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Reducing Operational Expenses

Small-scale cannabis retailers are working with innovative technology, a trimmed workforce, and talented friends to make ends meet.

To compete with the proliferation of much larger retail operators and turn a profit in Canada’s burgeoning cannabis industry, smaller retailers are getting creative to reduce operational costs.

Let’s have a look at how the little guys are working to be profitable.

Scheduling Staff

To offset labour costs at Giggles Cannabis Co. in Toronto, owner Pegah Abdulahi and a full-time employee have been working all statutory holidays and 14-hour days.

“Labour is a huge cost that cuts into our profits, especially as a smaller retailer,” says Abdulahi. She notes that while the store is still working out staffing kinks, there are plans to hire one or two part-time employees in the future. That said, with a limited budget, Giggles simply cannot afford to offer a competitive hourly wage like its larger competitors. However, the retailer does promise to pay staff above minimum wage.

“We do try to stay within the midrange of what the going hourly rate is amongst smaller retailers,” says Abdulahi.

Weedjar co-owner Jesse Terrence agrees staffing is the biggest variable expense for cannabis retailers. Between his two locations in Toronto, staffing eats up about 15% of the company’s total operational costs, but that number is about to get a lot smaller very soon.

Since working with data intelligence and analytics company, Headset, Terrence has prioritized allocating staffing hours based on when the customers are in the store, rather than on the dollar value of sales.

“For example, just because on average a retailer may have more dollar value of sales in a certain hour of the day, it does not mean you had more customers,” he said. Headset provides leading insights into cannabis consumer trends to give retailers a big picture view of operations while allowing them to drill into consumer demographics and shopping behaviour.

Weedjar has been able to reduce excess staffing by over 25%.

“Headset has been an extremely useful tool in determining how our hourly customer sales ratio intersects with our hourly basket size,” he says noting Weedjar has been able to reduce excess staffing by over 25% and customer service has not suffered in the slightest.

Reducing Rent

In choosing an ideal location, cannabis retailers, like any retailer, have a lot to consider.

A stellar high-visibility location with serious foot traffic will cost a fortune to lease in a large city, while a more secluded location will be less expensive but possibly less overrun with customers. Out of sight usually means out of mind for businesses, at least those without a robust marketing strategy in place.

Weedjar has the best of both worlds.

“We focus on finding high-traffic hidden street arteries that have a considerable amount of traffic and long-term growth potential,” says Terrence. He adds that it’s also important that his cannabis stores are located in neighbourhoods with high community engagement.

Weedjar is located on Broadview Avenue, close to Toronto’s lively Danforth neighbourhood on the east end and, further west, cannabis consumers will find a Weedjar shop near the vibrant Forest Hill community. Both neighbourhoods have a significant volume of foot traffic.

Giggles’ Cannabis was fortunate to snag a fantastic retail space in Leslieville, one of Toronto’s fastest growing neighbourhoods. The store is located on Queen Street East with incredible visibility, but rent is no laughing matter.

“Rent has really cut into our profit margins,” explains Abdulahi. In the long term she thinks it may make more sense to move to a less expensive location in the neighbourhood or a different part of the city. Abdulahi also looked at the possibility of sharing their space with another retailer to save some money.

“But, as you may know, there are a lot of regulations,” she notes.

Using In-house Talent

Both Toronto cannabis retailers rely on friends and social media savvy staff to communicate their latest products and promotions.

We have employees who are interested in social media create content.

“We have been fortunate enough to have friends who have experience in the marketing industry help review and oversee our website, SEO, and media presence at no cost,” says Abdulahi. “We also have our employees who are interested in social media come up with ideas and create content which has been very helpful to us.”

While staff currently do marketing in-house at Weedjar also, Terrence says the cannabis retailer has plans to outsource communications by the middle of the year.

Reducing Overhead

With so many suppliers to choose from, accessories like cannabis rolling papers, pipes, and grinders are another area where small retailers have some buying power. Giggles has even cut costs on printer paper and cleaning supplies for the store. “We shop around and purchase in bulk to offset costs,” describes Abdulahi.

Staff also encourage cannabis consumers at Giggles to pay with cash to cut down on credit and debit card fees.

The cannabis industry is a fast-changing landscape and cannabis retailers have realized they also must stay on top of trends if they want to make a profit. “By keeping on top of the latest trends, we are careful not to over-order too many products that could potentially be sitting in our inventory tying up our funds,” says Abdulahi. “We do try to move product before we purchase anymore.”

Tags: Cannabis Retail (394), Giggles Cannabis Co. (1), innovative technology (1), Jesse Terrence (1), managing operational costs (1), Pegah Abdulahi (1), reducing operational expenses (1), Toronto cannabis retailers (1), Weedjar (1)