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Ask any profitable cannabis retail owner what it takes to succeed and they’ll tell you: You’ve got to have a flow of customers regularly purchasing products. And in this day and age, in-store sales alone won’t cut it. In today’s environment, you need an omnichannel sales strategy that complies with strict advertising regulations while attracting new customers.
If it sounds challenging, well, it is. But with a few key profit strategies, you can boost your cannabis retail business’s visibility and help drive more traffic. In this post, we’ll discuss our top seven tips for maximizing cannabis dispensary profit margins.
Tip 1: Differentiate Your Brand
Developing a clear brand for your cannabis dispensary is one of the best ways to set yourself apart in the market. More than that, a strong brand gives people something deeper to buy into. Customers who are brand loyal are willing to pay higher prices for higher perceived value – and as a retailer, a more premium experience can help you justify a higher markup, thereby increasing your cannabis profit margins.
Of course, you need to know your competition, and keep up with industry trends and changes. As the legal cannabis industry continues to grow, your competition is only going to intensify. You’ll need to maintain a superior customer experience, a strong local marketing presence, and remain nimble enough to adapt to the changing marketplace and identify market opportunities your competition might be missing.
Tip 2: Offer Product Differentiation
One way most dispensaries can increase their basic profit margins is by engaging in product differentiation. Invest in different flower strains that no one else in the area provides; what you lose on yield you may recoup by way of novelty factor, strain fans, or other developments. Consider providing cannabis formulations not easily available on the black market, like live resin, shatter, or wax – prices on these types of products are higher and less resistant to market stress. In fact, cannabis concentrates are the one class of products that has risen over time. Concentrated marijuana prices in Colorado are up several hundred percent in recent years.
Tip 3: Develop New Product Lines
Along with investing in product differentiation, you may also want to consider diversification into entirely new product lines. Profits in the edibles market, for example, have remained higher than those of other cannabis products, due to the enhanced regulatory burdens around manufacturing them – think legal compliance requirements for labeling, packaging, etc. Keep prices of in-demand products higher to ensure you cover the costs of loss-making product categories.
Tip 4: Fine-Tune Your Operations
An easy, straightforward way to help ensure your dispensary’s profitability is to make sure its daily operations are as streamlined and efficient as possible. Staying on top of the day-to-day functions of your cannabis retail business will help you identify opportunities for reducing costs. That’s why implementing operational best practices is crucial. For instance, creating a system of checks and balances to ensure no one on staff is ever left unsupervised with product or cash helps prevent the risk of internal theft.
When hiring, offering a higher hourly rate can help attract better-qualified applicants and reduce employee turnaround. And investing in technology and tools that simplify manual processes – like a dispensary POS system that automatically syncs data into the menu board and website, reducing the need for repetitive data entry – helps ensure accuracy while decreasing the likelihood of costly mistakes.
Tip 5: Stay on top of Inventory
Inventory control is central to all retail operations. But because cannabis retailers have the added pressure of fulfilling government regulatory requirements, it’s especially crucial that dispensaries closely monitor product inventory – since failure to do so can put your business in legal jeopardy. Adopting systems like a dependable POS helps management access accurate inventory data in real time, enabling them to perform inventory audits and report discrepancies as stipulated by the government.
Tip 6: Spend Wisely
While the old saying “you have to spend money to make money” certainly holds true in cannabis retail, it’s essential to a dispensary’s profitability that costs stay reigned in wherever possible. Cannabis retail owners must regularly monitor expenses and be prepared to make adjustments accordingly, particularly in areas that have a broader impact on the business overall. A few ways to control costs at your dispensary include outsourcing critical non-retail operations to experienced outside professionals, and using sales data to inform you of product assortment and marketing activities.
Tip 7: Set the Right Price & Offer Promotions
The most important aspect of setting price points for your cannabis dispensary is the competitive research process. Make sure your organization is doing all it can to keep its finger on the pulse of the market, and make your strategic decisions accordingly. This means checking up on competitors’ prices, learning about black market averages in your area, reviewing websites and comment boards where people discuss cannabis pricing – anything you can do to ensure you have an accurate read on current trends in your market. And while you should always sell your products above break-even to make a profit, you can offer discounts and promotions on expiring inventory to avoid waste.
Tip 8: Level Up Your Online Presence
In today’s digital age, your website and social media channels will most likely be the first touchpoints for many of your clients. Having an eCommerce platform to sell your products online is only the first step in increasing your sales and profits; designing a social media strategy is equally crucial to connect with your target market and keep them coming back.
You must make the buyer journey more interactive by engaging customers regularly through social media, SEO-optimized website content, or email newsletters so that they stay aware of your brand and remain loyal customers. For this, it is essential to level up your online presence and provide an omnichannel customer experience – because if you lose customers, you lose profits.
Tip 9: Provide Delivery and Pickup Services
As customers seek safer and more convenient buying options, delivery and pickup services are becoming a substantial source of revenue for cannabis dispensaries. And as more states in the U.S. award cannabis delivery licenses, not providing these services could start to cost you customers. Plus, this kind of flexibility can add to your bottom line while ensuring safe transactions.
Store or curbside pickup is an easy service to provide on your website, and customers can easily schedule a time convenient for them. When starting out with cannabis delivery, ensure that you comply with all local rules and regulations, and have a reliable technology partner that offers delivery solutions and can quickly enable the service for you.
Tip 10: Increase Customer Retention
Returning customers are crucial to the success of any retail business, and cannabis is no different. Offering promotions and implementing loyalty programs will give consumers plenty of incentives to return to your dispensary for all their cannabis needs. Pulling POS data to reference a customer’s shopping history allows budtenders to engage with customers on a more personal level when making product suggestions. Personalized recommendations through email automation is another way to build brand recognition and loyalty. Fostering customer trust and encouraging future purchases will not only increase your dispensary’s profits in the short term, but elevate the dispensary experience and ensure that customers keep coming back for more.
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