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How to merchandize your cannabis retail store

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 properly merchandize your cannabis retail store or dispensary. She runs through why merchandizing is so important to cannabis retailers, how to measure if the merchandizing is successful and some tips and tricks to improve your store’s merchandizing.

Other segments in this series include:

Learn more about Krista Raymer and the team at Vetrina Group.

Retail Expert with Krista Raymer – Pt 3 – Merchandising 

Today, we’re going to talk about merchandising; why it’s important in a cannabis retail environment; what KPIs tell us if we’re doing a good job, and some tips and tricks to help lead our customers to the right products.

Merchandising Importance

So, first up: why is merchandising important in a cannabis retail store? Merchandising is that secondary piece to our floor plans. So it’s exactly how our product is going to show up in our customer journey. That space in the direction to which our customer travels through the store. Merchandising is going to influence what products our customers see when, and what information they can tell about those products specifically. 

Merchandising is a tool that can be pulled to be able to empower both our sales team, as well as our customer, to understand our product better. Merchandising informs the value that our customer understands that product is worth. So if we place a product in-store in a particular way, that can influence the value that the customer perceives with it.

For example, if we put something in a discount bin, the customer understands it as being discounted. If it’s maybe prioritized in a special place in the store, they might also take into consideration what value is associated with that product. This is going to both help us get the product sold at a particular price point, and help with our SKU velocity. Effective merchandising is going to lead our customer, not just to the product that they came in store considering, but also prompt other products that they might not have anticipated purchasing.

In doing that, we’re going to directly impact our average-per-customer, as well as our sell-through across different categories.

Merchandising Measurements

Second, we want to talk about those KPIs that are used to measure how effective our merchandising is. 

The first one is going to be our average-per-customer, or units-per-transaction. Both of these are going to allow us to understand what products are being prompted along the customer journey, and how effectively they are being leveraged to sell to our customer.

Merchandising is a little bit about communicating with our customer, and a lot more about creating the right tools for our budtenders to get the product sold. So if we’re positioning the right product in the right place, we should be able to lift our average-per-customer and our units-per-transaction.

Number two is gross margin. We want to think about gross margin as it ties directly to merchandising; it’s really going to be an indication of what categories are selling in what place in the store, and to what customers. 

In our inventory video, we talked a little bit about breaking it up into sub categories; when we do this, we can also optimize our pricing. 

So when we think about merchandising, we want to get the right mix of the right product in the right place; then be able to push our overall gross margin, because we’re attaching particular products to our transactions. Those products might include ‘lower barrier to entry’ products, like edibles or beverages; we can generally price them a little bit higher and increase our gross margin.

If we can attach them to all of our transactions, now we’ve got a winning success on what it looks like to lift our gross margins. 

Okay- so number three is going to be what our sell-through looks like per category. This is essentially what our category mix is per transaction. Why this is important, is because we usually see that if a customer purchases from multiple different categories in store, they’re more likely to repurchase with us again in the future.

So, if we’re getting the right mix of products into our baskets, we’re more likely to retain the customer and see a higher lifetime value. So merchandising is going to be that prompt that lets us get different categories into one transaction.

Merchandising Tips & Tricks

So finally, let’s get into some tips and tricks around merchandising. 

The first one is going to be signage. We’ve walked into so many cannabis stores, and the majority of them have way too many words on signs. The goal of really effective signage is that your customer can take it in within three seconds. 30 seconds would be the maximum amount of time that we want to see a customer spend reading a sign.

So think about how we can keep that signage really simple, as well as guide customers through the environment. 

Tip number two is to think about how many products we’re presenting to our customers at one time. Within a display, if we have a lot of products, it’s really difficult for our customers to be able to distinguish the differences, or the features, of each one. So we want to dial it back a little bit and present less information to them, so that they can clearly understand what the key features of each product are. 

The goal is really to get it down to three to five products presented at once. So if we have three similar products, we can put them all out. But if we have ten- that’s way too many. Our customer won’t be able to make a decision; we essentially force them into decision paralysis where they stand there and then don’t purchase anything. So keeping your numbers tight to three to five, enables our customer to make an effective decision and feel confident in their transaction. 

The last tip for merchandising, is don’t forget about impulse purchasing. These are all of those great pieces as we get closer to the cash desk, that are usually lower in price. Impulse purchasing can really influence our gross margins, or our average-per-customer, as well as getting additional products into our basket that the customer didn’t anticipate. This is a great place to put out product that is a new test, or something that we want to iterate on and make a decision about whether we’re going to carry it in the future. 

So prompting our customer, right as they’re getting to that cash desk, is going to be really important in being able to drive additional revenue, as well as play around with some fun products that our customers want to purchase.

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.

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