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Is the little guy getting squeezed out by big cannabis? How to survive 2022 as a boutique dispensary

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As the cannabis industry is growing across the US we are seeing the rise of larger “canna-conglomerates” yet much of the industry is still made up of smaller boutique style dispensaries. According to BofA Securities, cannabis sales in the U.S. increased 40% in 2021 to $25 billion, easily surpassing the $18 Billion in sales from 2020.The vast legal cannabis market in California alone includes 866 licensed dispensaries. Although some medical dispensaries have been operating in California since 1996, recreational dispensaries have only been operating since November 2016. In the early days of the recreational cannabis industry, shoestring budgets and less than organized operations were commonplace. Now, big brands like Cookies, Stiiizy and Caliva are taking over the market putting up stores as quickly as McDonald’s franchises new locations. Stiiizy already has 16 locations in California alone and Cookies has over 40 retail locations in seven states.

But what does that mean for the “mom and pop” dispensary focused on a local community? It can be hard for smaller boutique dispensaries to compete with the pricing or volume that a major brand like Cookies can negotiate. If you’re a small retailer, you can’t simply rely on in-store purchases anymore, you must have an omnichannel sales strategy to succeed. Things like advertising regulations can make it hard for smaller brands or businesses to get their name out there. For example, Mathew Dell from Happy Cabbage Analytics, a predictive analytics company explained that, “The Bureau of Cannabis Control in California prohibits licensed cannabis businesses from advertising or marketing on a billboard or similar advertising device located on an Interstate Highway or on a State Highway which crosses the California border.” So if a company wants to put a billboard up on the highway, the road can’t cross state lines…and while the distributor ‘superstores’ can afford billboards, not all smaller retailers can.

If a retailer can’t compete with these larger retailers in terms of economics of scale and marketing, how can small retailers compete? Dell notes, “The best way to compete is to have a toolkit that allows your business to scale effectively. Your toolkit should allow you to seamlessly locate key opportunities, offer advanced targeting, automate your campaign, offer ROI attribution, customer insights and have an intelligent design while utilizing predictive analytics to make the data you have work for you.” Predictive analytics help highlight the busiest times of the week as well as helping you serve your customers better by tailoring your marketing to customer preferences. You can use this data collected to predict customer trends and purchasing behaviors. Aside from employing a predictive analytics solution, what can you do to get the most out of your dispensary? 

Here are five tips to help small dispensaries build their marketing toolkit and get the most out of their boutique canna-business. 

  1. Focus on delivery

Gone are the days of having to stand in line or (god forbid) run into a co-worker or family member at a store. While Kevin Smith may enjoy running into his daughter at the dispensary, not everyone shares that same sentiment. Consumers want to purchase cannabis easily and discreetly. In its survey Onfleet found that nearly half of Americans would be willing to purchase legal cannabis products via delivery versus going into a physical store or dispensary. That is a massive opportunity to tap into. That same study also found that around half of 18-34 year old people would rather spend time at the DMV than run into someone they know while buying legal cannabis products. Cannabis delivery has roots in being a delivery only business before dispensaries were legal to operate. Now supported by brick and mortar locations, delivery has still taken over the market and it is here to stay. Cannabis deliveries have quadrupled since the beginning of the pandemic, with 79% of dispensaries changing their business models and offering curbside pickup or delivery. Due to stay-at-home orders and social distancing protocols, customers were opting for delivery and “online shopping jumped from 17% of dispensary revenue to over 52% as customers stayed out of retail stores in favor of curbside collection and delivery,” according to MG Magazine. That trend is here to stay as the convenience of having your product delivered right to your door when you run out has been cemented as both a convenient and safe solution for regular and casual customers. In order to thrive, smaller retailers must embrace this change and offer an affordable and accessible delivery service to their customers to meet this demand.

  1. Enhance your Point of Sale system

For states with retail operations, the experience of purchasing cannabis can be just as important as the quality of the product. Enhancing your POS by finding the right software can be crucial today for success as a dispensary. Improving the POS system improves the customer experience and allows you to leverage and track data regarding sales and customer experience. Every dispensary needs end-to-end route planning, efficient dispatch, clear communication and data-driven analytics to thrive. These insights are invaluable to a smaller sized dispensary where the experience itself is why a lot of people come back. Having key data points on your customers and being able to offer them deals and discounts depending on their purchasing habits can have a massive impact on your bottom line and people’s experience. 

  1. It’s a matter of quality

On the same note, people also pick smaller sized dispensaries because of their attention to quality. A Cookies store may move $250,000 dollars of inventory a day, but how well can they control quality with that quantity? Focusing on top-tier products and a positive shopping experience is where smaller mom and pop shops shine. Offer your customers an experience they can’t get at a Cookies or Stiiizy. It’s like going to your favorite bartender or hairstylist, the knowledge and positive interaction is what keeps people coming back. An experienced budtender can make all the difference, but when a bigger store has a thousand SKUs in stock, it’s tough for budtenders to keep track of what’s what. These smaller mom and pop shops can offer a local ‘farmer’s market’ as opposed to a ‘Sam’s Club’ experience, and for some that’s definitely worth it. Especially if you local dispensaries knows you well enough to keep your favorite products in stock so you don’t need to constantly find new strains to meet your needs. 

  1. Increase your online presence

Today a website or social media landing page can be a very important first introduction. Having a viable and effective eCommerce platform is crucial. Another important focal point is social media strategy. How are you positioning your brand and your customers? This positioning can have a direct impact on sales and profits. In order to succeed you want to improve the customer’s buying journey through social media, website content, newsletters or SMS campaigns to foster brand recognition and loyalty. California law says any cannabis advertisement can only be displayed where at least 71.6% of the audience is suspected to be 21 years of age or older. This includes advertisements in broadcast, cable, radio, print, and digital communications. This restriction can make online advertising more challenging for cannabis companies, especially smaller ones who don’t necessarily have the money or time to research precise age demographics to determine where they can and cannot advertise.

  1. Discover more in your own data

Leveraging the data you already have can give you new insights into the customers you know, and find new trends. Inventory is everything in the cannabis world, so it’s very important to use the data you collect to make smart purchasing decisions. Smaller dispensaries cannot carry the vast quantity of products that larger dispensaries have the luxury of being able to afford so it’s important to stock items customers actually want and will move quickly. This is where predictive analytics come in, and where software providers like Happy Cabbage can offer marketing and operations AI that transforms the data you collect from your POS system into something useful and scalable. That means you’ll know which products are selling and which are staying on shelves. The data is already there, why not put it to work for you?

There is plenty of competition in the retail cannabis market, however it has become harder and harder for smaller dispensaries to compete with major corporations. The solution may be to not put all your buds in one basket and only focus on your store front. But focusing on fundamentals like delivery, a full-featured POS system, and increasing your online presence will put you in a position to compete with the bigger canna-conglomerates. Just remember, the experience is what will keep customers coming back. Offer them something unique.

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