David Cho knows that the big boxes and groceries stores present a challenge to his small business model.

But Cho, who owns the formerly state-owned Port Orchard Liquor & Wine on S.E. Lund Ave., thinks he can succeed. The 5,000-square foot store offers 1,400 different brands of spirits. In addition to popular domestic brands, Cho sells a variety of local beer, vodka and wine, and allows custom orders. He said that is in contrast with larger stores that only “will carry what sells.”

“That’s the niche we’re trying to create,” said Cho, referring to carrying local products.

The selection does not mean much if people are not coming into the store, though. That has been Cho’s biggest issue since opening July 3. The store was closed for six weeks while the state transferred the business to him.

“A lot of people don’t even know we’re open,” he said, adding that his sales are about 15 percent of what of $4 million the store generated as a monopoly.

Another issue is the store’s size. While Cho has made some renovations, including the addition of a 14-door cooler to provide products ranging from energy drinks to growlers, he said the cost of operating the store is “unsustainable.” He said 3,000-square feet would be more ideal.

And while Cho would like to be in a more visible location, he said that is not possible because when Initiative 1183, which led to the state giving up control of liquor sales after 78 years, was approved by voters in 2011, one stipulation was that new owners could not move too far from the store’s previous location.

“It has been hard because it is not in the mall,” said Cho, who also purchased a state-owned liquor store in Tacoma when they were auctioned in March.

Perhaps just as significant a challenge for Cho is price. While acknowledging that he cannot match competitors, such as Costco and Safeway, in that realm, Cho said he tries to stay “competitive.” That is only part of the quandry when it comes to price, though. Cho used a bottle of Potters Vodka as an example. It retails for $15.99, but the customer pays $25.87. In addition to that tax assessed against the customer, Cho said he pays $1.20 to the distributor and $2.72 to the state liquor board in taxes and fees per bottle. That is in addition to licensing fees and other operating expenses.

“Every sale we make is mostly taxes,” he said.

Citing Washington Supreme Court’s January ruling in McCleary v. Washington, which ruled that the state failed to meet its constitutional duty to fully fund basic education, Cho does not expect relief from those taxes for himself or customers anytime soon.

“That money has to come from somewhere,” he said. “We have to do what we can control.”

Still, Cho, who traded stock futures for 15 years, said he remains excited about new enterprise.

“I wanted to try something else,” he said. “My heart is in small business. I like talking to customers.”

And, with some adjustments, Cho feels he can be successful even though he said about one-third of the 167 former state-run liquor stores have failed since going private.

“We’re going to survive,” he said.

A Bremerton resident, Cho said he eventually hopes to create strong South Kitsap ties if the store can become profitable.

“If we are successful, we can be more of a part of this community,” he said. “I want to be a neighborhood small business.”