Questions about opening a retail home-brew store

My long time friend and I are avid home-brewers looking to enter into the brewing industry. After our initial exploration of possibilities we have decided that retailing home-brewing equipment is the best fit for our budget and constraints. As we continue this period of serious research and planning, we have realized the limitations of our knowledge in the retail sale of hobby equipment. It was the supportive home-brewing community that first ignited our passions, so we continue to reach out to various industry experts in order to compensate for our lack of experience.

1. What sorts of profit margins are there with this type of business?
1. What products sell better then others? Is it better to stock our inventory with lots of recipes, or is it better to have a tangible catalogue of a wide array of products (recipes, bottles, books, carboys, ale pales, mash tuns, emergent chillers, etc).
2. How big of a marketing budget is recommended? Is radio and newspaper advertising the best approach, or are posting flyers around town and other “gorilla” marketing tactics the better approach?
3. Within about a 10-mile radius of the store, the population is about 30,000 people. For a store with approximately 1,500 sq feet of space, what sorts of revenues can be expected?
4. Who are some of the suppliers of homebrew supplies? Who take care of the clients the best, and are the easiest to work with?
5. Are the sales of home brewing supplies fairly consistent from month to month, or is there a “busy season”.
6. Is there any other advice or heeds of caution that we should know about?

The first question I would have is how vibrant the competition is in your area. If your target market is only the 30k people in the 10-mile square radius, that's not going to be nearly large enough to support a full-fledged operation. The Albany, NY area supports one HBS, and Albany County has a population of about 300k.

It's a real tough business, however you look at it. Even the stores that do manage to stay open for a while don't seem to make very much money. If the budget is already tight before even opening, you're already in a real tight spot. Not to be too discouraging, but many businesses fail simply because the owners run out of capital before they can get really established.

Population base was my first concern as well. Even if you are the only game in town you will be in competition with the online vendors as well. While people probably would rather "have it now" the online vendors prices are tough to beat. If you could get rock bottom rent and overhead that would help. Good luck.

Have you thought about a BOP or wine-making operation to help support the supplies side? I don't know about in the US but here in Canada the BOP and wine-making on site are very popular. My LHBS is mainly about making wine and beer and just sells the equipment and ingredients because he already has them.

Also I think if you want to maximize profits you will need to leverage internet sales, with that small of a customer base I don't think you'd be able to stay afloat with walk-in customers only.

You might want to talk to the sales department at one of the big wholesalers (LD Carlson, maybe) and see if they can answer some of your questions about profit margins and product selection. They might even have some business plan assistance.

bradsul said:

Have you thought about a BOP or wine-making operation to help support the supplies side? I don't know about in the US but here in Canada the BOP and wine-making on site are very popular. My LHBS is mainly about making wine and beer and just sells the equipment and ingredients because he already has them.

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My LHBS is similar - the main business is making wine on premises for customers but they carry an excellent assortment of beer and wine making supplies including bulk grains and bulk liquid malt extract. I am fortunate enough to have the choice of two supply shops within a reasonable drive and I almost always go to the one that is further away due to their superior stock and selection. FWIW - I have never ordered any supplies online.