Top 15 Mistakes that Kill Cannabis Retailers
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Cannabis retail is a young and dynamic industry plagued by easily avoidable pitfalls.
GetGreenline.co has seen the ups and downs of more than a hundred cannabis retailers. The industry today is still constantly in motion with new federal and local legislation and ever changing industry standards.
We have compiled 15 of the most common mistakes made by businesses in this document to help cannabis retailers optimize operations. Why experience these roadblocks first-hand when you can learn from the mistakes of others? GetGreenline’s goal is to strengthen the cannabis retail industry by informing business owners of potential mistakes that can kill their cannabis dreams.
*Stories told in this document are real events. Names of particular persons, locations, and brands have been withheld for confidentiality purposes.
- The staff is unprepared for the wide range of clients.
Cannabis is medicine to many customers, and staff should be well versed in client needs and the appropriate choices of product. Many customers require cannabis as medication for mental health and can appear agitated and confrontational. Storefront employees working in cannabis retail must be knowledgeable in compassionate care and how to serve clients with disabilities. It is important that staff attitudes and speech be catered to the client’s emotional needs. The worst thing an employee can do is sell instead of serve; the primary goal should be to serve the customer’s needs, not to up sell the client on product.
- Employees do not have a set of operating procedures in place.
How should employees deal with difficult/aggressive customers? Is there a cash drop procedure? What does the team do when they sell the last bit of product? Plan and establish steps for employees to follow so they can have the comfort and security of falling back on pre-designed procedures. Even with no managers on site, the staff should know how to run the front of house efficiently based on pre-set operating procedures.
“A customer with a mental disability walked into a cannabis retail store and speaks loudly and erratically to an employee at the counter. The sudden movements of the customer spooked the employee and the police were called. The incident reflected poorly on the store, and the business took a significant hit to sales and sign ups for three months.”
These incidents could be easily avoided if staff and management had proper compassionate care training and customer service procedures to determine if a customer poses a real threat or is simply exhibiting symptoms of their conditions, for which cannabis provides relief.
- Low store morale due to lack of leadership.
“A small but rapidly growing dispensary had just received municipal approval for a second location. Excited about the opportunity, the owners and senior manager focused most of their attentions on the fresh location, neglecting employee management and training in the first store. Over the next three months of focusing on the new store, employee accountability and adherence to procedures were damaged in the first location. This created an environment that encouraged stealing, and over those three months the business lost over $10,000 in product due to internal theft.”
In order for employees to properly care for customers, they must also feel cared for. Managers should be champions for worker needs. If management is not in touch with staff regularly, procedures can start breaking down and discontent can spread quickly. This is dangerous in cannabis retail if accurate compliance is compromised as a result of poor procedure following. Furthermore, low employee morale will damage customer service quality and your retail business will lose recurring clients over time.
- Poor data security leads to inaccurate compliance reporting.
Besides creating good passwords and operating procedures for data entry, retailers must restrict access to sensitive store data. Customizable user security roles on your POS will limit the functions staff have access to, and is critical to maintaining store data integrity. New hires should not have full access to discounts right away, and cannabis retail chains may wish to block branch stores from seeing company-wide reports. This is why GetGreenline POS comes with customizable employee and locational security locks.
- Product data accuracy is lost during conversions, purchasing, and transfers.
Weight loss due to processing and transfers is often overlooked in smaller operations, but can result in large cumulative losses in accounting and compliance. To help with stock verification, make sure that the team performs regular stock checks and frequent item spot checks. Your POS needs to have a location based auditing function, weighted conversions and transfer loss tracking to establish a reliable inventory system.
“A cannabis retailer running five separate stores and warehouses was constantly missing product from their inventory. Their stock management system had no way of tracking transfers and manage separate storage locations. After consulting with GetGreenline, they discovered that transfers between warehouse 2 and store 3 were losing product due to internal theft.”
Accurate multi-location inventory tracking is critical for your store’s operations. Without it, you will have no idea when, where, and why cash and stock inconsistencies are happening in your business. Every cannabis retailer must have a reliable POS that is able to handle tracking between all branches of the business, from purchase and processing to customers at final sale.
- The POS software can’t keep up with incoming legislation.
Do your software providers know what laws you need to comply with? If not, how quickly can they address new compliance requirements? Never compromise your licence due to non-compliant software. Ask your POS provider if they can satisfy your compliance needs. The fastest way for a cannabis retailer to fail is by not having the compliance tools they need.
- Not looking 2-3 years into the future.
Dispensaries with a cash grab mentality do not fully understand the potential size of the industry, and only act on the short term. Invest back into the business and make sure that proper scalable operating procedures are in place. For example, store owners should invest in items like decent computers to shorten client wait time, as well as interior design for store presentation. The look of your store is important for remaining competitive in acquiring and retaining new customers.
- The POS can’t track product movements across multiple locations.
The use of safe storage locations separate from the retail environment is key to minimizing risk. As a result, your POS must be able to manage multiple locations and separate inventory pools. Additionally, the software needs to accurately track movements of product across these locations and be able to adjust the stock in case of any losses.
- No visibility on exactly how much inventory is at any given location.
Inventory visibility improves internal security and allows business owners to catch, prevent, and accurately account for losses due to theft. Your POS needs to accurately track and report all movements of cash and inventory at all times, across all locations. The software should record the actions performed for record keeping in case of any mismatched reports, allowing users to review them and catch any inconsistencies. Have absolute control over your stock, know what you have and where you have it, whenever you want.
- No limit on front of store stock and not making use of safes and storage areas. Theft hurts stores and ruins expansion goals. Minimize the pain by limiting stock levels at the front of store. Stores may lose hundreds of thousands of dollars in a single night if risk is not distributed across multiple locations. Cash and inventory needs to be regularly transferred and stored in safe holding locations, separated from the retail environment. Transfers between these storage locations and the front of store should happen daily, and remember to never leave inventory in store overnight. Cash amounts in the register also need to be managed on a regular schedule by creating cash limits. Once a limit is reached, staff need to do a cash drop from the till to a safe.
- Poor customer retention offers and rewards programs.
Specials and in product spotlights are great tools for expanding the customer base without explicit advertising. Daily specials and other limited time rewards on purchases will help stores foster a loyal customer base. Gift cards, promos, etc. can increase positive customer engagement and provide healthy visibility of the store in the community as long as it falls within the parameters of your province’s marketing restrictions. An enticing discount system is an essential part of any good branding/marketing strategy.
- Underestimating marketing and branding work.
Most users already have a source for their cannabis and in order to grab their attention, they need need to be aware that your business exists. Securing a retail location doesn’t automatically mean success, there’s always work to be done on growing your customer base (marketing) and establishing your business voice and goals (branding). Online presence is critical for marketing and branding work. Establishing a web store and adding your business to the local directories (Weedmaps, Leafly, Google business pages) will improve visibility of your retail location.
- Poor presentation of the cannabis retail environment.
The look and feel of a cannabis store can make the difference between surviving and closing down. The retail storefront must feel safe, clean, and accessible from the outside. This means increasing visibility with large windows, good interior lighting, clean air, and unobtrusive security measures. Barred windows and doors often contribute to an uncomfortable, illegal atmosphere.
“A cannabis retailer recently got shut down by the local authorities due to a number of complaints filed against their store. The city was home to four cannabis retailers, all of which are operating under grey market conditions until Spring 2018. This allows the municipal and provincial governing bodies to enforce existing cannabis laws when they choose. Essentially, the stores in the area are tolerated, but not fully licenced. The only reason why this particular cannabis retailer was shut down by the city was due to the negative effect it had in the community.”
The complaints included:
- Loitering and cannabis use at the front door affecting surrounding businesses.
- Poor parking management leading to blockages in traffic and other stores.
- Smoking cannabis inside the store, breaking indoor smoking bylaws.
- Using the backyard of the shop as an employee and friends smoking area, right next to ventilation for the other storefronts.
After these four complaints were filed by the affected community, the store was shut down by the local authorities. This closure would not have happened if the retail owners were more mindful of their neighbours and how the store activity affected others.
- Manage how employees and clients use the store space.
The behaviour of people in a cannabis store is just as important as the physical appearance of that store. Consumption of cannabis in and around the front door can lead to negative feedback from neighbors. Make sure that customer parking and behavior around the retail environment is considerate of other residents and businesses. Annoying the community is a sure way to get complaints filed against a cannabis store. Having many complaints filed against a store can lead to the closure of a cannabis business.
- No participation in the community or communication with neighbours.
Cannabis businesses that participate in community outreach and actively engage with their neighbors have a higher chance long term survival. Because the local culture might still not be educated on cannabis use and its benefits, it is the cannabis retailer’s responsibility to promote a positive and open atmosphere. Engage the community by holding information sessions, learning lunches, or free consultations. If the capital is available, sponsoring local events is also a great way to make a brand known in the community.
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