At a time when labor challenges are impacting nearly every aspect of the beverage alcohol business, Jon Stiles thinks The Party Source has the right approach. Based in Bellevue, Kentucky, The Party Source is 100% employee owned. As president and CEO of the company Stiles leads a team of 120 employees, about 70 of whom have a direct stake in the company.
“That, in and of itself, helps with customer service,” says Stiles. “Almost everyone you approach on the floor is an owner—those who have been here for a year or more. The better the store does, the more profitable it is, the higher the stock value of the company.” This ultimately means employees reap the benefits.
The Party Source wasn’t always in the hands of employees. Ken Lewis launched the Cincinnati-adjacent store in 1993 after running stores in Louisville and Lexington—stores he eventually sold to focus on The Party Source. In 2013, Lewis decided to launch New Riff Distillery, but Kentucky law prohibited ownership of both. So, the next year, Lewis sold the beverage alcohol megastore to his employees in an Employee Stock Ownership Plan, or ESOP. According to interviews published at the time, Lewis said the approach netted less for him but was an effort to chip away at income disparity between management and workers, and to give retirement security to long-time employees.
Stiles started as specialty food director at The Party Source, then transitioned to general manager before taking over as president and CEO when the ESOP occurred. “It’s an excellent way for owners to cash out of businesses and take care of the future for their employees,” he says. The store is now firmly in the hands of its employees. “We purchased the store from Ken in April 2014 and we had eight years to pay the store off,” Stiles notes. “That required a lot of financial discipline, but we actually paid the store off 18 months early.”
The Party Source has evolved and grown in the 28 years since Lewis launched it, but its retail approach has remained constant. “Our tagline is ‘Everything but The Guests,’ and that really sums up The Party Source,” says Stiles. “You supply the guests, we provide everything else.”
With about 60,000 square feet of selling space as well as the storage and office space, the two-story store spans more than 100,000 square feet. The store has been through three expansions since its launch, becoming a destination not only for Kentuckians but also to Ohioans just across the river.
“It’s a large store so we have pretty much the largest selection of products available anywhere in our marketplace,” Stiles says. The Party Source doesn’t specialize in any one particular segment; instead focusing on offering everything at attractive prices.
“Spirits are certainly the No.-1 category,” he notes. “They are about 40% of our volume. But at the same time we do an extraordinary job in wine and we have a fine wine buyer that crafts an excellent selection of wine. We also have an extremely large beer selection, thanks to our beer buyer. We carry almost every beer that’s available in Kentucky and we have a 900-square-foot walk-in beer cooler.” Beer and wine each account for about 15% of total sales.
The Party Source is also a destination for cigars and other tobacco products, Stiles adds. “We do maybe $10 million a year just in tobacco sales, and from what we understand from the industry, we’re the largest single location for cigar storage in the United States,” he says. “We’ll do $3.5 million in cigars this year. It’s an extraordinary program and we have an excellent buyer and a 400-square-foot humidor and a humidor within the humidor. Also, our guys give the best customer service in this market.”
That customer service philosophy extends throughout the store. “Good customer service is in our DNA,” Stiles says. “Ken Lewis stressed customer service, stressed excellent care of our employees and then trusted them in turn to take excellent care of our customers.”
Stiles says the goal is to ensure people can find products at The Party Source that they can’t find anywhere, else, and to enjoy the shopping experience while they’re at it. “We’re not just a big box store,” he says. “We have people in the aisles and we have cashiers at the front – there are people all around to help customers and answer questions and make suggestions.”
The Party Source also offers party planning services that have expanded in recent years. “Our store manager has developed a group—they call themselves the Party Pros,” Stiles says. “We have people available every day on every shift to talk to someone online, on the phone or in person and help them plan their parties. Products can be pulled for them and be ready for pickup or we can deliver. It’s become a very significant part of the business because people trust us.”
In-store events and tastings were halted during the pandemic and had restarted slowly by the middle of summer 2021. “We’re just getting the events back rolling,” Stiles said in August, noting the popularity of everything from product tastings to dog photo events. “It’s gotten to the point where we feel the employees are comfortable and people are comfortable. Events are part of the shopping experience that’s what it’s all about. People want experiential shopping.”
Many of the employees executing the party planning, events, and general customer service are longtime employees. The fact that The Party Source is employee owned means those individuals tend to stick around much longer than most front-line workers. “We have cashiers that have been with us for more than 20 years,” Stiles notes. “Customers come in here and we know them. They seek out specific people on the sales floor and there are personal relationships that are built every day. Price is just price, but personal relationships, those are really valuable.”
But, of course, attractive pricing is essential in today’s hyper-competitive marketplace. The location of The Party Source, directly across the river from Cincinnati, Ohio, is no accident. Ohio has minimum markups on beer and wine and is a control state for liquor. “We have a significant price advantage over Ohio and that’s why the store is located where it is,” Stiles says. “Probably about 75% of our business comes from Ohio.” He notes that Ohio retail “has gotten more competitive in the past couple of years, and they have become a much better alcohol beverage retailer.” Still, the price differential and the big-box experience of The Party Source are a big draw. In Kentucky as well, 100,000-square-foot stores devoted to beverage alcohol and other party goods are hard to come by, making the store a destination.
Stiles says The Party Source has the lowest prices some of the time and strives to be competitive all of the time. “We provide excellent value and extremely competitive pricing, but I never go out there trying to be the lowest on everything,” he says.
Challenges And Opportunities
As with every business, the Covid-19 pandemic paved the way for more evolution and strategy shifts at The Party Source. Concern about business at the start of the pandemic gave way to confidence when the state declared beverage alcohol retail stores as essential businesses. “We immediately switched from conservative to aggressive,” recalls Stiles.
A delayed web redesign, initially planned for November 2019, was launched in mid-March 2020, just in time to meet a changing customer need. “Covid did more for our buy-online, pick-up-in-store program in one year than we could have done in five years,” he says. “The previous year we had done about $1.2 million in online sales. Last year we did almost $6 million.”
“Once we realized we were going to stay open, we got aggressive,” he continues. “People were shopping, the website was going, and curb-side pickup was taking off, so we increased our inventories, we made bulk purchases where we could on all these high demand products people wanted from us. It was all the premium stuff: especially Tequilas and Bourbons.”
Stiles says taking care of employees was also a key goal in such an unpredictable time. “We started to incentivize our employees,” he says. “We started giving hero pay and bonuses to them as well.” The Party Source team also invested in the store itself with new paint and other upgrades that “showed the customer we had confidence in the business.”
The store revamp extended last fall when Stiles and his team realized people were coming back in droves and the retail space wasn’t set up for social distancing. “During the second half of last year we essentially re-set the entire store,” Stiles says. “We doubled the size of the liquor department. With a 60,000 square foot store, you wouldn’t think 250 people would be a problem; but if 200 of them are in the liquor department, it becomes a problem. Liquor is a huge growth area.”
The Party Source made adjustments to other store areas as well, shrinking down the party section in particular due to weakened demand. A big change came at the front of the store, where space was expanded to nearly double the number of registers to 11, from six. “We gave people plenty of room to walk around the room and feel comfortable to shop and social distance,” he says. “It was good for our employees because they were concerned, too. They wanted to be safe and we listened to their concerns about too many people in the aisles.”
For the front, the change in registers will be permanent. “It made the store so much better,” Stiles says. “When people approach the front end with the registers they see all the lanes, they know who’s busy. We’ll never go back to being like we used to be.”
It’s unclear whether the pandemic will abate or continue for the months ahead, but either way, Stiles says The Party Source is positioned to succeed. With ownership now firmly in the hands of employees, the question is whether to expand or stick with the single mega-store. “Multiple stores are like multiple children,” Stiles says. “If you have two kids it’s not twice the issues, it’s four times the issues. Or six times. Ultimately, we like running this one great store. But at the same time we are in a position right now where we are looking for opportunities for smart acquisitions. If we find a place we feel could support another party source store and not cannibalize the business we enjoy at this location, we’re absolutely open to that.”