There are two types of dispensary shoppers: those who want to try something new, and those who want the same products every visit. As a dispensary manager, you want to balance your product menu to appease both types of consumers. That might mean you will need to take risks by purchasing products that are rather expensive, new, or on sale to make a better margin. How you manage that inventory will have a direct affect on your business.
Sell More with The Most Powerful Cannabis POS System: Meadow’s all-in-one platform allows you to automate discounts, offer promo codes, and create sale prices advertised within your online menu. All menus (in-store, online, delivery, pick-up, Weedmaps, and Leafly) automatically update in real-time when a product is sold, re-stocked, or re-priced, so your inventory is always up to date, everywhere customers are searching. Read More: Dispensary Inventory Management
Dispensary inventory is the most important asset to your company. Without proper inventory management, retail businesses would not be able to function. These products can be expensive and sometimes companies find themselves with too much inventory on hand. When this happens, they may need to discount products in order to get rid of it and free up cash flow. But how do you know when to discount your inventory, and how do you do it in a way that won't hurt your bottom line?
There are a few different circumstances in which you may need to discount your inventory. The first is if you have outdated, expiring products that you need to get rid of in order to make room for new SKUs. Second, you may need to discount your inventory if you're trying to clear it out before the end of the season. And third, you may need to discount your inventory if sales are slow and you're trying to boost them by offering discounts.
Knowing when to offer discounts on your inventory is only half the battle; you also need to know how to offer those discounts in a way that won't eat into your profits too much. The key is to offer strategic discounts that target specific items or groups of items, rather than offering across-the-board discounts that apply to everything in your inventory. For example, if you're trying to get rid of outdated items, offer a discount specifically on those items rather than offering a general percentage off all items in your store. And if sales are slow, target the items that aren't selling as well with deeper discounts in order to move them off the shelves quickly. By taking a targeted approach to discounts, you can minimize the impact on your bottom line while still getting rid of excess inventory.
When to discount your inventory:
- You have excess inventory: A common industry mistake is purchasing too much inventory to achieve a bulk order discount. Vendors will approach you with pricing structures that entice you to purchase more to get a percentage off the entire order. Before signing off on a deal like this, make sure you can move the product. To do this, purchase a small batch and track velocity.
- The quality of the product is deteriorating: Cannabis shoppers will not want to buy products that are expiring or old unless they are on sale. How can you identify this? If it’s flower you’re sitting on, how long is the shelf life? Most flower shoppers will not purchase flower that exceed a few months after the package date. If it’s an edible or tincture, when is the expiration date? You will find this on the product’s packaging. Consider the product’s shelf price. Is the value of the product lower than what you’re selling it for? These factors should help you decide how urgently you should sell through this inventory.
Meadow’s point of sale system makes it easy to track product expiration dates. Expiration dates can be entered when the product is received or anytime thereafter. Run a report or filter the packages tab within Meadow Admin to track product expiration dates. Read more: FIFO: The Importance of This Dispensary Inventory Management Best Practice
- The season is ending: Summer hits like cannabis infused beverages and holiday packaging will go out of style as the seasons change. If you still have this inventory on your shelves, it’s time to put it on sale.
- Sales are down: To promote sales, marketing lower prices will entice shoppers to stop by and purchase from your store. You can do this by advertising a deal day. How you advertise this is important, too. Read more about Cannabis Marketing
What to keep in mind while discounting your inventory:
- Consider your margins: How much profit are you looking to make on each sale? For cannabis dispensaries, your COGS would include the cost of labor and any materials used in the service. Once you know your COGS, you can calculate your margin by subtracting it from the selling price of the product or service. Let's say your product has a COGS of $5 and you're selling it for $10. Your margin would be 50%. So, if you're thinking about discounting your product by 10%, then you know that you'll still be making a 40% margin on each sale. However, if you're thinking about discounting your product by 20%, then you know that you'll only be making a 30% margin on each sale. Therefore, it's important to consider how much discounting will impact your bottom line before making any decisions.
- Know when you can afford it: Discounts can be a great way to drive sales and boost cash flow but they can also eat into your profits if not done correctly. That's why it's important to know when YOU can afford it. If done strategically, discounts can help increase revenues without sacrificing too much profit margin but if done haphazardly, discounts can quickly eat into profits.
- Know when your customers expect it: In addition to knowing when YOU can afford it, it's also important to know when YOUR CUSTOMERS expect it. If customers only purchase from you when they receive a discount, then eventually they will come to expect discounted pricing all the time which will erode margins and/or put a strain on cash flow. In addition, if customers only purchase from you when they receive a discount, then eventually they will stop buying from you altogether once they realize that there are other businesses out there that are willing to offer them what they want at a price point that makes sense for them (i.e., not discounted). Therefore, it's important not to offer discounts too often as this could ultimately hurt your business in the long run.
How Meadow can help:
- Record and review product expiration dates with Meadow: You can enter an expiration date on the package level during the purchase order process in Meadow. You can also go back at any time to add an expiration date to a package after it’s been received into your inventory. Once you’ve added expiration dates to your Metrc inventory, you have two options to manage that data. You can seamlessly view upcoming expiration dates within Meadow Admin, or download an Excel spreadsheet to review this data.
- Analytics and reporting: Meadow's powerful Insights tools crunch the numbers to show you data you can use on sales, products and customers over time. If you’d like to review sales data for your business, you can do so in Meadow Admin using the populated graphs, or download Excel spreadsheets to review that data in depth. These charts, graphs and tables make it easy to find popular products, number of active daily customers, order totals, and at-a-glance sales numbers for the day, week, month and year. Dive into your sales data to ensure you are making the best decisions for your business without impacting your bottom line. Read more: How Dispensaries Can Turn Data into More Revenue
- Easily see what you’re selling, in which sales channels, how quickly, and to who. With real-time accuracy and pre-built dashboards, Meadow's detailed, exportable reports give you the data you need to plan your inventory, manage staffing needs, simplify tax collection and remittance, and see what's happening in all facets of your cannabis retail operation. Check-out the Key Features of Meadow's Robust Reporting and Analytics System.
- Automate and cap discounts: Meadow’s cannabis point of sale software allows you to create and automate discounts by day of the week, time of day, brand, category, and product/option. Once created in Admin, these discounts will automatically apply to your online menu and at point-of-sale. Set it and forget it with Meadow’s automated discount functionality.
Read More: 5 Tips for Cannabis Retail Forecasting & Smart Inventory Buying
