Cannabis retail is still a relatively new industry, and most progress has happened only in the last five years. As such, there are no historical benchmarks for success in this industry, and new cannabis dispensaries must learn from the experience of other retailers who may have succeeded or failed in the past. Cove Software has worked closely with over 1200 cannabis retailers across North America and has the industry expertise to help potential dispensary owners implement best retail practices. In this blog post, we examine a few common mistakes that you must avoid to ensure the success of your cannabis retail business.
1. Not Having a Business and Financial Plan
The most successful cannabis retailers know their vision and have a clear-cut business and financial plan. A well-designed business plan addresses the process of opening a dispensary and finding the right location, the competitive strategy and positioning, and future growth plans. Without this kind of direction, it’s easy to get lost.
A financial plan must lay out all the costs of opening a cannabis retail store. If you cannot execute your vision within your budget, you’ll want to modify your plan. You can still provide the experience you want to deliver, just in a more economical way. Ensure that your aspirations match your finances.
2. Unclear Target Market and Segmentation
How you implement your vision must align with the people you will be serving. Knowing your target demographic helps inform how you will build out your customer experience. For instance, a store in a rural county might not want a glitzy modern facade because their customers wouldn’t want to pay for ambiance. But for a retailer in a wealthy suburb, high-end finishes and upscale fixtures might be crucial.
Segmenting your target market helps design a more customized experience based on age, values, buying behavior, and other preferences. A millennial may order online for pickup or delivery, while a baby boomer may want to have detailed information and consult a budtender about their needs before buying a product. Depending on your location’s demographics, you must provide services tailored for each segment of the market.
3. Not Hiring for Expertise
Your staff can make or break your cannabis dispensary. Ensure that you are hiring people for their cannabis expertise and not just friends and family who may not be the right fit for your store. In the cannabis industry, you may have to pay higher than the minimum wage. But if you hire the right people, they will help you manage the store better, create an unforgettable customer experience, and ensure that your dispensary remains compliant with the law.
Your team must include experts who can offer legal and financial advice for you to stay on top of things. As your dispensary business grows, you may need to add more specialized staff with dedicated responsibilities. An inventory manager and a compliance manager will be required to manage operations efficiently at a multi-location enterprise.
4. Disregarding Community and Compliance
Building a good relationship with the local community takes real work, but it’s one of the most important things you must do as a retailer. Cannabis legalization remains polarizing- new retailers sometimes find that they’re an unwelcome addition to the neighborhood. That’s why it’s crucial to engage with people, educate the community and build a relationship with the local authorities to ensure that your dispensary becomes an integral part of the area where you operate.
Compliance and seed-to-sale tracking are equally crucial in the regulated cannabis industry. Nowadays, POS systems can do automatic traceability and reporting. Cova’s cannabis POS seamlessly integrates with government traceability systems like Metrc and is specially built to keep retailers compliant in all states and provinces, as it syncs all your inventory adjustments and sales automatically and makes reporting easy as well.
5. Not Using Data Strategically
Successful retailers track top-selling products and profit per product and use this data to make decisions about procurement. When you understand the dynamics of your inventory, you can stop ordering problematic products, order fewer slow-moving products, and order more of the products that have the best turnover and highest margins.
Not all data comes from internal tracking- market-level data should inform your strategy as much as possible. Market intelligence includes trends, pricing levels, customer preferences, innovative products, and industry-wide operating metrics. While internal data from your POS tells you how you’re doing, benchmark data tells you how you should be doing. If your margins are 30%, that may sound awesome — until you realize everyone else in your state is making 40% margins.
6. Using technology that can’t keep up
Ironically, spending more on technology can save you tens of thousands of dollars. That’s because technology reduces payroll expenses. For example, if your managers stay late every night to reconcile the daily report, the payroll costs add up. A well-integrated POS platform prevents things like “double-entry” of sales by automatically syncing data and mitigates errors that could cost you your license.
Be aware that many POS platforms don’t have the capacity for high-volume transactions and crash when needed the most, for example, on occasions like 420. Look for a cannabis-specific POS system that can grow with you. Cova has an IT infrastructure exceeding current industry needs, has industry-specific knowledge and expertise, and regularly updates software to keep up with the ever-changing cannabis regulations.
7. Not Adapting to Changing Times
Before COVID-19, online ordering and cannabis delivery services were in increasing demand. Social distancing will not last forever, but non-traditional sales channels have become necessary, as people love convenient buying options, and technology is meeting the demand.
If you have a robust and flexible retail platform that can scale and adapt when you need it, you can easily add new sales channels such as a marketplace, an online menu, or a delivery service. As you grow, you may want to enable a more personalized shopping experience with smart clienteling, which improves the shopping experience.
Offering options that customers want and having the tech to support that expansion should be part of your strategy long before opportunity or necessity come knocking. With Cova Software as your dispensary technology partner, you will always stay ahead of the curve. Our E-book, “Why Some Cannabis Retailers Fail” presents cautionary tales of what not to do if you want to thrive in this business. Click below to download it and learn in detail about all the mistakes to avoid and secrets to succeed in the cannabis retail industry.