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Managing Cannabis Inventory Levels

The improper management of inventory levels can have tough financial implications for retailers and brands alike. One example is a retailer having too much of a product which results in thousands of dollars in capital left to sit on a shelf. Another would be when a retailer possesses too little stock of popular products which can lead to a loss of customers to competitors.

Analyzing this issue with cannabis retailers, Headset calculated weeks of inventory on hand as the number of weeks it would take to sell through all the inventory currently available without replenishment. This is calculated as “total units in inventory/total units sold in prior week”. The median retailer is determined by the weeks of inventory on hand across retailers in a given market for the specific period (example: the median retailer for a given week). Profit value was calculated using the average item price minus the average item cost in a given market during the specified period.

The Canadian inventory trends revealed a median retailer in ON, SK and AB usually had four to five weeks of inventory on hand. However, weeks of inventory on hand for the median retailer in BC starts to drop in weeks of inventory on hand in the beginning of February, bottoming out around 2.7 weeks on hand towards the end of March. This highlights an issue with limited inventory which can result in a loss of customers who will shop at a competing retailer to get their preferred product.

Running out of Products

According to the report, flower (2.1 weeks), and pre-rolls (2.2 weeks), are the primary drivers of the limited inventory levels. An inventory management system would enable a flower-dominant brand in BC to ensure their products have sufficient inventory to avoid running out of stock. Coincidentally, flower was also responsible for being a main driver of excess inventory levels in Canada.

The report also revealed how diverse each market’s customer base is, pointing out how crucial it is for a business to know its customer base in order to develop, market, and sell products that suit their demographic. Ontario brands, for example, were heavily reliant on Gen Z and millennial consumers.

Retail operations are complex and an inventory management system can aid in profitability.

Note: Headset’s report uses data from their business intelligence software which is linked to real-time sales reporting by participating cannabis retailers via their point-of-sale systems. In the report they analyze retail data from Ontario, Alberta, Saskatchewan and British Columbia.

Tags: Alberta (18), British Columbia cannabis (45), Cannabis Industry (181), Cannabis Retail (390), cannabis sales trends (49), consumer trends (39), Headset (41), Ontario (27), retail inventory management (1), Saskatchewan (9)