The Retail Expert Series features Krista Raymer, CEO of Vetrina Group, a leading cannabis retail consultancy. In this segment, Raymer shares her expertise on how to optimizing pricing in your cannabis retail store or dispensary. Raymer will describe why pricing is so critical to a shop’s success, how to measure if your pricing strategies are working and finish with tips and tricks to get you started with a pricing strategy.
Learn more about Krista Raymer and the team at Vetrina Group.
More from Vetrina Group
Watch and read more from Krista Raymer and Vetrina Group:
- February 2022 | How brands and retailers may interact in Ontario right now
- January 2022 | Building your cannabis inventory plan right now
- December 2021 | Understanding cannabis retail density right now
- November 2021 | 3 takeaways from Lift&Co. Expo
- October 2021 | A look at the cannabis industry’s Las Vegas show week
- September 2021 | What happened at Hall of Flowers Santa Rosa 2021?
The Retail Expert with Krista Raymer – Pt 4 – Pricing
Today, we’re going to talk about pricing in a cannabis retail environment, and how impactful it really is to our bottom line.
Pricing in a cannabis retail environment is a really important consideration to make. Customer’s attraction, as well as retention, can be directly tied back to pricing. Now, different customers will pay different attention to pricing and its sensitivity. What we want to first think about, is whether we are being price sensitive ourselves, or whether our customers are. Our own personal biases really impact our decisions on how we price in a cannabis retail store.
So first, we need to take the emotion out of it and take a look at how our customers perceive the value of the product. Pricing and how we nuance and price our products individually is going to directly tie back to our profitability. So this is a really important aspect of the business to be on top of and manage accordingly, as we bring in new products.
So next up, let’s talk about some KPIs on how we measure how effective our pricing is in a retail environment.
The first one is velocity. We talked about velocity from an inventory perspective, but we also want to talk about it from a pricing perspective. Changing a price can directly impact the velocity of a particular product and how quickly it sells in the store.
We want to be aware of what the velocity is; how that relates to our price points in store, and if there are levers we can pull to amplify that velocity.
The second one is gross margin. Gross margin, at the end of the day, is going to directly impact our profitability. So, there are areas where if we set the price at a certain level, then we can expect a certain return in terms of gross margins.
Being able to drive healthy gross margins is going to pad our budget so that we can run a profitable environment, and absorb some of the other costs associated with running a cannabis retail store.
Our third KPI to think about with pricing is what our average price of our product is in store. If we’re running a retail environment and our inventory is all priced low, then that’s going to directly impact our average-per-customer.
Opposingly, if we run an inventory where the price point is high, that will also impact our average-per-customer. So taking an assessment of what our overall price points look like, both at a store level, as well as those categories that we talked about in inventory, become really important in understanding what potential we have in driving our average-per-customer.
Pricing Tips & Tricks
So let’s get into some tips and tricks for pricing in our cannabis retail store.
The first one is that we can use cents as a code. What does that mean? It essentially means that we can send very subtle messages to our budtenders about products in store, based off what the cents are. So if we change products, for example, to 99 cents, that might mean that they’re on promotion.
This is a tool, both for our tenders, as well as can read into the psychology of pricing of our customers, to influence a decision around purchasing a product.
Our second tip around pricing in a cannabis retail store is that the prices should show up. We want to ensure that there is either signage or an indication of price with all of the products in store.
What we know is that if a price isn’t attached to a product, it often doesn’t sell. So if we include all of the information for our customer, it’s much more likely to help get the product sold.
The third tip or trick that we want to consider is what our pricing mix looks like. If we’re helping our customers by making decisions around our product with merchandising or inventory assortment, we also want to make sure that we’ve got a diverse set of price points in store, that help bring in our customer when they’re shopping in a retail environment.
That might include presenting three similar products at three different price points; an entry, a mid, and a higher price point. This is going to influence what products get sold, as well as influence our average-per-customer.
Thanks for joining us today. If you have more questions, or want to know how to drive a profitable retail environment in cannabis, you can reach out to me directly at Vetrina Group.
We have more awesome content just like this, that will be on businessofcannabis.com.