Located in arcade, liquor shop (4)
I believe the answer is:
deli
'shop' is the definition.
(I know that deli is a type of shop)
'located in arcade liquor' is the wordplay.
'located in' says the answer is hidden in the clue.
'DELI' can be found hidden inside 'arcade liquor'.
(Other definitions for deli that I've seen before include "Shop selling foreign foods" , "Specialist food shop" , "Special shop" , "food-store?" , "Food shop or counter" .)