With more cannabis products on the market than ever, retailers must avoid overwhelming consumers
by Omar Sacirbey
Consumers shopping for items like toothpaste or cereal can feel overwhelmed by the sheer number of choices on a grocery shelf.
The result: A frustrated shopper moves on without buying the product, a concept dubbed “the paradox of choice.” Marijuana retailers also can fall prey to loading shelves with too many items – be it flower, edibles or concentrates – which can prove costly.
Offering too many choices, it turns out, is a problem that new and experienced cannabis retailers often share. The frequent cause is a misguided enthusiasm to give customers the widest possible selection of products.
Having too many products is a predicament that can take a while to develop – and an even longer time to undo. The fallout includes turning off customers by overwhelming them with excessive options, locking up capital in a product that isn’t moving, dealing with longer customer wait times, and seeing unsold items decline in quality over time.
James Lathrop knows this firsthand.
The owner of Seattle’s first recreational cannabis store, Cannabis City, he hired an inventory and product manager who got “free rein” to stock the store’s shelves. Lathrop later came to regret the decision, as he saw his shelves and storage space swell with excess flower, edibles and other products.
“We did have too many choices on the shelf and (saw) customer fatigue. And too many choices are a significant issue in retail. One of the things I’ve discovered is that customers can get overwhelmed with choices,” Lathrop said. “It’s an ongoing problem and one that we specifically started targeting over the last few months.”
Avoid Too Many Products
Shayne Lynn – executive director of the Champlain Valley Dispensary in Vermont – started winnowing his own product lines after questioning the need for so many items and the cost of producing them. As a vertically integrated business, Champlain Valley spent a lot of time and money at the outset trying to offer customers a large selection of flower and oils as well as infused products like canna-butter.
“When we started we were very excited and enthused to try and have as many products as possible. And whenever someone came in and said, ‘Hey can you do this,’ we set out on trying to please every individual,” Lynn said.
The danger with that approach is that a small number of patients ends up liking a new product, so most of the volume produced doesn’t leave the shelf.
Champlain Valley Dispensary performs weekly reviews of sales volumes by unit and by category, allowing the company to quickly detect if certain products aren’t moving as expected.
If a product isn’t selling, the company’s executives start investigating.
“It starts from the top down,” Lynn said. “If we don’t see an uptick in the products then we’ll go back and have a conversation with whatever manager is responsible for that product, whether it’s coming out of the kitchen or the lab, and understand what the costs associated with those products are.”
“Over time, as we’ve matured and developed our manufacturing, we started to learn some of the true cost of goods on producing things,” Lynn added. “We’ve made it a priority over the last six to eight months to see how many SKUs we do have, and how many we genuinely need.”
Keep or Cut
If you find you’ve overstocked your shelves, it’s important to address the matter quickly.
“There’s constantly an upping of the game, and as a retailer I have to curate accordingly. If I’m not up to speed, my competitors will be, and I’ll lose market share,” said Andrew DeAngelo, co-owner of Harborside dispensary in Oakland. “Curating is a daily effort where your buyers and your sales team and your team are just going to have to manage.”
Several years ago, Harborside executives started noticing customers were spending way too much time examining products displayed on counter shelves, often up to 15 minutes. The company added staff and cash registers, but the long time spent at counters didn’t go away.
Harborside next hired a consultant who, after spending time with patients and staff, determined the long counter times were the result of too many products for the customers to go through, DeAngelo said. The company literally had hundreds of different products on its shelves, including edibles, flower and concentrates.
“All that research gave us some information that perhaps we needed to curate our menu,” DeAngelo said.
The next decision was about what to cut – and how. The most obvious metrics to use for that decision were sales volume and rate of sales, DeAngelo said.
“You see what’s moving in your inventory,” he said, but added: “It’s basically trying to find things that look and smoke well, and are affordable.”
Champlain Valley executives examine weekly sales by volume and category.
“If something is not selling well, we’ll talk with someone in the lab or kitchen, depending on where the product comes from, and ask them what the cost is,” Lynn said. If the sales of a certain product are struggling to support the cost, that product gets cut.
Champlain Valley, which serves about 2,200 patients, also performs biannual product reviews to see how many types of products it needs. As a vertically integrated dispensary owner, Lynn factors in yield and how quickly a strain can go from seed to harvest, or turnaround, when deciding what strains to keep or cut. For the moment, Lynn’s business regularly carries 12 strains and has perhaps another 12 in rotation or that it offers on a seasonal basis.
How to Cut
Once you’ve decided what you need to cut, the next question is how to do so.
At Cannabis City, Lathrop instituted a buying freeze on all products except his top 10% sellers, such as Phat Panda pre-rolls and Ionic brand vape cartridges. He then imposed the freeze on all products but the top 20%.
“We tried to keep our 20% that were selling all the time, and we really tried to get rid of the 20% that was sitting around. Then you have this 60% in the middle that could also use some trimming,” Lathrop said.
Cannabis City also subscribed to 502Data Pro – an online site that tracks retail cannabis sales and other metrics in Washington state. The service allows an MJ retailer to track its own business statistics as well as those of competitors (note: no other state reports such data to this degree). Lathrop, for example, learned that while Cannabis City was dealing with about 130 vendors, his competitors on average had about 60.
Part of the problem was that too many Cannabis City staffers, often four or five at a time, had product-purchasing authority. Too many people making those decisions resulted in too many vendors that the store worked with – not to mention too many products.
Lathrop streamlined the process so that no more than two people at any given time have purchasing power. He also conducted a thorough inventory review, and weeded out products – and with them some vendors – that weren’t selling. Today, Cannabis City deals with about 75 vendors.
When Harborside’s inventory was the most bloated, the company had about 150 edible SKUs, 50 concentrate SKUs, 50 flower SKUs, a couple thousand clone SKUs and a few hundred seed SKUs.
Harborside started cutting edibles, which was the least popular category and accounted for only 10% of sales.
“Let’s take a risk where we have the least amount of sales, and not be too disruptive,” DeAngelo said, explaining Harborside’s decision to start the winnowing process with edibles. Over the course of about 18 months, Harborside cut its edible SKUs by about 50%. Now it has about 75.
“We chose the ones that sold best and that our research indicated patients had the best connection to,” DeAngelo said.
A key to any successful product winnowing effort is an experienced and mindful staff.
“We decided to use the trust that the patients have in us and use our expertise and our knowledge to curate our menu,” DeAngelo said. “It’s a process, and feedback from your patients and from your staff is key. The people in your organization who know cannabis should be spending time on this.”
A smart staff is also important to reassure customers who may be upset about one of their favorite products no longer being available, and to persuade them to try other items the store carries.
“We’ve trained our team to be flexible with patients. If a patient finds something that they want isn’t there because we’ve curated it off, they’re supposed to guide them in another direction,” DeAngelo said. “Some patients will try the other category and keep coming back, and others will look for that product somewhere else.”
Reducing product choice doesn’t mean sales will be reduced. Quite the contrary: The owners interviewed for this article said customers are buying as much as before. But they’re spending less time browsing in the stores.
“It’s an art, not a science,” DeAngelo said.” There’s stuff that we kept on the menu that didn’t sell so good, and we’ve made mistakes. But most of the time we’ve made the right choices.”