They’ve spent hundreds of thousands of dollars of their own and their friends’ and families’ money buying former state liquor stores hoping to create stable businesses that will create a steady income stream for themselves and their families.
Instead, they are losing money monthly, and are scrambling to adjust their business models to find a comfortable niche in the now-hypercompetitive Washington retail liquor industry.
Many worry that the rules of the retail liquor game have doomed them to failure when their bank accounts run dry.
Here are some of their stories.
• Michael Cho gets agitated when he begins reciting the ways the state’s new privatized liquor sales model is stacked against small independent merchants like himself and his partners. Cho owns three former state liquor stores, in Gig Harbor, Bainbridge Island and Anacortes.
“This,” he declared without hesitation, “is the most stupid thing I ever did.”
“We believed that with hard work, with careful spending, we would eventually succeed. That’s the American dream. So far, it’s not happening.”
Cho said he and his partners carefully planned the stores’ acquisitions, but they didn’t count on what he calls “fundamental flaws” in the system.
Chief among those is the power that the new system gives liquor distributors, Exclusive agreements with major distilleries mean each distributor is the sole source of a long list of different brands of spirits.
Distributors offer lower prices to volume buyers, but the state’s rules don’t allow the small liquor stores to form a collective to buy in bulk. Cho can’t earn volume discounts by entering a single order for all three of his stores unless he accepts delivery at a single location.
The liquor store owner said distributors are selling spirits in some cases to bars and restaurants at lower prices than they’re selling them to the former state stores. He knows because he also owns a bar. That effectively eliminates any chance that those small local stores, which had been the bars’ and restaurants’ suppliers before privatization, could sell any volume of spirits to bars and restaurants.
• Benti Sarai said he considered multiple “what ifs” before bidding on liquor stores, but the reality of ownership has proved worse than even his “worst case” predictions. Sarai, an experienced convenience store owner, owns two former state stores, one in west Olympia and the other in Longview.
In the case of his Longview store, the high total cost of spirits after all of the fees and taxes, plus the prices charged by distributors, have diverted considerable business to Oregon liquor stores across the Columbia River.
In addition to the fees and taxes small store owners send to the state, they’re paying credit card surcharges, typically about 3 percent, on the money they’re collecting for the state.
• At DuPont Cigar and Liquor, Nyong Pang, the store’s owner, is now working 12-hour days, seven days a week in an effort to keep her costs to a minimum.
“I don’t have a private life,” she said.
Forty percent of her former business disappeared under the new system because higher prices drove military buyers onto the nearby JBLM base, where taxes aren’t charged. She and relatives and friends here and in South Korea paid $150,000 for the store.
• On Tacoma’s Sixth Avenue, Pop’s Liquor co-owner Michelle Tate said she’s applied for a job as a dog catcher to supplement the income the store is generating.
She’s enlisted family members to staff the store. If she gets the dog-catcher job, she’ll work days on that job, and evenings clerking at the store. She and her father spent more than $400,000 to buy the store and its inventory.
• David Cho (no relation to Michael Cho) had a successful career in finance in New York before moving to the Northwest. He now owns two former state stores, one in Port Orchard, the other near North 26th and Pearl streets in Tacoma.
He’s remodeled both stores to give them more character. “I wanted to get rid of the DMV look,” he said. And he spreads his time between both stores every day, taking off only Sunday morning.
Both stores are still a cash drain on Cho. He sold a piece of property in New York to help pay the bills. Each store now costs him more than $5,000 a month out of his pocket.
And the long hours, he said, have taken a toll on his home life.
To move the stores toward profitability, he’s trying to renegotiate his leases, but so far landlords are resistant.
• In Olympia, a downtown store co-owner said business is good. Andy Thielen, co-owner of T Brothers Liquor Lodge with his brother Mike, said the store created a wine cellar inside the store to cater to oenophiles in the capital city. That cellar features hundreds of different varieties of wine.
That selection is larger than any supermarket or discount store in Thurston County, he said. Neither of the big spirits and wine specialty stores, Total Wine and Spirits and BevMo, has opened a Thurston County outpost, giving T Brothers no major competition in the specialty wine business.
John Gillie: 253-597-8663 john.gillie@thenewstribune.com
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