This post was originally published on this site.
Nearly a year ago, David Vautrin led the opening of one of New York’s first licensed cannabis dispensaries. As more retail shops come online, and regulators expect to approve hundreds of general license applications, Vautrin is sharing some tips for success for running a weed store.
Currently an operating partner at Union Square Travel Agency – which opened in Manhattan last February – Vautrin has worked in the cannabis industry for nearly a decade. In 2016, he started working for a Canadian investment firm, CannaRoyalty, to start up the US operations in California.
After CannaRoyalty was acquired by Cresco, Vautrin maintained ties with the business indirectly via CEO coaching and investing. He returned to his home state of New York last year to build and Launch USTA.
With USTA nearing its first anniversary, Vautrin – who served as a multidisciplinary consumer product goods leader in a variety of industries before joining the cannabis sector – has put together a guide for how to plan and stand up a successful dispensary.
The fundamentals
Getting licensed and finding real estate are huge challenges for those looking to open cannabis retail shops in New York. They’re also only the very first steps entrepreneurs need to take before the real work begins.
Three aspects of planning in which entrepreneurs need to engage once they have their license and location squared away are: building a revenue forecast, establishing a product purchasing budget by category, and understanding consumer personas, according to Vautrin.
Revenue and budget
In order to build a revenue forecast, the prospective store owner must look at factors inside and outside the shop, and how they will affect sales. External factors include things like foot traffic and the competitive landscape in the area in which the store is located.
Internal factors that affect revenue include:
• Service approach – consultative, self-serve, hybrid, etc.
• Hours of operation, community restrictions
• Staffing plan and number of registers
• Marketing intentions and community activations, etc.
• Projected growth rate, building customer retention levels
• Delivery business intentions, scope and forecast
• Grower showcase intentions
• Size of store
Once a business figures out its revenue projections, owners should use that and other factors to set a viable budget.
According to Vautrin, a good equation to use when figuring out an initial weekly budget is: Revenue x 2.5 weeks supply, divide that by 50% of the cost of goods and services – i.e. $189K / week, (9.8+M annually).
A slide from David Vautrin’s presentation.David Vautrin
Understanding consumers
Before opening doors to customers, dispensary owners should understand the types of cannabis consumers that exist, and the kinds of products each group is likely to gravitate toward.
Some of the key cannabis consumer demographics Vautrin identifies include “canna-curious” wellness seekers, cannabis connoisseurs, never smokers and fun seekers. These customer demographics tend to make different purchasing decisions, so it makes sense for dispensaries to carry products proportional to the types of customers they expect.
For example, the canna-curious wellness seekers and never smokers are more likely to opt for edibles and low-dose products, while connoisseurs often go for premium flower and concentrate products, while many fun seekers choose whatever has a high THC content and shareable.
When buying weed products, customers usually want to know about potency, how to control dosing, strain qualities and purity. Customer experience improves when stores carry products with packaging that clearly communicates what benefits to expect, and train budtenders who can answer questions about these topics.
A slide from David Vautrin’s presentation.David Vautrin
Inventory decisions
Curating a portfolio – i.e. flower, edibles, vapes, etc. – and how much of each product SKU a dispensary will carry is among the most important decisions store owners make. Dispensaries targeting a market of older people and medical patients will likely want to focus more heavily on edibles, while stores that serve more connoisseurs will probably carry more high-quality flower.
When dispensary owners are thinking about their product and brand portfolio, they should make sure the inventory they plan to stock serves their core customers. When it comes to specific brands, they should make sure they provide a unique benefit the customers are seeking.
Retailers should also take a good look at companies before agreeing to stock their brands, according to Vautrin. Beyond a general overview of the company, retailers should do the following due diligence:
• Get a copy of the license and determine who you are buying from
• Inquire about ethos, diversity, sustainability of the brand and or 3rd party supplier
• Understand current portfolio categories and company future state vision
• Probe for core competencies, understand their role
• Validate their commitment to building a brand in New York
• Consider their approach to packaging – compared to peers
• Evaluate the depth of brand assets – training, digital presence, photography, ring cards
• Talk about what makes the company special (it’s story, objective, connection to consumers, etc.)
Working with brands
Additionally, Vautrin put together a list of dos and don’ts for retailers and brands, when it comes to forming business relationships:
Retailers:
• Request a comprehensive menu with a list of all active SKUs, links to descriptions, images, potency and pricing.
• Understand who the target consumer is for each brand they present, if he/she is being addressed?
• Understand the brands pricing strategy. i.e. Super Premium, premium, penetration pricing, value, loss leader, etc.
• Understand the brand’s go-to-market strategy and commitment to activate the brand.
• Be selective when requesting testing samples. Pick the brands and SKUs you want to try which made it through the pre-sampling vetting process. This minimizes unnecessary expenses for the supplier.
• Having too many samples can complicate your testing process.
• Establish a protocol for testing – Identify key testers for each category to do sensory testing. Utilize a recording system to capture feedback. Be cautious about “it’s dope bias”
• Get guidance from your supplier on best sellers in the region
• Option – establish a relationship with other legal cannabis retailers to confirm your selections
Brands:
• Communicate what makes your brand special. Be prepared to explain why replacing an
incumbent with your SKUs would be beneficial to that particular store
• Consider that there are a few thousand available SKUs and a typical retail store can not properly service more than 350. Be disciplined about the number of SKUs you launch, as well as be prepared to prioritize.
• Wrapping a thin label around someone else’s product is not a brand, determine a sustainable competitive advantage
• Do not drop off bags of weed; it’s not compliant and creates confusion. Understand the
sampling retailers’ process and make best efforts to adhere to that.
• Testing and activations samples should always be in the resale package
• When possible, use data to speak about regional SKU level performance
• Ask retailers to provide guidance on expectations. i.e. turns, revenue, gross margin dollars etc.
A slide from David Vautrin’s presentation.David Vautrin
Performance tracking
Once a store has its product lineup stocked, and opens its doors to customers, it should keep close track of how different products are selling, Vautrin said. That includes tracking how many days supplies of each product lasts on shelves, how many distinct customers are buying them and how frequently customers are buying.
Additionally, dispensary owners should monitor how each brand sells compared to others of the same category (edibles, flower, etc.). They should also keep track of what price points customers appear comfortable paying. This data should inform dispensary owners’ future inventory decisions.