The Power of Relationships: Navigating Risks in Cannabis RetailOct 02, 2023
Long gone are the days of generating sales simply by opening your doors. What started as a Green Rush has led the cannabis industry to be more competitive than ever.
The cannabis industry demands a fresh approach, one that goes beyond offering the best product, the most comprehensive education, or the lowest prices. And this goes for both cannabis retailers and cannabis brands.
As pricing competition intensifies and product life cycles shorten, cannabis retailers and cannabis brands must forge deeper relationships to succeed. In this blog, we'll explore the challenges facing the cannabis retail sector and how building sustainable relationships can lead to growth and prosperity for both retailers and brands.
The Challenge of Increasing Competition in the Cannabis Industry
With cannabis stores popping up rapidly, retailers are facing intense competition. According to Statistics Canada, the distance Canadians travel to reach a shop is decreasing. In Alberta, which ranked second in terms of accessibility, the proximity measure dropped from 25 km in March to 13 km in July 2019, following the opening of over 100 new stores. Canada has approximately 40 million people and is home to thousands of recreational cannabis retail stores spread across 10 provinces and three territories. By late August 2023, Canada had over 3,800 legal recreational cannabis storefronts.
As for cannabis producers and brands, the entire population of Canada can fit into the state of California. However, in 2023, California experienced a decline in legal sales, generating $5.3 billion, an 8.2% drop from 2021. This marked the first decline since the launch of the adult-use market in 2018. The abundance of cannabis production in California has resulted in a price war within the legal industry and intense competition from the illicit market.
What does this all mean? Whether you are a cannabis retailer or brand, whether you are in the USA or Canada, competition is picking up and you will need to stand out to compete. A proliferation of products results in decision paralysis for customers and retailers alike.
Retailers are bombarded with emails from salespeople daily, each claiming to offer the best products at unbeatable prices. This information overload poses a challenge for retailers as they struggle to differentiate between products and align them with their assortment strategy. With consumers having more options than ever for where they want to shop, a store once considered a destination may now find itself lower on the list among many cannabis retailers on the same block.
The Solution: Building Sustainable Relationships
Here are some elements that contribute to successful partnerships:
Building Trust through Data and Insights
For cannabis brands, simply bringing a product to market, targeting 300 stores, and running educational Product Knowledge sessions is no longer sufficient. All your competitors are doing the exact same thing, and considering that many retail cannabis buyers have limited time, establishing a trusted connection becomes more crucial than ever.
Presenting data and actionable insights in your interactions can strengthen your sales pitch. It's not just about giving them the info they need to make confident choices; it also helps them trust you, your products and your brand.
Informed Forecast Plans:
Predicting future demand accurately is exceptionally hard in our industry. In Canada and many US States, there isn’t enough historical sales data for reliable forecasting because they aren’t stable or mature enough.
Utilizing whatever historical sales data you have, market trends (look to more mature Cannabis markets or similar industries), and seasonal variations, both retailers and brands can better anticipate when and where fluctuations in demand are likely to occur.
This proactive approach helps in aligning production, inventory, and marketing efforts, reducing the risk of overstocking or running out of popular products and creating a missed revenue opportunity. Knowing this information will also make it simpler to communicate with a possible buyer or brand what is on the horizon for your business, simplifying communication.
Effective communication is the backbone of any successful partnership. Consider creating structured communication to keep both brands and retailers informed, aligned, and responsive to market dynamics. Establishing a regular cadence for meetings, updates, and feedback sessions ensures that both parties are on the same page. This includes discussing sales performance, customer feedback, inventory status, and marketing strategies. A structured communication framework allows for swift adjustments when necessary, helping brands and retailers stay agile and responsive to changing consumer preferences. It also fosters collaboration and partnership rather than a transactional relationship.
Proactively identifying and mitigating risks is vital for maintaining a stable and productive business relationship. Risks in the cannabis retail sector can encompass various aspects, such as regulatory changes, supply chain disruptions, or shifts in consumer behaviour. Brands and retailers should collaborate to identify these potential pitfalls early on. By monitoring sales patterns and inventory availability closely, both parties can anticipate and address issues like product shortages or surpluses.
Additionally, staying informed about evolving regulations and compliance requirements is crucial to avoid legal complications. A risk-aware partnership is better equipped to adapt to challenges, minimize disruptions, and seize opportunities in a rapidly changing industry.
Building sustainable relationships in the cannabis industry is not just about transactions; it's about creating a mutually beneficial ecosystem where brands, producers, and retailers thrive together. By implementing these elements into your business strategy, you can navigate the complexities of the cannabis industry while fostering trust, reliability, and adaptability in your partnerships.
Creating Efficient Relationships in the Cannabis Industry
Efficiency remains crucial. One way to concentrate your efforts and see a bigger payoff is to look for events and trade shows that bring retailers and brands together efficiently. An excellent example of such an event is the Hall of Flowers trade show, which Vetrina had a hand in bringing the show to Canada and has remained the presenting sponsor since its Canadian inception.
This trade show is dedicated to fostering connections between retailers and brands. It offers education, sampling opportunities, and the chance to connect with new and existing partners over a two-day period. This streamlined approach to networking can be a game-changer in building loyal relationships.
Help your Cannabis Brand Stand Out
What does your cannabis brand have to do with building relationships? Savvy cannabis retailers understand what their consumers are seeking, and first impressions are crucial. A positive initial encounter can help establish a foundation for building relationships and streamline the process. End-use consumers, retailers, and budtenders often research brands they find intriguing. If their search yields outdated or unimpressive information, they may be less likely to answer your call or respond to outreach efforts.
Begin by examining the foundation of your brand. Is it time for a subtle refinement to ensure that its key features and benefits are still perceived as highly valuable by your target retailers and consumers?
If you're seeking fresh approaches to conquer the market, consider hosting a brainstorming session. Gather ideas from every member of your team and compile them in one place. Remember, during this creative process, no idea is too far-fetched, and for a brief period, compliance can take a backseat.
Looking for innovative ways to engage with your customers? Create a mind map. Position the core concept at the center, encircle it with a halo, and place the topic at the summit. Then, create interconnected bubbles branching out from the central idea. Enlist the help of your colleagues to populate these bubbles with inventive strategies.
While it's essential to continually nurture your existing relationships, what steps should you take when your brand or product requires a revitalization, especially in the face of encroaching competition?
Tips for Retailers and Brands
- Before attending any event or trade show, ensure your team understands what the objective is for the show, and outline your investment: tickets, wages, the opportunity cost of having management, senior team leads being out of store
- Following an event or trade show, gather team feedback, review objectives and ROI and keep a conference list with feedback points each year.
- When attending, focus on understanding your customers' consumption settings to identify product benefits more effectively. Know where the gaps in your inventory and assortment are. Be strategic with your time.
- Don’t be afraid to ask brands that sell well at your location for insights or ways to build a relationship that benefits you both.
- Before attending any event or trade show, ensure they are meeting your overall business objectives, Meeting and creating relationships between brands and buyers is the #1 objective of the Hall of Flowers. If you’re looking to create local budtender relationships, your team might look at KIND events.
- Before investing in new printed materials and trade show deliverables, check in with your brand and messaging to create a stellar first impression for potential buyers. Check sampling guidelines wherever you’re visiting to ensure you’re within legal limits.
- Train your sales teams to communicate product benefits using two features and one clear benefit. Know the competition’s offerings and prepare with sales
- Reassess customer perceptions of product benefits to refine your marketing strategy and stand out in the market.
Building strong and sustainable relationships between retailers and brands, backed by data and insights, is the key to success in a competitive landscape. Attend events like Hall of Flowers, purposefully, to ensure you’re adapting to market trends and staying ahead of the curve. The cannabis industry is continually evolving, and those willing to adapt and innovate will reap the rewards.
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This course is not your basic Cannabis 101 course — we go deeper. We will go over the retail core principles and help you apply and use them in your cannabis retail environment.