Data and finance are increasingly linked, and cannabis dispensaries that are growing fast – or facing headwinds – should be on the lookout for information that helps them adapt.
Gathering the right analytics has become top of mind for financial executives in recent years, especially as the pandemic introduced new levels of unpredictability. That rudderless feeling that comes with such turbulence is never welcome in a growing business, and the impacts are real. In AAFCPAs’ 2021 CFO Survey, financial leaders identified the biggest opportunity costs of not leveraging data as:
Lack of visibility
Missed competitive advantage
Lost efficiency/productivity
This is true across industries. Traditional, well established, and e-commerce retailers know that customer analytics drive business. In the cannabis space, putting data to its best use is not yet as common; due to the rapid pace and learning curves, owners are simply running so fast that they are not taking the time to properly mine data.
That process starts with Key Business Questions (KBQs): forward-looking questions that establish a framework for what you will do with the insights produced by analytics. These questions are central to the overall strategy that is being deployed or may be deployed in the future.
Here are a few KBQs that can influence your decisions as an operator:
What is my optimal inventory balance?
Cannabis owners often struggle to find the right balance of inventory. They feel the need to carry a wide variety to appeal to different customers, which often leads to product sitting on the shelves.
By digging into more granular point of sale data, you can identify strains that are moving through inventory quicker and those that are lagging. You can see not only broad strokes in terms of total inventory, you can also track performance all the way to the SKU level. Such visibility allows you to make more informed purchasing decisions.
How can I maximize sales bundles?
Point of sale data can go beyond which product is moving to show average basket sizes and which items are combining to increase the checkout value.
It is no secret that the more customers spend at the counter, the greater value they bring. It could be that certain strains pair with ancillary products to bring basket size up by 20 percent – a difference-maker as the business scales.
Is my territory at risk?
Dispensaries are opening at a startling rate. What may once have seemed like a neighborhood monopoly for a given operator is now a free for all, with multiple stores in a tight geographic radius. Understanding where customers are coming from and whether a new competitor threatens the business gives you a head start on solidifying your position.
Using customer ID data from the point of sale system allows you to track what percentage of customers are coming from the vicinity, how many are loyal or repeat customers, and even gives a hint as to how far they may travel. Developing a heat map that shows the customer distribution provides a quick look at what the impact of new competition might be.
How can I staff most efficiently?
Staffing is one of the biggest operational expenses for operators. Finding the right people takes time, money, and coordination as you consider the ebbs and flows of the business. In addition to product and customer insights, point of sale data can help identify high traffic times, informing decisions about staffing levels and store hours.
Putting the proper staff levels in place at the right times helps reduce cash burn and maximize the customer experience – two keys to an efficient retail operation.
Gaining an edge
These are just a few of the key business questions you can use to get better information that guides the business. It does take time to gather enough data to accurately predict where you are headed; six to 12 months’ worth of analytics usually paints a vivid picture.
In fact, “the picture” is the next helpful step. Insights from analytics are important in any format, but dashboards and visual representations make it easier for financial professionals to comprehend and share findings across the team.
If you aren’t asking the right questions, tracking the right data, and communicating across the organization, it is likely that market trends will catch you by surprise. Even when the business is thriving, without visibility you could easily find yourself in a quick decline without understanding why. A corner that was cut in 2021 could show its impact in the numbers – but you need to actively gather those numbers to know how to adapt.
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