In any retail environment, but especially for cannabis retailers, having accurate data is vital. Whether it’s inventory counts, end-of-day sales numbers, or taxes, your data must be meaningful and actionable.
But it's also necessary to have people who are comfortable analyzing the data and making sense of what it says.
The challenge is usually in finding the information, or data, you need to answer specific business questions. Where do you look? What metrics are most useful? What do you do with that real-time data? How can you use insights to improve profits?
The answers to improving cannabis dispensary outcomes, aligning the team, and accelerating careers are in the data.
In this post you'll learn how cannabis retail professionals can level up their data game, and in the process, level up their career with the SCORE method.
Tell your dispensary data story
First, it's critical to understand that working with data isn't about flexing your graphing calculator skills. And you don’t need to be a data scientist to do successful dispensary data analytics.
It’s about finding actionable insights from your data.
Data Storybooks are the meaningful narratives to inspire understanding and alignment with teammates and managers. How can we translate into words the compelling, true story the data set is telling us?
Data Playbooks are the specific next steps and action items we use to change the story. Once we all understand and agree on what's happening, how can we empower the team to tell a new, better (more profitable) story?
Introducing the SCORE method
To practice data-analysis skills, top retail professionals use the SCORE method:
Simplify big questions or complex conversations into a single plain English question. For example, "Why is 2020 revenue so much higher than 2019?"
Connect the data dots through data collection of all numbers and other information that inform the top-level question. In our example, that'll include transaction data, cannabis consumer data, and catalog data.
Organize the data in such a way that anyone can clearly see the story unfold before their eyes. In our example, we might show that year-over-year pricing and inventory were similar, but certain demographic segments behaved differently.
Recommend specific actions to improve targeted business outcomes. These are sometimes called Key Performance Indicators or KPIs. Because of the last three steps, these suggested changes are data-driven and have immediate buy-in from leadership. In our example, this could mean creating a targeted marketing campaign to increase basket size and repeat purchases from a specific under-performing group of customers.
Elevate the store's performance by doing the recommended next steps, then evaluate the outcome by starting with a simple question to explore. Most often, the evaluate question is "Did our suggested change have the desired outcome?" Then track the success of your recommended actions. In this example, you can track whether basket sizes increased through your dispensary point of sale (POS).
This method allows you take ownership and prove your value. Data mastery helps management to clearly understand the key question, the data story, and how to use that business intelligence to change the story for the better.
Using data not only builds internal trust, it allows you to make smart business decisions without reacting emotionally or making potentially dangerous guesses. The SCORE method empowers you to consistently boil down complex concepts or convoluted questions into simple, direct answers.
To help illustrate the point, let’s walk through a foundational area of a retail cannabis business — product pricing.
Example: How to price cannabis products for profit
Every retail store is in the business of selling cannabis products. The stores that survive and thrive are the ones that sell products and manage their supply chain profitably.
One key consideration for products is pricing. That breaks down into the concepts of markups (how much are we marking up any given SKU over our costs) and markdowns (how much are we discounting that SKU from list price).
In this example, we'll focus on a simple idea that’s incredibly common for cannabis companies: keystone markups.
Keystone pricing is the idea of selling list prices at double wholesale prices. So if a package of pre-rolls costs $10 to purchase or make in-house, the keystone markup is $10, for a customer list price of $20. This rough ballpark estimates a markup where the store still makes money after factoring in non-product costs like rent, payroll, utilities, insurance, and others.
Using the SCORE method, you can impress management with the following presentation:
Simplify: "You mentioned we cut it close paying payroll last month. That makes me wonder, are we marking up our products enough to cover our costs?"
Connect: "I reviewed the top 100 products by sales over the last 3 months and compared the markup rates to our keystone markup target."
Organize: "This chart, ordered by top sellers first, shows the percent markup. The orange line shows our markup target. Everything above the line is what we want, below the line is not marked up enough."
Recommend: "As you probably see, 23 of our top 100 products are below our target markup, and we clearly have strong demand. I suggest we raise the list price on these products to exactly match our target, and if that doesn't hurt demand, we can consider raising prices slightly above our target to account for discounts."
Elevate & Evaluate: "We changed the prices on March 1st and watched sales for a month. Did increasing our markup increase our overall profits so we have more financial wiggle room? Here you can see that demand for the 23 products with increased prices didn't change, so we just made more profit on every one of those sales. The impact is clear in this profit chart for the month of March."
Master cannabis data analytics
Data mastery is a skillset that has the potential to change your career in the cannabis industry.
Most people have heard of a Most Valuable Player (MVP), or the player that had the biggest impact or scored the most points. When a player is “valuable,” they had a good short-run and were useful for the team, but the MVP changes almost every year.
There is a different label reserved for the best of the best. The Most Invaluable Player (MIP) is something much more rare and powerful. When a player is “invaluable,” they’re so central and important that the team will hurt without them.
MIPs are so priceless, they call the shots and drive the team for the long term, and MIPs are always first draft picks, with the highest-paid contracts.
The key to becoming a cannabis MIP is mastering your dispensary data analytics game.
Are you ready to show up and level up?
Practice the basics you learned in this post and you'll immediately see a difference.
Or, if you want a data coach to train your retail data skills in products, inventory, customers, marketing, employee, forecasting, and benchmarking data, check out the Cannabis Retail Data Mastery course.