Privatization Killing Off Old WA State Liquor Stores – Competition, Special Regulations The Cause
When the voters of Washington state approved doing away with the state's liquor store system, and allowed privatization, hundreds of businessmen and women jumped into bid on the 167 state-run stores that would be auctioned off.
Now, nearly two years later, over 60% of those stores are gone, out of business, and the owners awash in debt.
The Tacoma News-Tribune has done an extensive followup about how these stores fared since the state system went away. The state auctioned off the stores to the total price of some $31.9 million for the rights to own one. 19 months later, dozens are closed, and at least 24 others are in danger of losing their license because they are far behind in payments to the state.
The News-Tribune reports some of the suspected reasons for the failures:
"A number of things contributed to the business disaster that has ensued: Too-high prices for state store rights, a rushed effort to privatize the state’s liquor business, competition from big-box stores and liquor superstores, unclear rules and regulations about how the new system would work and a privatization initiative written by and for big liquor retailers, not the state’s neighborhood liquor stores."
The state store owners figured that with them offering a much wider variety of never-before available liquor, they could counter the lower prices and purchasing power of the big box stores who also were allowed to sell liquor if they were bigger than 10,000 square feet. However, in the months following the privatization, that didn't happen. Experts also say that since restaurants and bars can now buy their liquor from a variety of sources, including suppliers who came here to open up new venues, the old state stores lost almost all of that business.
Under the old state system, such establishments had to buy from the state stores and suppliers. One store in Chelan, WA saw it's sales drop from about $2.5 million when it was a state store, to about $260,000 after privatization.
Many of the store owners also blame the state liquor control board for how they handled procedures and policies concerning the old state stores, claiming the state gave preferential treatment to the big box outlets. Also, many of the people who bid on the state stores found themselves facing leases and building rentals they had trouble affording, let alone making the payments with business slumping.
What happens next is not sure, but some critics say the bidders didn't do their homework, and the state shouldn't interfere with the "natural selection" that weeds out less competitive businesses. The store owners and others say the state should provide a resolution to the issue. Several store owners say they paid (collectively) the state $31 million and all they got was grief.
[Via The News Tribune]