In this week’s special installment of the business overview series, Andrew from Fire Business Strategies is joined by Eden from Green Guardian Management to discuss the keys to dispensary success.
Dispensaries, also known as retail licensees, treatment centers and more, are responsible for the retail sale of cannabis and cannabis products to the end consumer. Dispensaries make up the majority of licensees nationwide. They are the face of the industry, interfacing with customers to drive awareness, knowledge, and most importantly, sales.
Dispensary Keys to Success
Location
Andrew:
Like any retail store, location is often central to the success of a dispensary, but there is a lot to consider from a viability standpoint, it is important when selecting a retail location to consider not only traffic, but also accessibility, visibility, and zoning restrictions (especially local ones like proximity limits). Location is closely tied to competitiveness, customer demographics, and sales goals Are you looking to open a small boutique in a downtown area whose regulars are price-blind connoisseurs, or trying to snatch market share in a busy commercial area with high volume? Little bit of both? Either way, location is highly indicative of a cannabis retail business’ potential and is a key part of their strategy.
Eden:
Additionally, a dispensary’s location ultimately determines the local regulations that a store must follow. Local regulations vary a great deal therefore each local licensing authority may have its own unique business impacts. Dispensary owners should consider local regulations and their impacts on operating costs which can ultimately make or break a location’s profitability.
For example, local licensing authorities that have compliance requirements above and beyond state regulations will impact profitability. Another local consideration is local cannabis sales taxes. These rates can vary, and customers notice these different prices at the counter. This can and does push customers to locations with lower cost offerings, lower taxes, or both. In some Colorado mountain towns this is even a heavily advertised benefit in on-location signage, urging customers to buy before they reach their ski-town destinations and sometimes 5-10% higher taxes. This is just part of a larger dynamic between location and pricing, where it is important to understand local economics and existing competition in order to both draw and retain customers.
Another aspect to consider is cannabis tourism; with several states still under partial or complete prohibition, cannabis legality remains an attractive draw for travelers and day-trippers alike. Dispensaries near airports and prohibitive state lines often see great short-term success, but continuing legalization efforts nationwide put these operators at risk.
For example, dispensaries located in previously booming cannabis border towns such as Trinidad, Colorado have had to quickly adapt to New Mexico’s 2021 legalization of recreational cannabis.
Cannabis sales in Montezuma, La Plata, Archuleta, Conejos, Costilla, and Las Animas counties, which includes Trinidad, have experienced a 47% decline from their peak in 2021. Notably, all these locations are situated along the border with New Mexico. The Colorado Sun Article on Trinidad Cannabis Post New Mexico Rec
It’s important for dispensary owners to keep their finger on the pulse of legalization efforts and regulation changes in neighboring jurisdictions from the local to the interstate level. Considering the potential impacts of these changes early on can assist dispensary owners with crucial long-term strategic financial planning.
Marketing
Andrew:
There’s a lot to be said for marketing dispensaries, but it boils down to a few major strategic choices such as advertising venue and budget. After all, no one is crossing the threshold if they don’t even know what your business sells or where it is. I’ve personally seen a small downtown Boulder, CO dispensary go from ~$400k in sales to over $2m in revenues with targeted local advertising, including innovative partnerships like sponsoring local festivals.
Eden:
Marketing can be complex from a regulatory standpoint, with limitations on content and public visibility. Moreover, the marketing concerns for cannabis businesses can vary wildly across business models, locations, and jurisdictions. For smaller operations with a handful of dispensaries or less, the #1 priority is getting local traffic to your door. SEO and hyperlocal grassroots strategies are cost effective and targeted, allowing even small to medium sized dispensaries to outperform their competition while optimizing their reach and visibility in a market. This approach should encompass strategies like deploying organic, geo-targeted social media content and advertisements, as well as collaborating with local cannabis influencers.
Large operators with dispensaries that primarily sell products from affiliated production facilities should focus on brand building as a key aspect of their marketing strategy. Here, high quality informational marketing materials and hands-on training for budtenders and 3rd party product vendors can really help boost brand loyalty.
Regardless of size, all dispensaries can benefit from focusing on customer retention strategies rather than customer acquisition. These include tactics like rewards systems, which the industry has used with great success to drive customer loyalty. In today’s competitive environment, these strategies are cost-effective methods for driving revenue.
Suffice it to say, marketing strategy should be a major component of any cannabis business’ planning.
Product Selection & Vendor Relationships
Andrew:
Product selection is as complex and situational as it gets for cannabis. From boutique specialty stores to catch-all superstores, there are many successful strategies being deployed in the industry today. However, dispensaries will always have to consider price, accessibility and category coverage; having ‘something for everyone,’ is pivotal to converting every visitor into a customer. Additionally, product selection can be heavily influenced by hype. Edibles brands, flower strains, and more can often become sought-after must-haves and frequently lead to easy conversions through consumer recognition.
Regarding vendor relationships, I’ve seen maintaining a solid relationship have numerous fringe benefits like same-day delivery, frequent vendor samples, or early product previews that less reliable retailers cannot boast.
Eden:
To expand on Andrew’s points, it’s important to not only plan your product selection based on socio-economic factors near your location, but to back up and tailor that selection through data-driven decision-making. There’s no utility to dead shelf space, and often dispensaries have the means to begin analyzing this data embedded in existing systems. Efficiency in selection through data analysis, rather than basing purchasing decisions on things like personal preferences or persistent sales tactics from the supplier, can make sales simpler, faster, and more profitable over time.
Vendor relationships can also be a growing factor as markets mature and weather major changes; Colorado cannabis expanded massively during the COVID-19 pandemic, and the return to baseline in the years since has seen the fall of such staple brands as CoDA Signature, leaving a major gap in many dispensaries’ product selection despite being the best-selling chocolate brand in Colorado for several years running. While some of these situations cannot be avoided, paying your vendors on time or early, and in cash, will help maintain close ties. And you’ll also find that you get the best products at the best prices with the most consistent delivery.
Staffing & Education
Andrew:
Knowledge sells weed. That said, and with topics ranging from regulations to terpene effects to new products, retail staff are called upon to learn a lot. Making sure there are accessible, frequent product education opportunities for your budtenders is an excellent way to boost sales. And with more companies maturing, product education is included in the wholesale sales process with increasing frequency; so be sure to take advantage.
Depending on your setting, it may also be ideal to specialize certain budtenders, so they can appear as masters in a specific product category and use co-selling techniques to make customers feel heard and cared for.
As a note, there’s nowhere where product knowledge among staff is more important than the medical dispensary. Medical consumers–and even retail ones, these days–tend to be looking for very specific vectors, effects, or flavors. Being able to recommend with confidence makes both the budtender and the consumer feel more secure in their product choices.
Eden:
Dispensaries should view education programs as both a cornerstone in their sales methodology and their company culture. When allowed, product demos and samples help develop savvy budtenders and provide a direct line to ideal customers. Additionally, far too few vertically integrated companies take the time to have budtenders visit their production facilities or have production staff come to the dispensary specifically for education time; this can be a very cost-effective education method that helps improve outcomes at the point of sale.
Most dispensaries can also benefit from ‘traditional’ selling techniques like sales scripts. Sales are significantly smoother when customer service representatives have practice with not only the facts they are presenting, but also the mode and order of presentation. Be sure to work closely with your best budtenders to create realistic dialogues that encourage consistent and positive consumer experiences, in a way that supports the brand’s vision and values.
Finally, staffing is married to education inextricably; finding educated budtenders and dispensary management can be tricky in a fresh and evolving industry like cannabis, so retaining and connecting employees with the company is a significant factor in dispensary success. The benefits of a happy, educated staff range from increased sales to decreased costs to easier scheduling and beyond.
Conclusion
Without the dispensary, the industry would be a huddle of horticulturists, lab technicians, and other cannabis nerds waxing over their shared passion. With the dispensary, this industry has become a powerhouse of growth, winning public opinion nearly everywhere they pop up.
Huge thank you to Eden at Green Guardian Management for helping with this article. For more on how Fire Business Strategies or Green Guardian Management can collaborate with you to develop a winning dispensing strategy contact:
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