Cannabis is one of the fastest growing industries in North America, but for dispensary owners, the proof is in the profits. The success of a cannabis retail shop relies upon a flow of customers regularly visiting the dispensary to make purchases. Yet even at a time when demand for cannabis is stronger than ever, realities like strict advertising limitations can make it difficult for a shop to stand out. But cannabis retail owners can help their stores become more profitable by strategically addressing 5 key areas in their dispensary operations.
In this post, we describe how reducing costs, increasing average basket size per customer, avoiding inventory out-of-stocks, expanding the consumer base, and increasing buying frequency can help dispensary owners increase their profits.
1. Reduce Costs
Operational costs is the first thing to assess when profits aren’t where they should be. Certain expenses like rent and utilities are a given, but there are plenty of other costs within a retail owner’s control that should be regularly reviewed and adjusted when needed. Using your store’s cannabis POS system to pull sales information and track how products are selling is one way to directly impact outgoing expenses. Staying up-to-speed on the data enables owners to identify opportunities to eliminate slow-moving inventory, freeing up money for owners to invest in a product mix that sells better and yields higher margins.
2. Avoid Inventory Stockouts
Retail owners using POS data to track store trends should also keep a watchful eye out for looming inventory stockouts. Running out of stock means telling a customer you can’t help them, marking a missed opportunity and the potential that they’ll take their business elsewhere. But being able to review sales data and determine well in advance that a product’s inventory is getting low and could sell out prepares owners for making some key next steps, like placing orders for additional stock or limiting consumer purchase amounts until fresh inventory arrives.
3. Boost Average Basket Size Per Customer
Dispensaries don’t just sell products, they also serve as safe spaces for customers to learn about and discuss cannabis. By getting the most out of every transaction and working to increase basket size with every client, your shop works towards building long-term value with customers while also giving your profits a boost.
- Carrying rolling papers, pipes, grinders and other accessories not only enables guides to educate consumers about different methods of cannabis consumption, but also gives them plenty of options for upselling.
- Offering customers low-end, mid-tier and high-end price points within flower, edibles and other product categories helps demonstrate that your store caters to a range of consumer budgets.
- Using POS data to spot trends – like using it to identify which products consumers frequently purchase together - can give budtenders useful insights for making recommendations. A simple comment like, “If you like that product, you might like this too,” can go a long way to build trust with customers…and get them to spend more.
4. Expand Your Consumer Base
Spreading legalization means a larger segment of the population can now access cannabis for a variety of needs, and your retail store could be serving many more of them. Expand your consumer base by offering a range of products that address both medical and recreational clientele. Make sure budtenders have the skills to address the unique needs of cannabis newbies, many of whom could be walking into a dispensary for the first time. And even making it a point to market to tourists on vacation with out-of-towner promotions and branded souvenirs could help encourage more foot traffic to your store.
5. Increase Customers’ Buying Frequency
Returning customers are crucial to the success of any retail business, and cannabis is no different. Activating initiatives like promotional discounts when customers spend a certain amount, or buy-one-get-one bundles gives customers a sense of urgency to spend on the spot. Taking cues from boutiques, coffee chains and big box stores, punch cards and loyalty programs give consumers a lot of incentive to return to your dispensary for all of their cannabis product needs. And pulling POS data to reference a customer's shopping history gives budtenders the opportunity to engage with customers on a more personal level when making product suggestions. Fostering consumer loyalty and encouraging future buying will not only increase your store’s profits in the short term, but ensure the likelihood that customers keep coming back for more.
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