The Top 4 Challenges Facing Cannabis Retailers in 2019

From product sampling to compliance headaches, here are my top takeaways on the biggest challenges facing cannabis retailers.

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In my current role, I spend a lot of time talking with dispensary owners and managers. From small mom-and-pops to massive multi-state operators, understanding these businesses and the unique challenges of cannabis retail has been my complete focus for several years now.

Across countless conversations and consultations, four clear trends have emerged as consistent hurdles faced by brick and mortar cannabis retailers. As the frontlines of our industry, dispensaries and those who work in them represent the most consistent touchpoint consumers will ever have with the cannabis industry.

No matter your market, company-size, corporate mission nor customer-base, identifying and managing these challenges before they become a business-busting problem should be at the very top of your to-do list.

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Without further adieu, the four defining challenges of cannabis retail:

  • Sampling products is important, but difficult
  • Sales analytics lack granularity and actionable insights
  • Budtender training and product knowledge is top-of-mind
  • Compliance-related errors are a constant threat

If not nipped in the bud, any one of these problems can result in serious consequences for your operation. At best, your business could creep to a halt as your competition provides a consistently superior customer experience. At worst, you could be slapped with fines, mandatory business closures, or even jail time.

Below I examine these common challenges in-depth.

Product Sampling

In the cannabis industry, care must be taken to ensure product sampling is done in a compliant manner. Rather than wrestle with the state-mandated (or sometimes even municipality-specific) sampling laws, we’re seeing more and more retailers decide to no longer accept product samples from vendors.

This is a costly mistake.

Budtenders who have sampled a product are 202% more likely to recommend that product to a customer within one week. Employees with personal experience with a product can adequately speak to its benefits and support customers in finding the right product for their needs. On top of that, an employee who feels their manager cares about their feedback on products and business practices is 75% less likely to quit and will be 25% more productive while on the job.

As the industry matures and grows more competitive, brands are increasingly relying on the feedback and insights from the frontline employees who sample their products. This feedback is used to refine marketing strategies, aid in product development, and respond to consumer preferences. Limiting the communication and relationship between brands and budtenders is a disservice to the entire ecosystem and will ultimately limit the quality of products dispensaries are able to sell, hurting their revenue.

While some states and municipalities have said no altogether to product sampling, retailers who are able should take the time to manage this process in an organized and compliant way.

Your employees and bottom line will thank you.

Sales Analytics

Without proper sales data analysis, dispensary operators have no way of knowing which products are winners and which are loss-leaders. Retail operators recognize the importance of staying well-stocked with top-sellers and are ready to ditch the duds if necessary—but many feel they lack the tools and visibility to make those decisions with confidence.

There are certainly powerful tools out there helping retailers make sense of their business data. Plus, any POS system worth its salt is going to give you unbridled visibility into your sales productivity and inventory.

However, overly-complex interfaces, unintuitive data visualizations, and lack of customizability are consistently cited as shortcomings of existing solutions. Retailers don’t have the time to sift through spreadsheets or try to decrypt charts and graphs. They want clear insights, actionable recommendations, and flexible tools that fit their needs.

While some retailers turn to outside consultants, others are creating internal analyst roles dedicated to interpreting data and extrapolating business recommendations.

One thing is clear: the right person with the right tools can derive monumental insights and provide massive value for a dispensary, large or small. For now, however, the majority of retailers don’t have the bandwidth, manpower, nor toolkit to harness the full power of the data they generate.

Product Knowledge

Education is extremely important in the cannabis industry. Budtenders need to know as much as possible about the products they’re selling so they can properly advise customers about product benefits and differentiators.

Every day across America, people are walking into dispensaries for the very first time. The wrong recommendation from a budtender can make the difference between an awful online review and a loyal customer for life.

Ninety-two percent of consumers take the exact recommendation of the budtender when purchasing a cannabis product. Sophisticated retailers acknowledge the massive influence of their frontline workforce, but few feel they are providing adequate training, onboarding, and ongoing professional development.

Providing your workforce with instant access to product descriptions, frequently asked questions, and brand resources will make sure they are equipped to offer the best possible customer experience, ensuring higher average ticket prices, greater customer loyalty, and a meaningful competitive advantage.

Compliance Concerns

To nobody’s surprise, regulations and compliance issues are a major part of the cannabis industry and consistently come up as top concerns among cannabis retail operators. Nearly all mature dispensaries maintain a (at least one) full-time compliance officer on staff. Arduous documentation, bullet-proof Standard Operating Procedures (SOPs), rigorous training, and constant reminders all come with the territory of running a legal cannabis business.

Most compliance failures (86%) are a result of a lack of timely information. And with seemingly endless and constantly changing regulations to keep track of, clear communication is the name of the game. More and more dispensaries, particularly big operations with large teams across multiple locations, are citing team communication as a key business challenge they are hoping to resolve in 2019.

A connected and engaged workforce with constant access to SOP checklists and compliance information make 40% fewer compliance-related errors. Today, there is no reason any organization should be relying on post-it notes or even emails or texts to communicate mission-critical information. When the stakes are this high, retailers must (and many already are) invest the time and resources into developing a culture of complete transparency and accountability that will ensure their business thrives.

If there’s anything I’ve learned in my time in the industry, it’s that cannabis operations are awash with risk, but with that risk comes the potential for massive reward. Whether you’re breaking ground on your first storefront or evaluating expansion into the next big market, identifying, mitigating, and (hopefully) eliminating these four challenges is your best bet to clear the way to a protected and profitable retail cannabis investment.

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