You won’t be surprised that the keys to running a successful and profitable cannabis dispensary aren’t really that different than operating other traditional retail operations, you need to understand how much is riding on few key elements and how high the stakes are for your short and long term success.
For the sake of comparison, let’s imagine you are running a boutique wine and spirits shop, you compete against several types of businesses, such nearby shops like yours, big box grocery, Costco to name a few. Your customers are generally knowledgeable regarding your products having been educated by brands and consumption experience for years to develop preferences and loyalties. Your prospective customers are walking in expecting and prepared to buy a $15 bottle of Chardonnay from a few brands names that they trust. They may ask some questions but if your staff is busy, they will likely leave with the wine.
The dispensary world could not be more different on virtually every front and your operation needs to recognize and embrace the challenge to serve your market, before someone else, including someone who hasn’t invested hundreds of thousands in a license.
You Must Master the Three S’s – Service, Selection & Systems
On the tv show The Profit, it’s star/guru Marcus Lemonis constantly speaks of the 3 P’s – People, Product and Processes, but we are switching it to S’s for the dispensary business, which stand for Service, Selection and Systems (human and digital).
S #1 : SERVICE
A dispensary is going to live and die based on whether it can attract and retain what we refer to as “new users” as clients. These individuals have no illicit source for their “pot” and have little or no knowledge of today’s cannabis and all the forms intakes like concentrates, oils in vaporizers, edibles, beverages, topicals, etc… They are coming into your store because they are curious, and they believe the safeguards put into place by the state and local governments will protect them. But make no mistake, they may be nervous, unsure of what is really waiting for them inside, what type of people they’ll encounter as employees or even fellow customers, hoping not to see their neighbor, boss or kids’ teachers.
These potential clients need more than a quick checkout line and a smile, they may require a 20 minute tutorial in Indica versus Sativa, dosage guidelines, instructions on how a vape pen works, and lastly some reassurance that it’s safe to experiment with cannabis for medical or recreational use.
But likely any commercial environment, shoppers love to buy but hate to be sold, so your staff needs to walk the line between helpful and pushy. They should think educate first, influence second, sales last, which takes time. You will have to properly staff you shop with enough well-trained budtenders to fill this need to reap the rewards of a loyal client who will tell their friends about such a pleasant experience.
Consider using technology to automate parts of your education process, relieving your staff whenever possible. Companies like http://www.getseed.io/are developing digital educational resources that can be utilized in dispensaries alongside your budtenders. Expect these tools to integrate with your inventory and even make suggestions based on the user’s inputs.
S #2 : SELECTION
Your inventory dollars need to be allocated to a blend of products that move from your backstock through the cash register as fast as possible at the highest margins.
As a dispensary owner or purchasing manager, your phone is (or will be) ringing off the hook with pitches from new brands promising better products, bigger margins, and better product “mouse traps”. But there are simply too many new brands popping up to carry or even speak with all of them and still be functional.
A few suggestions in this regard are:
- Make sure you consider all your customers’ tastes and budgets, don’t just buy what you may like or your budtenders enjoy.
- Limit the number of products you know you can successfully represent to a reasonable number, perhaps a range of 250 – 400.
- Only agree to meet with reps of new brands on a set schedule, by appointment during your slower times, and have an agenda – get the facts and grill them on key items like inventory levels, distribution, pricing and discounts, and ask for references.
- Consider setting up an evaluation process including representatives of your customer base, not just your staff. Be sure to judge the product, including the packaging and distribution, harshly against the current roster, asking “ will this do better than what we already carry?”
- Always be looking for replacements for your lowest producers. Study your data and create a “hit list” of products that aren’t moving to your standards and expectations.
Launch a House of White Label Brand of Your Own. As the cannabis world today is lacking in clear (or any) brand leaders, you may want to consider creating one of your own with the help of distributors and manufacturers. With a $199 logo, some cool packaging and the promotion of you staff to a semi-captive and hopefully loyal audience, you may even develop a brand that other stores are then asked to carry.
S #3 : SYSTEMS
After all the investments you have made just to open your business, the last mistake you can make is not investing in, implementing or fully utilizing digital systems to help you manage your dispensary and customer list. At the heart of this effort to make your operation hum is going to be sophisticated software that your team needs to be trained on and committed to operating properly and efficiently. But in addition, you should design your store in a way that you can leverage this software to its full capacity.
Please be sure that your system(s):
- Captures your visitor/customer informationfor digital marketing efforts – names, emails, social media profiles, product preferences, birthdays and more. This can be done at the security check in, by budtenders on the sales floor with mobile Point of Sale (POS) devices or at a more traditional checkout counter depending on your store layout and staffing levels.
- Helps in the educational processes, especially when you are understaffed for the traffic and to help those clients that don’t enjoy personal interaction as much as digging for the data themselves. In store display screens, kiosks and even information on your website that you make available in store can all help in this regard.
- Assists you to upsell by tying in promotions or allowing you to reference your customer’s profile for past purchases, which may allow for some upselling or substitutions if they were unhappy with those items.
- Maximizes your sales floor space by taking a customer’s order online, on a mobile device before they arrive or as they browse, or offer a standing “regular order” or subscription option that is waiting for them when they arrive. Your system can create a pick ticket for staff to pull from the back while you keep building relationships.
- [MOST IMPORTANT] Delivers you actionable information that you can use to run and improve your business. Graphs and reports are great to look at but always ask yourself “what is this information telling me to do?” Perhaps you have slow moving items or even categories that need a reboot or your store layout is not functioning properly based on dead spots, or some members of your staff are far superior upselling or adding promotional items. Whenever you have data, you are empowered to make comparisons and decisions that help improve your bottom line.
Systems we recommend?
There are many software providers to choose from, but the that one stands out in our experience and the feedback we’ve received is COVA Software. They have really tied the efficiency you need to streamline your operation into the sales and marketing efforts your customers will really love in both the digital signage and POS systems. Be sure to ask them for a demo of how you build out a touchscreen menu that makes training your customers and staff so much easier and fast.
Finding a location to open up your dispensary and that your city will permit is hard enough, but once you get the permits and licenses, there is a lot more to consider as you build out your dispensary and get ready to open. Be sure to factor in all three S’s and get the proper help from your vendors to properly implement all the systems into which you invest your capital.
With offices throughout California, Begreenlegal Consulting is here to help you find a location and apply for your local permits, state cannabis licenses all while providing expert cannabis business strategy including help with vendor selection. We have resources who will design your store layout as well as help in the hiring and training of your staff all with a focus on compliance with all regulations. Just reach out for a free consultation to get started.
Chris Cahill, a Michigan State Bar member and MBA since 1995, has helped hundreds of small and mid-sized business owners grow and manage their operations, including multi-state cannabis operators and suppliers.