The comments were made by Jim Botterill, chairman of Top 50 independent operator Botterills Convenience Stores, in a speech at the Robert Wiseman Dairies Neighbourhood Shop of the Year Awards.
Although all 40 finalists had told Botterill, who was judging the awards, they had a robust underage sales policy, half did not have a log book to record refused sales, he claimed.
"If this is the cream of retailers, then our industry is in trouble," he said. "It is time we all collectively took action and accepted we have a serious problem before it is too late."
The sale of age-restricted products was the single biggest challenge to c-stores now that the government and Trading Standards had got tough, said Boterrill. C-stores were vulnerable, he warned, as they had become the scapegoats for binge-drinking.
The loss of a licence to sell alcohol could affect total sales by as much as 50% and lead to store closure, he said. In Fife alone, six licences to sell alcohol had been revoked in the past two months and at least two of the finalists at the Wiseman awards had recently lost their licences.
Retailers should also do more to exploit their milk fixtures, said Botterill.
Milk was a "big money-spinner" - it accounted for more than 6% of gross profit at Botterills - and needed much more focus.
"Display and ranging are vital to increasing sales and the retailers and the Wiseman sales teams still have work to do," he said. "Pricing across the country is all over the place and my best advice is no one needs to be the cheapest. Availability, shelf life and range are more important."
Spar South Street in Greenock, Inverclyde, took the top award at the event.