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Cost-Saving Strategies Increase Profit

Increasing profitability in your store can be a difficult challenge in the cannabis market—especially in increasingly saturated markets.

“The landscape that was originally designed to give mom-and-pop style owners a chance in this growing industry has been a challenging one, as profits are hard to come by with all the competition around you,” says Bret Unger, owner of Takeoff Cannabis.

Despite the struggles many owners have faced in the cannabis retail market, there are cost-saving strategies you can incorporate to increase profitability in your store. Being strategic when it comes to payroll, rent, pricing products, and hiring can cut costs and widen the margins. Keeping overhead low, and most importantly hiring knowledgeable staff who go above and beyond, will increase the profitability of your store.

Payroll

Being strategic when it comes to payroll is one of the most important tactics to decrease costs. Having strong budtenders who are trained in all areas of the store will cut wage costs by not having to hire multiple managers or specialty positions. Greeters, stock associates, and cashiers are all positions that can be filled by a few well-trained staff.

“Payroll is often the biggest lever for profitability,” says Mike Dunn, co-founder of 1922 Cannabis. “Be clear with roles and responsibilities that align with compensation, whether hourly or salary, and provide clear company and store objectives with the ability for your team to directly contribute and influence performance.”

Unger agrees, “Some retailers have greeters upon entry, so you’re greeted at the door and then taken through the store as if you’re being ushered around by a personal assistant. It sounds fantastic, but that’s an extra employee you’re paying. Now if you have three customers at once, that can be three extra employees just to provide this service. Although the appeal is awesome, conceptually, it will be difficult when it comes to being profitable.”

Staffing

Utilizing your POS system to track the analytics of your busy hours can be a huge cost-saving tool when it comes to employee scheduling. You can track your hourly sales and know exactly when it’s best to have extra staff and when to have a skeleton crew. If data shows your sales don’t pick up until the afternoon, you can reduce expenses by scheduling a lighter morning team and utilize those hours during high-traffic periods to increase sales and in turn, increase profitability.

Track your hourly sales and know exactly when it’s best to have extra staff.

Hiring and identifying employees who go above and beyond is another strategy. Develop these staff members and increase their skill set to benefit the business. “Having knowledgeable, dedicated staff is extremely important to the growth and profitability of a retail location,” says Tyler Audet, owner of Roll’d Cannabis Co. in Kanata, Ontario.

Unger agrees, advising that a great team can bring in and keep customers. “Make sure your staff are extremely knowledgeable and friendly,” he says. “This can drive business and make you stand out from your competition.”

Strong budtenders can replace management positions and cut payroll costs, while also selling the correct products to increase profit margins. Additionally, you must have staff who continue to follow the cost-saving strategies you incorporate.

Rent

Keeping rent low is another way to increase profitability. Not only should your rent be affordable but finding a space that suits your needs and is the right size is very important. If your store has square footage you’re not using, are you getting your money’s worth?

Underutilized space may be causing you to pay unnecessarily higher rent and keep your employee count high. “The layout of the store can be a large factor in how your store is employed on an hourly and daily basis,” says Unger.

Inventory Management

Make sure you keep an eye on how long SKUs have been sitting in the backroom and analyze why they may not be selling so you can make better ordering decisions in the future.

“If you find you have a SKU that may be on the shelves for too long, getting it on sale and out the door is a key factor in pushing the sales and turning inventory for cash flow,” Unger advises.

Pricing

Competitive pricing may help as well. By monitoring the competition and making changes to your prices accordingly, you can improve product margins drastically. Using this strategy, you can match or beat competitors’ prices without bleeding money or increase prices without losing your competitive edge.

Low Overhead

“Build for profitability and do not overextend,” says Duxe Murthi, co-founder of Soul Rebel Cannabis.

Keeping overhead costs low is an important cost-saving strategy.

Dunn agrees, advising new operators to work smart and focus on quality over quantity. “For new operators looking to join the community, cost management is one of the most critical and terrifying steps to tackle. Focus on who you think your consumer will be and think about all of the things you anticipate them to value,” he says.

What they are saying is this: utilize as much of the industry as possible, especially if it’s free. Licensed producers offer free product knowledge sessions for your staff and support at in-store events. They also offer display materials free of charge so you can cut merchandising costs. You can also utilize the free support you get from your provincial cannabis distributor and the product information and industry knowledge they provide—the analytics you can get from them related to your store, your competition, and the region in which your store is located is extremely beneficial.

With so much competition in saturated Canadian cannabis markets, it has been difficult to increase profits in cannabis stores, however, with the right payroll structure, low rent, smart scheduling, and competitive pricing—along with keeping a low overhead and hiring the right staff—you can cut costs and increase profitability in your store.

After opening four storefronts as a multi-unit manager for High Tide, Canada’s largest cannabis retailer, Erik Weekes founded Blunt Talk, a thriving cannabis social media brand and cannabis consulting company.

Tags: 1922 Cannabis (1), Bret Unger (1), cannabis retail profitability strategies (2), Duxe Murthi (1), Mike Dunn (2), retail store profitability (1), Roll'd Cannabis (1), Soul Rebel Cannabis (1), Takeoff Cannabis (1), Tyler Audet (1)