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Benchmarking your Performance

Taking a ‘pulse check’ can help you to see how your business is performing and give you ideas about ways to improve.

When it comes to benchmarking your performance, there are several key performance indicators (KPIs) that can be examined to see how you are doing in comparison with other retailers. Comparing your sales to those of your competitors gives you an idea of whether you need to implement more marketing measures to step up sales, and looking at store traffic data can help you decide if you need to change your staffing schedules or inventory levels.

Analyzing Sales Data

So, how are you doing compared to other retailers? While many other retailers might use the holidays and Boxing Day sales as a benchmark, in the cannabis industry it makes sense to take 4/20 as a date for comparison and look at your sales against the national average. This one-day snapshot of sales, on likely the busiest day of the year, can give you a pulse check for benchmarking your business against other retailers and yourself year-on-year.

According to COVA, a cannabis retail POS company that operates both in Canada and the US, the average sales in Canada per store on April 20, 2018 was $7, 300 and post-legalization this jumped to $12,300 on April 20, 2019. While average sales went up, the average price per transaction went down from $72.04 in 2018 to $47.00 in 2019. Average transactions per store were up from 101 in 2018 to 263 in 2019. These statistics are based on average data collected by retailers using COVA’s point-of-sale system (in Canada but excluding Ontario).

Looking for Top Performers

Headset, an analytics service provider for the cannabis industry in both Canada and the US, collected information from US retailers to capture a picture of 4/20 this year. Most of the top-performing products were ready-to-consume ones such as pre-rolls, edibles, and beverages, which bodes well for the legalization of edibles later this year. The report, 4/20 The greenest day of the year: Insights and predictions based on four years of data, states that “Pre-rolls—usually a category with low item prices—saw a bigger increase in units than in overall sales… Right now, category trends indicate that the most effective specials are concentrated on those single-serve items, but cannabis is still relatively new to the world of retail.”

Average transactions per store were up from 101 in 2018 to 263 in 2019.

Understanding Revenue Trends

“Cannabis retail is similar to general retail in that the profit equation remains identical,” says Phil McDonald, Headset’s director of regional strategy, Canada. “A deep understanding of revenue trends across time, products, categories, and vendors will allow savvy retailers to pull the right growth levers. Whether that’s optimizing their pricing and product mix, staffing to meet demand, or rolling out well-timed promotions.”

Managing Inventory Levels

McDonald suggests that specific metrics can be used to make informed business decisions and act as a benchmarking tool when it comes to issues such as inventory management. “In much the same way retailers should be laser-focused on managing costs and margins across the same dimensions. As supply issues in the market begin to stabilize, sound inventory management will win the day,” says McDonald. “The Stock-Coverage-Ratio, for example, is a useful metric that tells a retailer how many times it can cover the demand for the particular product in a chosen date range. It’s important because an operator can determine if there’s too little inventory, which can lead to stock-outs and lost sales. Conversely, if there’s too much inventory it suggests too much capital is tied to inventory, which could be better invested elsewhere such as staffing, marketing or store upgrades.”

Tracking Store Traffic

POS analytics can help with benchmarking performance, but tracking store traffic is another useful tool to help you evaluate your success in the market. Mark Ryski is founder & CEO of HeadCount, a company that helps retailers turn store traffic and conversion data into better sales results. “Store visitor traffic defines the store’s sales opportunity and is an important indicator of consumer demand,” says Ryski. “Sales are a function of three things: number of people who visit the store (traffic), the percentage of visitors who actually purchase, also referred to as shopper conversion rate, and how much each buyer spends (average sale). Store performance is most commonly benchmarked based on sales results and financial metrics, but since stores don’t control the amount of traffic they receive, a better way to benchmark store performance is to compare shopper conversion rates and average sale values – the two variables store teams can influence. Without store traffic count data, there’s no way to calculate shopper conversion rates, which essentially leaves retailers with only sales and POS data to rely on for benchmarking store performance.”

Modern store traffic counters are usually installed above the front entrance to capture a top-down view of customers (to maintain privacy) and count traffic to combine with sales transaction data to calculate shopper conversion rates. Shopper conversion rates are a KPI in store performance benchmarking, especially when comparing store locations. POS data could show that one store is outperforming another in terms of transactions and sales, but adding in traffic counts may show that the actual conversion rate is lower.

While retailers can take advantage of this data to benchmark performance, conversion rates can also help with other aspects of the business. Ryksi suggests that shopper conversion data can help with: “Scheduling frontline staff to traffic visits to minimize over/under staffing; measuring store experience (via shopper conversion); forecasting store activity (monitoring trends like what happens when edibles launch); refining/optimizing store operating hours (based on traffic trends); measuring the impact of marketing initiatives (did it drive more traffic into the store?); and benchmarking performance across stores.”

Whether you choose to use POS analytics, shopper conversion data, or a direct comparison with national averages, benchmarking your performance is a useful way to get a snapshot of how your business is doing and provide inspiration about ways you might be able to take your store to the next level.

April 2019 Sales in Washington State 

Flower: $44M
Tinctures & Sublinguals: $2.35M
Concentrates: $11.97M
Edibles: $8.7M
Beverages: $1.52M
Pre-Roll: $11.30M
Topical: $1.65M
Vapor Pens: $19M
Capsules: $730.9K