/liquor. In cases where traders fail to research on proper locations, the businesses spiral downward into unending losses.

MANAGEMENT

The biggest cause of failure for any business is poor management. Lack of proper management can affect the profitability of liquor businesses severely. Ideally, management of liquor businesses is obviously difficult as it involves dealing with drunkards. One of the causes of managerial failures is giving too much credit to customers. While it is hard to turn-down loyal customers requests for credit, it is harder to follow up on debts owed for liquor. As such, many liquor stores have had to grapple with serious debts owed by their customers.

COMPETITION

The wine and liquor industry has many players who have mastered the approach to profitability. It takes a number of years for investments in wines and liquor to be sustainable. However, there are many short-cuts that most traders use to gain competitive edge over their competitors. For instance, pricing has helped many traders become more competitive than most of their counterparts. Customer service and environment also influence the competitiveness of liquor stores. For instance, stores with clean and attractive displays, good music and beautiful customer service persons tend to be more popular than those without.

However, stiff competition has drove a number of players out of the markets as many traders do not capitalize on marketing. Poor marketing strategy or lack of it has led to poor visibility of certain stores. on the other hand, inability to improve and scale up for most liquor stores have made them prone to losses. Most profitable stores are those that scale-up to become wholesalers after a year or so.

COUNTERFEITS

Counterfeiting is a common trend in the liquor industry. While there are many genuine brands of wines and liquor in the Kenyan markets, counterfeits continue to penetrate the markets sharply. Sadly, it is difficult to tell the difference between genuine and counterfeits as prices are often same. With the influx of counterfeit brands in the market, most traders who fail to identify with genuine brands would definitely be baited and kicked out of markets.

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