Rocky Mountain Retailing

Colfax Avenue is a 26-mile long artery running through the heart of Denver and serving as its primary east-west travel corridor. The Denver Mint – where all those quarters stamped with a ‘€œD’€ under the motto, ‘€œIn God We Trust,’€ were made – is located along Colfax Avenue, as is the state capitol. So is Argonaut Liquors, which as a business dates back to the period immediately following Repeal, and is now housed in its third location along the busy street.

‘€œArgonaut is a family-owned, family-run business that tries to focus on giving the consumer great prices and a great shopping environment,’€ explained co-owner and COO Ron Vaughn. He is part of the third generation of the current ownership of what he calls a Denver landmark, which dates back to the 1960s, when his father-in-law, Hank Robinson, bought half of the business. Three years later, Hank was joined by his brother, Jack, and father, Lewis, who purchased the remaining 50% of the business.

Jack Robinson passed away in 2001, but Hank, at the age of 89 still comes in to the store every day, although he’€™s ceded control of day-to-day operations to Vaughn.

‘€œIt was a small mom-and-pop store,’€ Vaughn noted. ‘€œThey had a counter where the staff went and pulled people’€™s orders and brought them to the counter.’€ By the mid-‘€™70s, that kind of a retailing environment would no longer fly, so the Robinsons built a new 20,000 sq. ft. store right behind the original location. Some 30 years later that location was starting to show its age and was no longer adequate for the store’€™s ever-increasing volume, and so two years ago Argonaut moved into a new 40,000 sq. ft. store very much in keeping with the city’€™s emphasis on urban renewal in the surrounding area.

‘€œOur customer demographics have begun to skew toward young couples and single women and part of that is the redevelopment in this whole area,’€ Vaughn said. ‘€œWe’€™re seven blocks from the capitol, which puts us pretty close to downtown and that presents its own challenges.’€ The city, Vaughn said, has done a really good job of aiding in the renewal and development of the surrounding area, particularly with townhouses and apartments. ‘€œThat’€™s kind of helped my business,’€ Vaughn said. Indeed, 2009 was Argonaut’€™s best revenue year ever, and the store beat those numbers in 2010.’€

Building a New Store

Building a new store was not something that Argonaut’€™s owners entered into lightly. Vaughn said they spent a solid year working with the architect on planning the store before construction even began. ‘€œWe were looking at all the different ways that we could make the building efficient and try to use what had we learned from being in business in an older store. When we built this store we tried to be progressive, and we tried to go fairly green.’€

The new building uses its roof to incorporate solar power, and where practical, recycled materials were used in construction. The lighting system is adjustable and there are lots of windows to allow the maximum use of ambient light.

‘€œI think in the old days, liquor stores kind of viewed themselves as fortresses,’€ said Vaughn. ‘€œThey didn’€™t have a lot of windows and were closed in. We decided to go in the opposite direction and make the building as attractive on the outside as it is beautiful on the inside.’€

Contrary to conventional wisdom, taking a green approach doesn’€™t have to cost a lot more. ‘€œThere are a lot of things you can do that don’€™t cost you a lot more money,’€ said Vaughn. ‘€œA couple of things probably cost us a little bit more, but overall it’€™s the right direction to go in, and the payback on it comes over a period of time.

‘€œI’€™m not really a nuts-and-berries green guy, but it was great,’€ he said of the experience. ‘€œI learned a lot and it wasn’€™t hard to do, so I would recommend it to anybody.’€

Outpacing the Economy

With the difficult economy over the last few years, the largest American corporations have decided to hold onto their cash, even if they collectively have more than a trillion dollars in reserve. So, in some respects, it’€™s surprising to see a relatively small, independent business decide to make the major capital expenditure that building a new headquarters entails, but Vaughn says Argonaut has been somewhat of an anomaly and that his business has grown steadily in recent years. ‘€œWe made the decision that the right thing to do was to go forward and not stay stuck where we were. Our business was growing even two years ago, and we committed to building a new building and being part of the redevelopment along Colfax Avenue.’€

In fact Vaughn thinks that the new building is one of the reasons that 2010, with more than 900,000 cash register transactions, was the store’€™s best ever, although he adds, ‘€œI’€™d probably be up even more in a great economy, so it’€™s hard to benchmark it.’€

He says it’€™s no secret that people gravitate toward what’€™s new and different rather than what’€™s old and stale. The giant 15-ft. tall, light-up champagne bottle on the corner of the store stresses the new. As he watches customers in the store, Vaughn says it often becomes obvious that customers who stopped in to pick up a 12-pack of beer or a bottle of wine, for example, have been captivated by the breadth of selection and end up spending not only more time in the store checking out the stock, but often spending more than may have been their original intent.

Maintaining Independence

Unlike the majority of states, Colorado does not allow chains to sell beverage alcohol. Each business entity can hold only one liquor license. So supermarket chains such as Safeway or other large retailers like Target, can sell spirits, wine and beer, but only in one single store within the state. Supermarkets can only sell beer with a 3.2% alcohol content. A battle over that section of the law has been ongoing between the supermarket industry and independent retailers, both large (like Argonaut and Applejack) and small. In fact, on the day that Vaughn spoke with Beverage Dynamics, he had just finished a meeting with a lobbyist regarding the possibility of a bill being introduced in the new legislative session to allow chain retailing.

‘€œEvery year for the last four, the grocery lobby has come forth with legislation trying to change those laws,’€ noted Vaughn. ‘€œLucky for us we’€™ve defeated it every year, but we’€™re expecting to have to face those issues again.’€

Although the independents compete against each other in the marketplace, they want to keep the playing field as level as possible and that means limiting the power of large corporate retailers. Toward that end, Vaughn says he supports several organizations.

‘€œThere’€™s CLBA, which is Colorado Licensed Beverage Association, which is one group that represents a good number of liquor licensees here, on- and off-premise; and there’€™s a group called Coloradoans for Safety, which is a coalition of larger stores that are also helping to fight against that legislation. It’€™s a continuing battle to try and marshal support financially, but a lot of the Ethiopian and Korean [retailer] groups have all rallied to do the hard legwork. So it’€™s worked out so far, and we’€™re very optimistic that this year we’€™ll be able to defeat it again. In actuality, in 26 years there hasn’€™t been a law change in the United States that allows grocery stores to sell beer, wines and liquors.’€

Selling Spirits, Wine and Beer

Vaughn says that sales at Argonaut break down at about 50% wine, 30% spirits and 20% beer, and that floor and shelf space allocations pretty much follow the same formula. He attributes that set-up to another family member, Jack Robinson’€™s son Scott, who was involved in the business when Vaughn first came onboard 18 years ago, and whose wife Ellen is still a partner in Argonaut.

‘€œHe changed the focus of the business in the late ‘€™90s to focus on wine and resetting the store, and I just carried on that direction,’€ Vaughn said modestly.

With Denver being the home of the Great American Beer Festival, it’€™s not surprising that a lot of attention is paid to the beer section at Argonaut. ‘€œOne of the smartest things we did here was hire a couple of guys who are like beer sommeliers,’€ said Vaughn. ‘€œI’€™ve been around the craft industry here in Colorado, but these guys really live it and breathe it.’€

Obviously the amount of cooler space available to the beer department was fixed when the store was designed, but Vaughn says that lately they’€™ve been devoting more space to ‘€œbombers’€’€”individually sold 22-oz. or 750 ml bottles. ‘€œWe probably have over 350 bomber sizes alone,’€ he said. ‘€œI think our beer SKUs are over 1,000 now. Here in Colorado people just love to come in and look at the beer selection. My fastest-growing segment is probably the craft beer section.’€

Colorado’€™s place as a leader in the craft beer movement led Vaughn to put together a Colorado section on the selling floor that contains not just local beers, but wines and spirits produced within the state. In fact there are at least 10 small licensed distilleries in the state, producing gin, vodka, whiskey, cordials, brandy and rum, and collectively they form the Colorado Distillers Guild.

Vaughn says that in his spirits section, ‘€œa lot of the Colorado products are hot,’€ citing such brands as Stranahan’€™s Colorado Whiskey and liqueurs produced by Leopold Brothers. People have an affinity for local products, but Vaughn says that there’€™s really a lot of interest in all kinds of boutique spirits products, especially some of the more ‘€œeclectic bourbons.’€

‘€œBrown spirits for a long time were very soft, now they’€™re in the midst of a resurgence,’€ Vaughn observed. He thinks it has to do with a perception of quality. ‘€œI think vodka suffers because it’€™s a clear spirit and it can be flavored. Most of them don’€™t have the character of a bourbon or a Scotch, where they’€™re aged in something, in sherry or oak, and I think people buy into the story.’€

Argonaut’€™s recent sales have also shown ‘€œsigns of life’€ among the Canadian whiskies. And of course in a market where more than 40% of the population is of Mexican descent, tequilas have always been strong. But whatever the spirits category, Vaughn says that people seem to be more willing to pay for quality.

Average Spend Is Up

‘€œMy average ring is up over the past year and that’€™s my direct economic indicator that people are willing to spend a little more money and they’€™re a little more comfortable in their budget,’€ he said.

The same thing is going on in the wine section, where he says people are more willing to go from the $12-14 range up to $18 or $20, and that the $25-and-over wine buyer who had disappeared for a while is becoming active again.

One of the things that Vaughn thinks has helped his business was a change in Colorado law four years ago that allowed retailers to offer product sampling in the store. ‘€œCustomers love being able to try things that they normally wouldn’€™t invest money in,’€ Vaughn said, noting that when they find something they really like, they’€™ll usually buy it.

Like many other retailers, Argonaut conducts regular wine tastings in the store on weekends to let customers try some of the current offerings. They also organize off-site events where they can offer a much larger variety of wines. In these cases, distributor representatives who know the wines get involved in the pouring. Vaughn says that usually a nominal fee is charged to attendees and the proceeds are donated to charity.

The store also offers a wine of the month club, and often donates membership to local charities for their fundraising auctions.

‘€œWe probably give out a couple of hundred or more of those each year to different charities to help them raise money,’€ explained Vaughn. ‘€œIt gets our name out there; it’€™s a nice deal; and it gets the customer in the store 12 times a year.’€

Charity Begins Here

But donating wine is far from the extent of Argonaut’€™s charitable efforts. ‘€œIf you’€™ve lived in Denver or been around here at all, you know the Argonaut name,’€ said Vaughn, with understandable pride. ‘€œJack and Hank Robinson were completely involved in the community and we still do a ton of charity stuff along with our distributors.

‘€œWhen I took over I said to our distributors, ‘€˜You know, we’€™re both in the business and we make money; we should share that.’€™ So every month we run things where we donate three bucks a case; they donate three bucks a case; and we pick a different charity every month. We do things with Budweiser or Coors where every November we’€™ll throw in a dollar for every twenty-pack we sell. And they can pick the charity or I can pick it; it doesn’€™t matter which charity. Charities are having such a tough time now that it just felt like the right thing to do.’€

Whatever items are featured in that effort are displayed in a special area on the store’€™s mezzanine and are also flagged on the website. ‘€œIt doesn’€™t cost the customer any more, and it helps out the charity.’€

Modern Media

To make sure that current and potential customers have access to the store’€™s outstanding selection and know what the bargains are, Argonaut has embraced all that 21st century communications technology has to offer. ‘€œWe’€™ve made a huge effort to try and learn all the different ways that we can promote our business,’€ Vaughn said. ‘€œWe have a great website. You can shop our entire inventory online. We do an e-mail daily wine blast. We have a preferred shopper program, like an airlines miles program. So people get bonused on stuff that’€™s not on sale or they get the sale price.’€

The store uses both Facebook and Twitter, with one of Vaughn’€™s young beer experts doing double duty on the social media front. The store’€™s website has also been using online videos featuring wine buyer Sheila Carey to offer wine education and tasting notes.

Carey also creates a daily e-mail blast that is automatically released sometime after midnight and features a wine that is on special for that day. Out of the 55,000 customers in the Preferred Shopper program, about 16,000 wine lovers have opted in to receive these bulletins and the program has been a huge success.

‘€œWe sell out of our daily special by 10 or 11 o’€™clock,’€ said Vaughn. ‘€œA ton of it is based on Sheila’€™s reputation, because we have over 9,000 wine SKUs and wine is the kind of thing that can be hard for the consumer to figure out. Sheila’€™s great at it.’€

Technology has also been an important part of the behind the scenes operation. All of Argonaut’€™s stock is listed online. The company that hosts the site is tied into the store’€™s POS inventory and updates it hourly, so that when the last bottle of a particular item is sold, it’€™s removed in short order from the product listing on the website. This also helps ensure that pricing that’€™s listed on the site is the same as what’€™s being charged in the store.

Customers can take advantage of the product selection online to place their orders and then have the option of either coming in and picking it up or having it delivered. The online component has picked up in recent years, but Vaughn says the store no longer does shipments to other parts of the state or country. ‘€œIt’€™s such a gray area of the law. I know there are a lot of retailers who do it, but my lawyer’€™s advice to me was that you’€™re exposing yourself to a potential lawsuit and unless I’€™m doing a huge volume of business, he suggested I stay away from it until the law becomes clarified. And I took that advice.’€

Keeping It in the Family

Ron Vaughn has spent the last 18 years working in a family business that he refers to as ‘€œa Denver landmark,’€ but he’€™s not from Denver and he wasn’€™t born into the family. He and his wife, Karen, the daughter of second-generation owner Hank Robinson, were happily living in California with their two daughters. Hank, however, wanted his grandchildren closer and for years had been after Vaughn to move to Colorado and join him at Argonaut. ‘€œHank was always talking about what a great place this is to live and raise a family,’€ Vaughn recalled, ‘€œand in the early ‘€™90s, the timing just felt right.’€

At the time, Vaughn, who had no retail experience whatsoever, was working as a project manager at an electrical company. ‘€œI spent my first year at the old Argonaut as the receiving manager,’€ he said. ‘€œI mopped the floor, ran a cash register and learned the business from the ground floor up.’€

And he’€™s still hungry to learn more. ‘€œEvery time I travel, I make it a habit to go into retail stores – liquor mostly, but any business. I try to learn and see what somebody else is doing better than I am and take a lesson from them. There are always good ideas out there if you admit you don’€™t know everything, and you’€™re never too old to learn.’€

Reflecting on the last two decades, he said, ‘€œI love to watch the change in different marketing strategies and the different products that come and go, but the basics stay the same. You hear it from every retailer in every business’€”service, selection and price’€”but you’€™ve got to believe that and live it to have a successful business.’€

Living that belief and paying attention to the basics is likely to keep the Argonaut name prominent in the Denver area for many years to come.

Denver: A Town Baptized With Whiskey

Denver began life as a frontier mining camp on the South Platte River and was named after the Kansas Territorial Governor James Denver, by settlers who hoped to gain political favors by the move. Unfortunately, Denver had retired by the time the town was christened.

Actually, there were originally three separate towns, with three separate names, where Denver now stands, but in 1859, the other names were dropped in return for a barrel of whiskey to be shared by all. Fittingly enough, the first permanent structure in Denver was a saloon.

Although there’€™s no evidence that alcohol consumption clouded their judgment, early settlers ignored the advice of local Indians not to build on that location. They probably should have listened, since in its first few years, Denver was destroyed twice, once by fire and once by flood.

Source: Visit Denver, The Convention and Visitors Bureau

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