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3 Advanced Retail Strategies – Marijuana Venture

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As the North American cannabis industry becomes more and more crowded, retailers are suddenly faced with flat or declining revenues. That’s bad news for owners, but it’s not necessarily the end of the world. Creative entrepreneurs are constantly looking for new ways to generate income, and those ideas are often hidden in plain sight in other retail industries.

Let’s look at three common retail practices that have yet to embed themselves in the DNA of the cannabis market.

 

Shelf Space

One of the best ways to supplement sales is by charging fees for premium placement of certain products and brands on store shelves. Welcome to the world of slotting fees.

This may seem like an esoteric corner of the retail market, but it is a major driver of revenues for retailers in many different verticals. In fact, the American Journal of Agricultural Economics reported that grocery stores actually make more money from fees charged to manufacturers and distributors than they do from sales. It’s hard to find a retail vertical where this does not occur — as far back as 1996, the New York Times reported that major chain bookstores were engaging in similar practices. In fact, Goldman Sachs published a report in 2015 claiming that consumer goods companies pay more than $200 billion to retailers in placement fees every year.

The economics of slotting fees (also known as “fixed trade spending”) are simple: Customers buy more products that are prominently displayed than those that are placed in nondescript parts of a store. Snack food companies pay thousands of dollars to put up special end-cap displays festooned with bags of chips because they know that shoppers will grab the products as impulse purchases on their way to get milk and bread. They also pay a premium to get their products placed at eye level, which generates significantly more sales than being on the top or bottom shelf.

While this is a common practice in traditional retail, it has not yet become a factor in the legal cannabis retail industry in North America. Mark Cavdar, vice president of business development at Alberta-based Nova Cannabis Inc., says that the vagueness of the current legal scheme creates uncertainty for retailers around what is and isn’t allowed.

“The laws in Canada are restrictive when it comes to any sort of marketing for cannabis products by producers. The regulations are much tighter than those for alcohol, roughly on par with tobacco,” he says. “Because of the uncertainty around trade relationships, cannabis retailers end up in these ad hoc negotiations with sales reps pushing new and untested products and brands. Ordering decisions are then made not because customers are asking for certain products, but because something is featured in a catalogue. This hurts the legal industry as it saddles retailers with inventory that might not move and slows the emergence of legal market brands that deliver consistent product experiences to customers.”

 

In-Store Experiences

Another practice that is common at many retail stores is the in-store promotion. If you’ve ever gone to Costco on a Saturday, you have most likely been accosted by people giving away small plastic cups filled with everything from Albanian granola to lumps of smoked cheese to alpaca pâté made by monks in Wisconsin. If you’re really lucky, you can finish up with a thimbleful of mystery wine. Why does all of this happen? Because it moves product.

“When people come up to a tasting stand and actually meet a representative, they have an immediate connection to the product even if they weren’t planning on buying it,” says food-industry veteran Michael Albert, who has sold everything from tea to gelato in Costco and other big-box stores. “It’s not so much about the product as it is about the personal contact. It’s a lot easier to walk past a product on the shelf than it is to tell a woman cutting up hot dogs on an electric grill that you aren’t interested.”

Obviously, it’s not possible to offer free samples of cannabis in most jurisdictions, but that doesn’t mean that retailers can’t create positive personal experiences for their shoppers. This is where branded swag — such as stickers, apparel and pens — can help retailers highlight certain products in their stores, even if they aren’t officially giving them preferential placement on their shelves.

 

Personal Shopping

One of the hallmarks of the fashion world is that top retailers from Louis Vuitton to Harrods offer personal shopping services. In general, these are appointment-only affairs reserved for high rollers, but it is surprisingly easy to get on the calendar. Why do stores offer these kinds of services? Simply put, they dramatically increase sales.

In many ways, it is the retail equivalent of the fox guarding the henhouse: Shoppers willingly walk the floor with an expert whose sole mission is to get them to buy more things.

As retail analyst Marshal Cohen of NPD Group says, “Imagine a person going into a store to buy a new skirt; personal shopping can turn that skirt into an outfit.”

In fact, Chinese clothing chain Lane Crawford reports that its sales are 400% higher than the average because more than half of its customers choose to work with a personal shopper who is employed by the company.

Personal shopping has been around for decades, if not centuries, but according to Bloomberg it finally went mainstream in the last two years. One of the major reasons for this is that online apps have made it easy for customers to schedule appointments without having to call stores to get on the calendar. In addition, the pandemic fundamentally changed how people interact with retailers, and savvy store owners recognize that now more than ever the personal connection is critical to driving sales. It’s no wonder that Nieman Marcus plans to triple the number of personal shoppers on its payroll by next year.

In addition to driving revenues-per-customer, personal shopping also allows retailers to gather valuable data on shoppers in their stores. It’s one thing for merchants to track general trends, but the personal shopping experience allows them to collect detailed information that they can use to develop future strategies for everything from staffing to merchandising to product selection.

“One of the best things about the pandemic restrictions being lifted here in Ontario is that we can finally offer concierge service, which was our vision from day one,” says Tatyana Parkanskaia, owner of Matchbox Cannabis. Parkanskaia operated a shoe store in Toronto’s West End for more than a decade and has now applied her experience to the Matchbox cannabis stores.

“Retail is all about the personal connection. It’s not just enough to have shoes for people to buy. You need to know what their preferences are, and what their needs are,” she says. “This is true no matter what you are selling. That’s why people can go to our website and book an appointment to meet one-on-one with one of our budtenders, even if they aren’t allowed to sample products in the stores. That’s how we are able to learn so much about our customers both as individuals and as a group.”

 

What’s Next?

The cannabis retail industry faces an uncertain future in Canada and the United States. Because many cannabis products are still illegal at a federal level in the U.S., stores often find themselves operating in a gray zone when it comes to everything from banking to paying taxes. And in Canada, federal and provincial restrictions significantly limit how stores can market products to their customers.

But by drawing inspiration from other retail verticals, stores can adopt best practices that will help them drive revenues and stay ahead of the curve.

 

Richard Berman is the CEO of VerbFactory, a marketing agency with offices in California, New York and Toronto. He has written more than 2,000 articles for publications including the Toronto Star, the San Francisco Chronicle and Condé Nast Traveler.

Original Source: www.marijuanaventure.com

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Rhode Island Rakes In $1.6 Million in First Week of Recreational Pot Sales

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Rhode Island’s new adult-use cannabis market opened for business earlier this month, and so far, business is good. 

Local news station WPRI, citing the state’s Department of Business Regulation, reported this week that “Rhode Island’s six marijuana dispensaries — five of which are currently authorized to sell to recreational customers — collectively sold just over $1.63 million worth of marijuana from Dec. 1 to Dec. 7.” 

“Less than half of those sales were for recreational marijuana, at about $786,000. The rest, about $845,400, were sales to medical marijuana patients,” the station reported. “For comparison, during the last week of October — the most recent full week available prior to recreational sales — the dispensaries collectively sold $1 million worth of medical marijuana.”

Rhode Island legalized recreational cannabis use in May, when Gov. Dan McKee signed a bill that was passed by lawmakers in the state General Assembly

The law made it legal for adults aged 21 and older to cultivate and possess marijuana, while also establishing the regulatory framework for cannabis sales. 

“This bill successfully incorporates our priorities of making sure cannabis legalization is equitable, controlled, and safe,” McKee, a Democrat, said in a statement at the time. “In addition, it creates a process for the automatic expungement of past cannabis convictions. My Administration’s original legalization plan also included such a provision and I am thrilled that the Assembly recognized the importance of this particular issue. The end result is a win for our state both socially and economically.”

Additionally, the law “will give courts until July 1, 2024, to automatically expunge past convictions, and those who want their expungement sooner may request it,” the governor’s office explained in a press release at the time.

Late last month, McKee and the state’s Department of Business Regulation’s Office of Cannabis Regulation announced that “five licensed medical marijuana compassion centers have received state approval to begin selling adult use marijuana on or after December 1.”

The five “compassion centers” that were given approval to begin adult-use sales are: Aura of Rhode Island (Central Falls); Thomas C. Slater Center (Providence); Mother Earth Wellness (Pawtucket); Greenleaf Compassionate Care Center (Portsmouth); and RISE Warwick (Warwick).

“This milestone is the result of a carefully executed process to ensure that our state’s entry into this emerging market was done in a safe, controlled and equitable manner,” McKee said last month. “It is also a win for our statewide economy and our strong, locally based cannabis supply chain, which consists of nearly 70 licensed cultivators, processors and manufacturers in addition to our licensed compassion centers. Finally, I thank the leadership of the General Assembly for passing this practical implementation framework in the Rhode Island Cannabis Act and I look forward to continuing our work together on this issue.”

Matt Santacroce, who is serving as interim deputy director of the Rhode Island Department of Business Regulation, said last month that the state was “pleased with the quality and comprehensiveness of the applications we received from the state’s compassion centers, and we are proud to launch adult use sales in Rhode Island just six months after the Cannabis Act was signed into law, marking the Northeast’s fastest implementation period.”

“We look forward to continuing to work with the state’s cannabis business community to ensure this critical economic sector scales in compliance with the rules and regulations put forward by state regulators,” Santacroce said. 

The launch of recreational sales on December 1 was only one change to Rhode Island’s existing marijuana policy to arrive this month. 

WPRI reported that, on the same day, “the state also stopped charging medical patients to obtain or renew their medical marijuana cards,” adding that “there is an expected revenue loss from the pending plan to expunge marijuana possession charges, which will eliminate court fees from those crimes.”

The post Rhode Island Rakes In $1.6 Million in First Week of Recreational Pot Sales appeared first on High Times.

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D.C. Council Approves Cannabis Bill To Promote Equity, Provide Tax Relief And Eliminate Medical Marijuana License Caps

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On Tuesday, lawmakers in Washington, D.C., approved a bill that would significantly alter the city’s medical marijuana program. The bill would, among other things, remove licensing caps on cannabis businesses, reduce taxes for operators, increase efforts to promote social equity, and establish new categories of regulated businesses, such as on-site consumption facilities and cannabis cooking classes.

Additionally, it would allow current “gifting” operators, who sell non-cannabis items in exchange for “free” marijuana products, to transition into the permitted market while granting authorities the ability to crack down on those who continue to operate unlawfully.

The measure, which had been revised by the Committee of the Whole earlier in the day, was passed by the full D.C. Council by a vote of 7 to 4. 

A second reading vote by the Council is still required before it can be sent to the mayor’s office.

Pro-reform lawmakers have voiced concerns that the bill’s most recent iteration may have unintended consequences for social fairness by granting preferential treatment to already established medical cannabis outlets.

Legally, adults would be able to selfcertify their medical marijuana use according to the Medical Cannabis Amendment Act. 

Council Chairman Phil Mendelson (D) introduced the legislation on behalf of Mayor Muriel Bowser (D).

A note prepared for the hearing by the Committee of the Whole states that the most recent print “retains a majority of the adjustments and additions made by” the Committee on Business and Economic Development (CBED), which passed the measure last week. 

It had progressed out of a different panel before.

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Dispensaries’ Cashless ATM Transactions Get The Ax

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Cannabis dispensaries in several states were left scrambling to find ways to process transactions without cash when a popular workaround to federal banking regulations known as cashless ATMs stopped working for many retailers beginning last week. Cashless ATMs, also known as “point of banking” systems, allow customers to use bank cards instead of cash at cannabis dispensaries, giving retailers and their patrons alike more flexibility when processing transactions for marijuana purchases.

But beginning last week, some of the biggest ATM transaction processors including NCR Corp.’s Columbus Data Services have shut down the ability of cashless ATM transaction processors to use their service, according to unidentified sources cited by Bloomberg. NCR declined to comment on the situation, according to the report.

“This is a pivotal point in cannabis banking,” Ryan Hamlin, chief executive officer of payment technology provider Posabit Systems Corp., told Bloomberg about the cashless ATM shutdowns.

Notice Given Last Year

Late last year, international payment processing giant Visa announced in a memo to retailers that it “was aware of a scheme where POS devices marketed as ‘Cashless ATMs’ are being deployed at merchant outlets.” 

The system worked by rounding up purchases, often to multiples of $20, to make the transaction appear to be cash disbursements. Instead, only the change from the transaction would be returned to the customer, and the dispensary would keep the rest to cover the payment for the purchase.

“Cashless ATMs are POS devices driven by payment applications that mimic standalone ATMs. However, no cash disbursements are made to cardholders,” the December 2021 memo continues. “Instead, the devices are used for purchase transactions, which are miscoded as ATM cash disbursements. Purchase amounts are often rounded up to create the appearance of a cash disbursement.

In April, Bloomberg reported that cashless ATM transactions were able to be processed because they were disguised by listing an address of a nearby business such as a fast food restaurant instead of the actual dispensary address. An estimate put the portion of cannabis sales processed through cashless ATM transactions at 25% of the $25 billion in projected annual dispensary sales.

“Those sales could generate more than $500 million in fees for payment processors, based on average purchase sizes,” Bloomberg reported.

Banking Laws Hinder Legitimate Cannabis Businesses

The popularity of cashless ATM transactions is indicative of the difficulty federal regulations pose for cannabis businesses, even those operating legally under state law. Federal banking and money laundering laws put restrictions on the banking industry, making it difficult for financial institutions to provide traditional services such as credit card processing, loans, and deposit and payroll accounts. But cashless ATMs fail to pass muster with the federal regulations.

“The cashless ATM trend is damaging to investors, dispensaries, and consumers, as when it comes down to it, it’s blatant money laundering,” CannaTrac CEO Tom Gavin told High Times. “Instead of creating loopholes and using a cashless ATM, dispensaries should take advantage of other solutions currently on the market that are safe, legal, and transparent. A proper financial solution should be registered with FinCEN and have a money transmitter license, or be the agent of a sponsor or bank with a money transmitter license in their state.”

Hamlin of Posabit said that signs of the cashless ATM shutdown began to appear in November and increased last week. He estimated that by the end of the weekend, only about 20% of the cannabis industry was still able to use cashless ATM payments.

Cannabis dispensaries in Arizona, California, and Massachusetts have reportedly been affected by the shutdown of cashless ATM transactions, with employees at those shops recommending that they pay for their purchases with cash instead. Curaleaf Holdings, one of the largest cannabis retailers in the United States, reported in April that approximately one-third of the company’s dispensary transactions were processed through cashless ATMs.

“It’s left merchants in the lurch because it happened overnight, but the writing has been on the wall for a while now,” said Peter Su, a senior vice president at Green Check Verified, a consulting and software company that specializes in cannabis and banking.

Sahar Ayinehsazian, a partner at Vicente Sederberg LLP and co-chair of the law firm’s Banking and Financial Services Access Group, said that the shutdown of the cashless ATM system illustrates the need for the passage of legislation now pending before Congress that would allow legal cannabis businesses access to banking services.

“This shutdown further underscores the ongoing need for banking and financial reform for cannabis businesses and the passage of the SAFE Act,” Ayinehsazian wrote in an email to High Times. “While there can be no guarantee that the Act will open up payment processing for cannabis operators, the industry is very optimistic that its passage will facilitate access to legal and legitimate cashless payment options for cannabis operators.”

The post Dispensaries’ Cashless ATM Transactions Get The Ax appeared first on High Times.

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