When it comes to liquor sales, Whatcom County merchants are finding that it's still a challenging time but appears to be improving.

As Washington state made the switch to privatized liquor sales in June, it was a bit chaotic: Distribution issues made it difficult for some stores to properly stock the shelves; many customers couldn't figure out the price of the product until they reached the register; and while some former state and contract stores were able to get open on June 1, others were saddled with permitting delays.

More than 10 weeks after the switchover, merchants are still adapting to this new system.

"I get asked a lot about this new system, and right now I tell people to ask me again after the first of the year," said Brian Waller, owner of the Beaver Inn bar in downtown Bellingham.

After years of buying liquor from state stores, Waller is now working with distributors to bring in the product at the best prices. "Initially I wasn't happy about this because it meant a lot more work for me and prices went up. But now I'm starting to get used to it."

Adjustments also are taking place at the grocery stores. At those owned by the Markets LLC, the company is continuing to refine the mix of liquor products, but overall the change is going well and sales are better than expected, said Sue Cole, spokeswoman for the company.

"Typically we see a lot of people browsing the shelves, buying one item then coming back to maybe try something else," Cole said. "We're also seeing that things are evening out when it comes to supply, so it's becoming easier to get product."

For some former state and contract stores that did get open, competing with the bigger grocery stores is the main challenge. At the Blaine Liquor Outlet on Peace Portal Drive, co-owner Denice Velasquez said sales took a hit initially, but she is optimistic that they will stabilize.

"I think some customers were shell-shocked by the higher prices," said Velasquez, who noted prices rose $3 to $4 a bottle for some specialty products, while some of the more common products are up $1 or $2 a bottle. "Our regular customers who have shopped around have said that our prices our competitive (with bigger stores), but it's still been quite an adjustment."

Along with trying to compete on price, Velasquez said they try to differentiate themselves by catering to their customers' needs.

"We're not a specialty store, but we do have 15 to 20 products in the store that our customers want," Velasquez said. "We really appreciate our local customers coming in and saying they want to keep shopping at our store, so we're working hard to keep them."

For some former state-run stores, getting re-started is also a challenge. Last week in the Barkley district, the former state liquor store was still going through a remodeling process.

SALES SLOWER IN FIRST MONTH

Last week The Associated Press reported state liquor sales declined 9 percent in June compared to a year earlier as businesses and consumers stocked up on spirits, anticipating the price increases. Meanwhile, May 2012 sales were nearly 27 percent higher than the same period in 2011.

Waller was one of those business owners who stocked up in May; now that he's worked through the extra inventory, he's noticed the price increases as he puts in new orders.

"I haven't raised my prices yet, but it looks like I will have to soon. It's not as much as I first feared, though," Waller said. "My customers have seen prices rise at other places, so they are expecting it. They still don't like it."

Velasquez believes one reason the stores and consumers are paying higher prices is because liquor is no longer being bought at a volume discount like the state was doing when it was the only buyer.

"Now it's being sold by more distributors in smaller quantities to stores," she said.

While stores and businesses are adjusting to this change, it appears most are following the laws to ensure they don't sell to minors or violate other rules. In June, the compliance rate among businesses was 92 percent, a rate similar to before privatization started, said Mikhail Carpenter, spokesman for the Washington State Liquor Control Board.

"We are doing enforcement checks, but it's also about education as we talk to businesses about these changes," Carpenter said.

While many businesses are complying, some merchants remain concerned about the potential for trouble. At the Beaver Inn, Waller said they've been keeping a closer eye on what alcohol is ending up on the street through store sales. With smaller bottles arriving at some stores, it's making it harder to keep outside liquor out of the tavern.

"It's always been a concern before, but I think it's more of a concern now," Waller said.

As consumers and businesses work through the extra inventory from May, the expectation is that liquor sales will start to bounce back.

"After this adjustment time, I think sales will begin to stabilize and get back to what it was (before privatization)," Velasquez said.

Reach DAVE GALLAGHER at dave.gallagher@bellinghamherald.com or call 715-2269. Visit his business blog online at blogs.bellinghamherald.com/business or get updates on Twitter at twitter.com/BhamHeraldBiz.