Maximizing Holiday Sales: Cannabis Retail Inventory PlanningOct 30, 2023
Are you missing out on holiday sales due to inventory mismanagement? As the holiday season approaches, cannabis retailers, much like their counterparts in other industries, must prepare to meet the surge in demand.
At Vetrina, we've observed a recurring issue in cannabis retail, a challenge inventory buyers and retailers frequently grapple with—fears of sitting on seasonal products past their prime or, even worse, forgetting to increase purchases to align with festive demand. These mistakes can lead to a common outcome: missed opportunities for holiday retail sales.
In this blog, we'll delve into the art of inventory management, emphasizing the need to balance inventory, prioritize popular products, understand your customers, and avoid stockouts to ensure you're well-prepared for the holiday season with the right inventory on hand.
Costly Inventory Mistakes for Cannabis Retailers
Let's draw a parallel with a holiday classic that resonates with many households—Baileys. There's nothing that quite captures the holiday spirit like gathering around a crackling fire, enveloped by the laughter of friends and family, and savouring a delightful cup of hot chocolate infused with the richness of Baileys Irish Cream. This imagery alone entices customers to flock to the store to acquire this sweet holiday treat, especially considering that the three months of Q4 alone can account for 50-60% of yearly sales for some Irish cream brands.
Now, envision arriving at the store only to discover that it's sold out. What happens when a retailer forgets to order Baileys? Regrettably, plenty of missed sales opportunities follow. In fact, we have a friend at Vetrina who grapples with this issue each year. They are a Director for a prominent national liquor brand, and annually, a handful of shop managers overlook restocking Baileys to match the festive demand.
Despite these store managers' determination to maintain tight inventory levels and avoid over-purchasing, the problem persists, resulting in barren shelves and lost revenue opportunities. This scenario is all too familiar for retailers who miss out on their slice of the holiday sales pie.
So, the question arises: What are consumers truly splurging on during the holidays, and do we have a well-defined game plan to capitalize on these trends?
Cannabis retailers often strive to reduce expenses and maintain low inventory levels as they approach the new year. However, it's crucial to recognize that having less inventory during the holiday season, when you aim to maximize sales, doesn't align with your goals.
The objective is to prevent running out of popular products during the holidays. Why is this critical? A McKinsey report underscores the significance, revealing that approximately 70% of customers facing a stockout situation will switch to other retailers, driven by their urgency to make a purchase. These lost customers represent missed sales opportunities, highlighting the paramount importance of proper inventory planning during the holiday season.
How to Begin Planning for Seasonal Inventory
At Vetrina, we work with cannabis retailers and brands well in advance to ensure they are ready to purchase and stock the right product, and enough of it. Holiday inventory planning often feels like peering into a crystal ball. Even with the most advanced demand forecasting tools, predicting the future remains an intricate puzzle. This challenge is particularly pronounced in the cannabis industry, where evolving customer shopping habits make seasonal inventory planning akin to a high-stakes gamble.
It may sound simple, but step one is to identify specific holiday-related cannabis products or strains that have historically performed well. Dedicate a slightly larger portion of your budget to ensure you have an ample stock of these in-demand items.
This is a great opportunity to collaborate closely with brands to not hesitate to reach out to guarantee a reliable and timely supply of popular holiday items. Ensuring a steady stream of these products is crucial to avoiding stockouts without going overboard on spending.
Much like Baileys, which consistently sells during the holidays, you must pinpoint which product will perform best during your holiday season.
Prioritize Popular Seasonal or In-Demand Products
This effective approach helps ground your choices in historical data and current inventory trends. By first understanding what happened last year and identifying the high-demand products that were top-performing SKUs during the holiday season, you can begin to strategically allocate your budget.
In cannabis retail, we possess a unique advantage – the flexibility to adjust our orders on a weekly basis. Nevertheless, this doesn't exempt us from the need to anticipate customer demand accurately and understand precisely when it's time to pivot to prevent surplus inventory that might necessitate substantial discounts to clear.
Pay keen attention to specific strains, edibles, or products that experienced increased demand. Craft a comprehensive list of these priority products to stock.
Set clear inventory goals for these priority items. Determine the quantity you need to meet the expected demand and incorporate a buffer to account for any unexpected surges in sales. This meticulous planning will help you maximize revenue.
Planning for Your Customer Needs
As important as it is to know and understand your data, you are selling to real people with real preferences. Pool together your teams’ insights if you are unable to pull from surveys, but understanding your customers' preferences during the holiday season is crucial. Collect customer feedback and conduct surveys to gauge their preferences. Learn if they have specific cannabis-related holiday traditions or if they're on the lookout for gift-worthy products.
Stay vigilant about monitoring social media and industry trends to stay informed about shifting customer preferences. Be agile in adjusting your inventory to cater to these evolving trends. Aligning your offerings with your customers' holiday desires will undoubtedly enhance their shopping experience.
A poll of 1,000 cannabis consumers revealed that 91% intended to use cannabis as a part of their holiday celebrations, and 75.6% of those surveyed said that they planned to give cannabis or cannabis-related products as gifts this holiday.
Your cannabis buyers are planning to gift and consume this holiday, so make sure to tap into their plans!
Avoid Stockouts and Missed Sales
Stockouts can be a retailer's worst nightmare during the holiday season, leading to lost sales and customer dissatisfaction. To mitigate this risk, implement an inventory tracking system that provides real-time insights into your stock levels. Use this system to closely monitor inventory levels, particularly for popular products.
Develop a well-structured restocking plan that includes clear triggers for reordering. When your inventory approaches a predetermined threshold for high-demand items, initiate the reorder process promptly. Ensuring the availability of these products is crucial for retaining customers.
In our course, we encourage and teach the understanding of key inventory metrics, such as turnover rate, and the implementation of an Inventory Funnel. You can learn more about it here.
🔗 Learn how to use an inventory funnel in our blog: Mastering Inventory Management: How the Inventory Funnel Boosts Profits.
Data is a valuable asset when it comes to holiday inventory planning. Consider investing in data analytics tools, such as Headset, to gain deeper insights into consumer behavior and product trends. These tools can assist you in making more accurate predictions about which products will be in high demand during the holidays. It is beneficial to establish a demand forecasting team or assign an individual to regularly review and update your inventory based on data-driven insights. By leveraging the power of data, you can make informed decisions that result in optimized inventory management
Plan for a Profitable Holiday Season
It may seem simple, but if you want to increase sales, you need to plan for higher inventory. Throughout most of the year, cannabis retailers are focused on avoiding excess inventory, but in Q4, there is a shift towards meeting increased sales targets. To effectively plan your inventory, set specific revenue and sales targets for the holiday season. Create a marketing plan that emphasizes your stocked holiday products, including special promotions or bundles to attract customers and boost sales. By setting clear goals and implementing a well-structured marketing strategy, you can ensure a profitable holiday season.
Tips for Cannabis Retailers and Brands
- Historical Data Analysis: Dive into past sales data to identify top-performing holiday products or strains, allowing you to allocate resources more effectively.
- Flexible Ordering: Leverage the flexibility of the cannabis industry to adjust orders weekly, aligning them with customer demand and preventing surplus inventory.
- Customer Surveys and Feedback: Engage with your customers through surveys and feedback to understand their holiday preferences and tailor your inventory accordingly.
- Special Promotions and Bundles: Craft marketing strategies that emphasize stocked holiday products, offering special promotions and bundles to entice customers.
- Inventory Tracking Systems: Implement robust inventory tracking systems that provide real-time insights into stock levels, allowing for proactive restocking.
- Data Analytics Tools: Invest in data analytics tools like Headset to gain deeper consumer insights and refine your holiday inventory planning.
- Set Clear Revenue Targets: Set specific revenue and sales targets for the holiday season to guide inventory planning efforts effectively.
- Collaborate Closely with Retailers: Keep your top stockists in the loop with any upcoming releases, inventory lulls, or possible products that have historically performed well.
- Know your data: Go over last year's top-performing holiday products, and start to share your findings with retailers.
- Social Media Monitoring: Keep a vigilant eye on social media and industry trends to stay informed about evolving customer preferences and adapt your offerings.
As the holiday season approaches, cannabis retailers and brands stand at the threshold of a tremendous opportunity. The delicate balance between avoiding overstock and ensuring product availability is key to a successful holiday season. With careful planning, data-driven insights, and a customer-centric approach, cannabis retailers can avoid stockouts, meet customer demand, and capitalize on the festive spirit. By following these tips and implementing sound inventory practices, we can look forward to a holiday season filled with satisfied customers and increased profitability.
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