Lee’s Discount Liquor in Las Vegas has become known for adding levity to its advertising messages, and in some cases, a bit of a racy edge. One reads, “Liquor until 10 p.m. nightly,” while another suggests, “Wine: how classy people get drunk.” An ad from a few years ago—ultimately taken down due to controversy—read “Alcohol: It’s cheaper than therapy.”
Kenneth Lee, president of the 17-unit Lee’s Discount Liquor, says it’s all part of the unique, permissive vibe in his home city. “It’s Vegas,” he notes. “We get a lot more compliments than anything else.” Lee and his father, company founder and 2002 Market Watch Leaders “Retailer of the Year” Hae Un Lee, regularly appear in television commercials and on billboards. “When we go out, people recognize us and want a picture with us,” he says. “It’s almost like we’re cheesy local celebrities. But my dad gets a kick out of it.”
Behind the tongue-in-cheek messaging is a retail powerhouse that continues to thrive and expand within the competitive Las Vegas marketplace. While his father is still involved in the business, Lee has been responsible for the day-to-day operations of the company’s 17 stores since 2012. In recognition of the growth and continuing success of the retail chain, Kenneth Lee has been honored as a 2015 Market Watch Leader.
Family Ties
When Lee’s Discount Liquor launched in 1981, the teenage Kenneth Lee was expected to pitch in from the beginning. “In order for me to go out, I would have to clean up the parking lot or move some inventory,” he recalls. Initially, Lee’s plans called for a career path far different from his father’s. “When I went to college, I was going to be an optometrist,” he says. “But after my sophomore year in 1989, my father said I should think about joining him in the family business. We had three or four stores back then, and the company was growing. I didn’t really like organic chemistry that much, so I switched over to management and returned home to work after graduation. I managed a struggling store from about 1992 to 1998 and soon I started overseeing the entire operation.”
Lee says the big growth for the company came around that time. “In the late 1990s and early 2000s, we went from six to 12 units in about four years,” he says. “We were opening up stores left and right, and business was just booming.” Today, Lee’s Discount Liquor has 17 locations, all owned by Lee, his father and other family members.
Expansion is in the works, with an 18th location slated to open later this year in northwestern area of Las Vegas and another scheduled to debut next year in West Wendover, Nevada—a border town just across the state line from Utah. Based on the retail chain’s success in Mesquite, Nevada, Lee says he’s counting on big returns from West Wendover. “One of our best locations is the Mesquite unit, which is about 20 minutes from St. George, Utah,” Lee says. “Utah is all state-run and priced so outrageously that people will drive to stock up. The average ring at the Mesquite store doubles that of Las Vegas. Customers there purchase by the case.”
All but one of the chain’s 16 Las Vegas units are named Lee’s Discount Liquor. The odd store out is Strip Liquor, in the heart of the Las Vegas Strip. “It’s a great little store,” Lee says. “If I had my way, I’d try to open up more locations like that one because you don’t have to staff it as much, you don’t need as much inventory and the margins are great.”
In the other stores, Lee puts heavy emphasis on price and selection, which he says is the formula for driving a volume business in a highly competitive market. “In Vegas, every drug store, large box store, grocery store and convenience store has spirits and can sell them 24/7,” he explains. “It’s a lot of competition, but only a few have the buying power that we do. Even Total Wine & More only has two locations here right now. Costco carries limited SKUs, but does well with them. The grocery stores are really aggressive when it comes to pricing. We got more aggressive after Total Wine came to town, and our business is going through the roof.”
Total Wine entered the market when the recession was in full throttle, creating what Lee calls a “perfect storm” for a hit to the bottom line. In 2009, revenues at Lee’s Discount Liquor dropped to about $70 million for from a high of $85 million a few years earlier. “Right now, we’re probably back to where we were at our peak, but we have two more stores,” Lee says. “This year, we’ll definitely hit $85 million, but on a per-store basis, we haven’t fully recovered yet. We’ve seen double-digit growth in the last two years.”
Super-Sized Selection
The strategy at Lee’s Discount Liquor calls for highly competitive pricing on the most sought-after brands. “We sell all the big national brands nearly at cost—probably 10 percent over—and that’s what draws people in,” Lee says. “We’re hoping they’ll buy other stuff when they’re here.” The chain couples its low-pricing strategy with a massive selection of about 18,000 SKUs, including 8,000 wine labels, 7,000 spirits brands and 3,000 beers.
The vast majority of those brands are available in all the company’s locations, no matter the store size. The 17 units range from about 5,000 square feet to 31,000 square feet, with an average of about 16,000 square feet. For spirits, the chain tries to carry every single flavor of all the major brands. “That’s my dad’s philosophy,” Lee says. “We carry every spirit because spirits are about 50 percent of our business.” He adds that wines comprise roughly 30 percent of revenues and beer covers the remaining 20 percent.
Whiskies are resonating most among Lee’s customers right now. “The big brands and the hard-to-find offerings like Pappy Van Winkle are popular,” Lee says. “There are all these other high-end Bourbons, and they don’t have to be recognizable names. Suppliers are being very creative with marketing, and people are buying them up.”
Beer is also big, although trends are a bit different than in other parts of the country. “There are local brands, but nothing really has much of a following, and a lot of the breweries don’t market or bottle their beers,” Lee explains, noting that craft brands have mixed but generally less-than-remarkable results. “They don’t sell the way distributors thought they were going to sell.” As a result, the store’s beer business is heavy on major labels. “I sell a lot of Sam Adams and a few other craft brands that have been around for a long time,” Lee says. “And we sell tons of Pabst, Coors and Budweiser.”
On the wine side, Lee’s Discount Liquor does a booming business in high-volume, premium-priced wines. “The sweet reds are selling like you wouldn’t believe,” Lee says. “We pay $7.25 for Apothic and sell it for $7.99. We don’t make much money, but it’s a volume business and we sell about 300 cases a month of just the red.”
The wine selection at Lee’s is vast. While much of the volume is at the lower end, the stores do huge business in higher-end wines, with about 70 percent hailing from California. The chain recently restarted its Bordeaux futures business. “We didn’t do it for a few years because the market wasn’t right,” Lee says, noting that demand for Bordeaux and other fine wines is coming back as the Las Vegas economy continues to improve.
Event-Focused Marketing
Lee’s Discount Liquor holds tastings in most of its stores at least once a week. The free events are integral to the selling process, Lee says. But the company’s charitable events are equally responsible for raising awareness of the stores and their offerings, with the added bonus of giving back to the community.
The idea of an off-site tasting event came about 12 years ago when the chain had a vibrant wine club that’s now defunct. Witnessing some other tasting events in the city, Lee and his father decided to hold one of their own, with the proceeds going to the family’s charitable organization, Lee’s Helping Hand.
The initial tasting took place in 2003 and was boosted by the presence of reality show star Andrew Firestone, who appeared on that year’s season of “The Bachelor” series. “We were expecting 500 people and about 1,200 showed up,” Lee says. “We raised a bunch of money.”
Since that first tasting, the company has developed two distinct annual fundraisers: Lee’s Beer & Tequila Experience, typically held in May, and Lee’s Wine Experience, which takes place in November. Both events are hosted at casino properties in the city. “Now we’re up to about 5,000 people,” Lee notes. “We generate quite a bit of money, and all of it goes to Lee’s Helping Hand. We help out probably a dozen different charities. Every year we give out just over $100,000.”
Lee says his company is likely to see further expansion, adding that the overall operation will likely grow with more shopping centers and related enterprises. He plans to continue many of the practices and strategies that his father used in building their retail business. “The only thing we really have conflict about is work ethic,” Lee says. “When my father was in charge, everyone worked 60 hours if they were on salary. Even now, it’s 54 hours.”
Other than that difference of opinion, Lee has embraced his father’s wisdom when it comes to running Lee’s Discount Liquor. “I definitely believe in the discount volume business,” he says. “It’s selection, price and service—that’s what my father always preaches.”