Binnys Beverage Depot Of Chicago Continues Aggressive ExpansionMay 19, 2011
Binny’s Beverage Depot owner Michael Binstein plans to open two new stores this year in the greater Chicago market. In the last four years alone, he has expanded his beverage alcohol retail business from 19 to 25 stores, and now ranks as the leading independent retailer in Illinois. Binstein recently spoke with Shanken News Daily about his business, which will surpass $250 million in revenues in its fiscal year ending July 31.
SND: In the last four years, you’ve expanded from 19 stores to 25 stores, mostly through acquisition during a very difficult economy. Has your investment paid off?
BINSTEIN: The honest answer is that the investment is paying off. Time is the ultimate test, and one needs a certain amount of humility. But there’s not a single acquisition, store opening or expansion of our model that I would take back.
SND: How has Binny’s been affected by the downturn in the economy?
BINSTEIN: The best time to run into a market is when everyone is running for the exit doors. I think we’re contrarians by nature. Our most dramatic growth has occurred since the Cassandras and the pundits sounded the death knell for our economy in general and our industry in particular. Then there’s the fact that when you sign 99-year leases, which we do as a matter of practice when we can’t buy our own property, you’d better be prepared to ride out the business cycles that will always be a part of life. You can’t be a summer soldier and be in business. We monitor certain things every day, and one of them is customer count. The number of people actually walking through our front doors has been showing double-digit growth. Market share is healthy and growing. Sales have been helping growth, but all things considered, I think customer count is the single most important vital sign for all three tiers of our industry—not just for retail and not just for Binny’s.
SND: In 2007, you reported revenues of $152 million. What are your expectations for this year?
BINSTEIN: We’re now passing $250 million in revenue. We’ll easily surpass that by the end of our fiscal year in July. We made a huge reinvestment last year, including a $1 million expansion and renovation of our Highland Park store in the North suburbs, a $1 million renovation of our Chicago, Lincoln Park store (formerly Sam’s Wine & Spirits). We also opened a new store in a suburb called Bolingbrook, a 23,000-square-foot unit that’s part of a regional shopping mall. So last year was a very productive and busy year on top of the year prior, when we acquired Sam’s. In August, we’re opening our 26th store in a major suburb called Bloomingdale in a former 27,000-square-foot Office Depot. Another announcement is imminent about a November opening in a suburban location outside of Chicago, but the deal hasn’t been finalized.
SND: How big a player are you in the greater Chicago market?
BINSTEIN: I’m told we’re the largest independent in the Midwest, and certainly the largest independent in Illinois.
SND: I read recently about Brian Rosen joining Evolution Wine & Spirits and their plans for two more stores in the Chicago area. What do you think about that? Is competition heating up in your market?
BINSTEIN: I’m proud to announce that Fred Rosen (former owner of Sam’s Wine & Spirits) is working for us.
SND: When did he join you?
BINSTEIN: Fred joined our company in October and is back working in the flagship store in Lincoln Park, the former Sam’s location. He’s helping to solidify the old Sam’s customer base, building bridges to old customers and new customers alike. He’s been a great asset for us.
SND: What do you think about his son competing against you?
BINSTEIN: I’m very happy and proud that Fred’s working for us.
SND: Who do you consider to be your biggest competitor in your market?
BINSTEIN: This is going to sound like a cliché, but I think anyone and everyone who holds a liquor license is competition, and there are tens of thousands of people who do. Convenience should not be underestimated. We may have the selection, we may have the best price, but with gasoline nearing $5 a gallon, people have to make tough decisions. Every player at every trade channel has a contribution to make. So there’s not a competitor that I minimize.
SND: In 2007, we reported that your online sales totaled $10 million. What are you doing online today?
BINSTEIN: It’s about $15 million. But the complexion of the business is changing, and you can see the outlines of the future. More and more of our business is in-state for customer pick-up at one of the stores. Let’s be realistic: It will take some time to sort out the inter-state shipping mess, and there are very few places in the country we can now ship to. At some point it will all get sorted out, but we’re not pushing the pause button on our Internet effort. In fact, we’ve found that some of the most dynamic growth is happening in our backyard—across town, not across the country. So binnys.com has become our 26th store. Two main forces are fueling growth here: the in-state (business) and something that’s relatively new to us, our deal of the day. We send that out to our targeted mailing list. It’s usually a wine, although it can be a spirit, that’s discounted for 12 hours only. It has done phenomenally well and now represents more than $1.5 million in annual business.
SND: How big is that mailing list?
BINSTEIN: The mailing list is the alpha and the omega of this effort. Without that customer list, without that data, without our ability to mine that list and target it, there would be no online sales campaign. We’re approaching 300,000 customers. One of the next frontiers of competitiveness—it’s not really the next frontier, it’s here now—is the ongoing conversation with our customers. It’s about how to continue having that conversation in a way that’s responsive, in real time, and deals with what they want and need. Any retailer spending heavily with print media right now is spending more and more money to chase fewer and fewer readers. With us, it’s about working toward the day when we have marketing self-sufficiency, when we’ve amassed a customer list that makes us virtually self-sufficient, when we can carry on this daily conversation with our customers and bypass the third party.
SND: Have you seen a change in your average sales receipt?
BINSTEIN: No, actually it’s always been stable and rising. We haven’t seen a drop in the average ticket. Because we’re in 25 markets, and each market is a reflection of its community and its local economy, some stores have been harder-hit than others. But by and large, our average ticket has not dropped.
SND: Do you have any plans to expand to other states?
BINSTEIN: We’re keeping an open mind. We certainly have looked, and there are opportunities. But there are so many places within our market, so many communities and areas where we still think we could open a store. I think we’d like to finish Illinois before moving on.
SND: How are your relations currently with major suppliers?
BINSTEIN: They can get very ideological—if not theological—about pricing. I think a bottle of wine, or liquor or beer is like all commodities. It’s no different from selling soybeans, corn or wheat. It has a price, and it’s based on supply and demand, and it ebbs and flows in every market. Just as the corn, soybean or wheat broker or farmer can’t get too ideological or theological about what a bushel should cost, the same goes for our business. One of the oxymorons in our business is something called price integrity, when suppliers believe something should cost $20 or $30 and they don’t really care what the customer thinks it should cost. I think that’s a very myopic, unprogressive way of looking at business. This is not a very popular thing to say.
SND: How about wholesalers?
BINSTEIN: There are bad retailers and there are bad wholesalers. There are lazy retailers and there are lazy wholesalers. I’ll leave it at that, but I will say that I think wholesalers have an opportunity, a very unique opportunity, to make themselves even more indispensable in this era of consolidation, because suppliers are looking for foster parents. Suppliers are no longer the primary caretakers of a brand. They may actually possess the birth certificate for the brand, but they need other people to nurture, raise and educate the brand. The suppliers have gotten away from brand-building, and now it falls more and more to the wholesaler and retailer to build those brands and fill that void.
SND: Are there still opportunities for small entrepreneurs in beverage alcohol retailing? Can a small, single-unit store survive and thrive in today’s climate?
BINSTEIN: Absolutely. There’s never an opportunity to overcharge and under-deliver. As long as we’re not using code language to ask the question, “Is it still okay to work at outrageous margins and not give people the selection they deserve?” There should have never been that opportunity, and there isn’t that opportunity now. There’s room for the Davids and the Goliaths. And they both need each other.
Michael Binstein was named a Market Watch Retail “Leader” in 1997 and was named Market Watch’s “Retailer of the Year” in 1999.