After 18 months of private liquor sales in Washington state, the competitive liquor market is moving into its second holiday season that is traditionally its highest sales period of the year.
Local spirits sellers are pulling out all the stops to compete for those sales. It’s a contest that has some retailers expanding store liquor departments, others carrying holiday gift packs and some offering extra services such as online sales and abundant, well-trained sales associates on the selling floor. Other liquor retailers, such as warehouse-style booze seller Total Wine & More, rely on volume-order advantages and promotions with spirits producers that help level the playing field with stores such as Costco and other volume discounters.
Issaquah-based Costco invested $22 million to back the voter-approved Initiative 1183, which pulled the state out of the business of selling spirits on June 1, 2012.
The sudden change in liquor sales rules created a highly competitive retail environment in which liquor sellers in Clark County increased from 14 state-run and state-contracted stores to more than 75 licensed sellers of hard liquor. The voter-approved law attracted major newcomers such as Potomac, Md.-based Total Wine & More, which opened a Vancouver store in May.
The company’s sales strategy is three-fold, based on its selection of more than 14,000 spirits, wines and beers, its trained service staff and price, said David Trone, co-owner of the more than 90-store chain.
“You’ve always got to have the best price in the market,” Trone told The Columbian.
That strategy appears to be working in some parts of the state, such as Bellevue, where the Total Wine & More store was the state’s highest grossing liquor store in 2012, according to the Puget Sound Business Journal.
Statewide, booze sales could top $260 million in the three months ending in December, an increase from the days of state-run liquor sales, if the upward trend continues. According to figures kept by the state Department of Revenue, fourth-quarter sales reached $258.9 million in 2012, a 13.6 percent increase over sales of $227.9 million in the same three-month period in 2011, before privatization went into effect.
But even as Clark County’s booze-carrying retailers ramp up for holiday sales, it’s unclear whether liquor sales here are following the state’s year-over-year rise in sales because the state does not track sales by county.
Taxes may drop
The initiative, which added a 10 percent distribution fee and a 17 percent liquor tax on every bottle sold, continues to send local booze buyers to Oregon and to no-frills spirits sellers such as Costco, which did not respond to requests for comment for this story.
Although the distribution fee imposed by I-1183 is set to be scaled back next year, members of the Washington State Liquor Control Board have said state legislators could extend the charge.
“If it (the tax structure) goes down, that will bring down the overall price of the spirits,” said Pam Lindloff, an associate vice president and retail expert with NAI Norris Beggs and Simpson’s Vancouver office.
She expects the change would entice more Clark County booze buyers to shop on the north side of the Columbia River. Lindloff also expects customers here to gradually grow accustomed to extra services being offered by the retailers competing in Washington’s privatized liquor market.
“They’re not going to get those kind of experiences in Oregon,” she said.
That’s because Washington’s transition to private sales quickly attracted chain liquor stores, such as Total Wine and California-based BevMo, which opened a store in April in east Vancouver near Southeast 164th Avenue.
The liquor seller’s strategy is to be thought of as a “neighborhood store,” said Jim Root, district manager of the chain’s 10 Washington stores. BevMo operates 120 stores in three states, including California and Arizona.
The company features spirits, wine, beer, a growler station for on-tap craft beers and a special tasting room, along with bar accessories. But training its staff about customer service and beverages is the company’s hallmark, Root said.
“If you’re getting ready for a holiday party and want to know what to buy, we can offer that help,” he said, adding that staff can also be trusted to know how to make a Rob Roy or a Manhattan.
Oregon sales boom
In Clark County, there are already signs that additional competition from Oregon’s cheaper state-run liquor system has had a damaging effect.
Only one Vancouver store remains open of the seven former state-run stores in Clark County that were auctioned off to small-business entrepreneurs, said Byron Roselli, a vice president with Eric Fuller & Associates, a commercial real estate firm that helped lease some of the former state sites.
Some blamed the initiative’s 10 percent distribution fee, which favors volume-buying retailers. Others blamed I-1183’s 17 percent liquor tax for sending their customers to Oregon.
Gross sales in the 12 Oregon liquor stores along the Washington state line were 31 percent higher in the first four months of the state’s 2013 fiscal year, compared with the same period in 2012, according to figures published by the Oregon State Liquor Control Commission. By comparison, gross sales for the entire state increased by 4 percent in the same four months in 2013 over that period in 2012.
But Oregon officials do not track where those liquor customers are coming from, making it difficult to know whether Clark County shoppers account for the increase, said Christie Scott, the agency’s public affairs specialist.
Still, the data “certainly indicates that those sales are coming from our neighbors in Washington,” Scott said.
That would explain why Portland liquor store owner Rob Babin has not seen a let-up in the sales increase his store experienced just after I-1183 went into effect. But, Babin said, his Jantzen Beach store Stateline Liquor has always drawn a primarily Washington customer base.
“Even before (Washington’s) privatization,” he said.
The store’s sales increase has held steady since I-1183 went into effect, said Babin, who has permanently retained the two additional employees he had hired to handle the volume.
The Oregon border’s increased liquor sales also prompted that state’s liquor agency to consider adding three more stores along the border. The state also is looking for ways to improve customer service for spirits sales by appointing a task force to study concepts such as online booze purchases for store pickup, Scott said.
That service and other booze-related sales concepts are already available at some of Washington’s new spirits retailers, such as BevMo and Total Wine & More, both of which offer online shopping with store pickups within one hour.
Other longtime retailers are investing in the business of selling hard liquor as well. Among them is Fred Meyer.
In a recent remodel of its east Vancouver Fisher’s Landing store, the retailer downsized its electronics department and created a large liquor store within the space formerly occupied by electronics. It was all part of its competitive strategy, said Melinda Merrill, a spokeswoman for Portland-based Fred Meyer, which is owned by Cincinnati-based Kroger Co.
“We absolutely want to increase our sales (of spirits),” Merrill said, adding that the space requirements for electronics have changed because people don’t buy as many movies and compact discs.
The Fisher’s Landing store’s new liquor section is also staffed by trained employees and a wine connoisseur, and equipped with a mini bar for tasting events.
“This was an opportunity to give this a try and see where the spirits business is going,” Merrill said.
Retail expert Lindloff said she isn’t surprised at all by the efforts retailers are making to compete in a new market that was formerly operated by a dull, noncompetitive state system.
“Now, it’s not just about buying a bottle of Jack Daniels or a bottle of wine,” she said. “Today, it’s more about an enhanced experience for the consumer.”
