Dispensaries Look for New Ways to Increase Revenues
The cannabis industry is one of the most challenging sectors to analyze. Each legal state has its own regulations, tax structures, and rules that govern medical and/or recreational sales. Accordingly, any statistic that looks at the industry as a whole, must be taken with a grain of salt because what's true in one state may be completely different in another. Some states may have surplus supply - causing prices to tumble. Other states don't have enough supply. And finally, some states haven't opened enough dispensaries so there is a chokepoint in the supply chain which not only causes prices to rise but also fuels the black market.
But however you slice the market, one thing is certain: Dispensary owners and operators are looking for new products to sell to create additional revenue streams, increase average ticket amounts, and attract more customers.
But where do you find new products to sell in a tightly regulated market that is already flooded with competition? Smart dispensary owners are looking to "cannabis-adjacent" non-consumable products to offer to their customers.
For instance, some dispensaries are now carrying hemp based personal products, such as shampoos, lip balms, and even toothpaste.
New York-based company, AXIM Biotechnologies, has developed a line of cannabis-infused toothpaste and mouthwash. The product line, called Oraximax, is the first of its kind to not only clean the teeth and oral cavity, but to improve its overall condition by infusing the cannabinoid CBG into the product.
Another category that is generating some heat is personal lubricants. Though it probably won't result in a typical head or body high, THC-infused lubricants from Evos and Foria can warm up the bedroom. That's because the cannabinoids found in these products can easily penetrate genitalia. Though it takes about 15 minutes to take effect, once it does, users can expect to feel a warm, relaxed sensation in the area, along with heightened sensations.
Other hot selling personal products include bath salts, acne treatments, and a wide variety of lotions of every kind.
One of the fastest growing categories of non-consumable items selling at dispensaries is jewelry. High Point Jewelry is the market leader in "cannabis-inspired jewelry" and offers a wide variety of beautiful pieces that range from inexpensive sterling silver earrings, beaded gemstone bracelets, and the company's famous "Molecule jewelry" - all the way up to diamond and gold luxury pieces.
High Point Jewelry's line is now being sold at dispensaries throughout the nation, and some dispensary operators are reporting that they are quickly selling out of many of the items. It seems that when people come into the dispensary for weed, the jewelry catches their eye.
However, merchandising is important. The impulse purchase items must be located in an area of the store where they will be seen, and like all retailing, the nearer the checkout, usually the better.
It also helps to have the dispensary staff trained on how to make these upsells. "Just asking the customer, 'Have you seen our new jewelry line?' has increased sales," one store manager told us. "It takes about 5-seconds to get someone interested, and that often results in them making an additional purchase," she added.
The additional revenue streams are particularly important now because of business disruptions due to the pandemic. This past year was somewhat of a roller-coaster for most dispensaries, including those in Nevada and especially those in Las Vegas.
The data reflects that, after the shutdown, we saw a slump in March, April and May,” said Layke Martin, director of the Nevada Dispensary Association.
The first state-mandated shutdown rules implemented in March allowed delivery-only sales, which killed foot traffic to stores and froze sales.
Then, curbside was allowed at the beginning of May, which helped a little but not enough to replace in-store sales.
When in-store sales resumed May 9, capacity was limited to only 10 shoppers at once or 50% of allowed occupancy based on fire code, whichever was a smaller number.
Now, the state allows a store to operate at 50% capacity.
To adapt to a sudden lack of visitors, cannabis businesses pivoted to cater to local shoppers through promotions, sales incentives, loyalty programs, and new product offerings like jewelry and personal care items.
New ways to handle delivery, curbside, and online ordering – have also helped boost revenue.
Mark Russ, president of the western region for multistate cannabis company Curaleaf, said the Nevada market was one of the worst hit by coronavirus regulations.
“It kind of shocked us they went to the extremes they did shutting down the whole industry,” he said.
For an operation such as Las Vegas’ Planet 13, the first round of shutdowns could have been crippling.
The company is vertically integrated, with a 112,000-square-foot facility that Planet 13 claims is the “world’s largest dispensary.”
David Farris, vice president of sales and marketing, said when Planet 13 received short notice it had to shut down the sales floor, the company “pivoted aggressively" to try to maintain revenues.
Despite the nimble response, the bulk of the company’s customer base disappeared overnight. According to Farris, before the outbreak, about 90% of its business came from tourists.
That’s mostly been replaced by local shoppers, and the average ticket amount is around $110-$120, which Farris says is strong. The company has added 40 new points-of-sale and an expanded retail floor that now totals 23,000 square feet.
The pandemic has brought things into focus for many dispensary operators, and the need to sell more than just weed has become clear.
With good planning, smart merchandising, and a dedicated sales force, most dispensaries will not only survive the pandemic, but will come out of it stronger - with a better product mix and less reliance on one or two product categories.
“The retail stores were shut, but our retailers were able to find innovative and safe ways to serve customers,” said Martin, “After that initial slump, things are doing OK."
And that's good news for everyone.