The Cornerstone of Cannabis Retail - 7 KPIs for Cannabis Managers

Where most cannabis retailers get into trouble

Amidst the hustle and bustle of day-to-day retail operations, it's easy to lose sight of long-term goals and their progression. 

Managers may only detect a gradual decline in the store's performance once it becomes too challenging to turn around.

Monitoring retail Key Performance Indicators (KPIs) is critical to your cannabis business. 

These KPIs act as a roadmap for retail managers to identify areas for improvement within the business. 

How well do you know your data?

Do you know what is driving profitability in your cannabis retail store? 

If you were to ask most leaders, they struggle to identify which KPIs need improvement or are driving results. 

Cannabis retail has complexity because of regulations, but at the core of it, it's the same as traditional retail. You stock inventory to sell it to customers for a profit. 

KPIs are the temperature checks for information, data, and insights that flow in all directions to help teams make decisions and investments.

All of these data points need to be monitored week-over-week to ensure your goals are being met in a document called a performance tracker. 

We'll have more on the performance tracker soon. In the meantime, let’s dig into what you’re all here for…the best KPIs for your cannabis managers to track.

The 7 Most Important Sales KPIs for Cannabis Managers   

Each retail store has its own Sales KPIs that are closely monitored weekly, monthly, quarterly, and annually.

The team at Vetrina has worked with over 250+ cannabis retail stores and we’ve seen some patterns. These 7 KPIs have stood out from the rest as the most essential for managers to pay attention to:

1. Gross Revenue (Sales) 
2. Net Revenue  (Sales)
3. Gross Margin (Inventory)
4. Average Per Customer (Sales & Inventory)
5. Units Per Customer (Sales)
6. Discount Percentage (Inventory & Marketing)
7. New Customer Rate (Marketing)

These performance metrics monitor and track various aspects of retail operations to ensure they cover all the areas of a retail store- sales performance, inventory, and marketing initiatives. 

These KPIs create a very specific focus funnel and should be closely monitored weekly, monthly, quarterly, and annually. 

These data points help gauge the sales team's performance against set goals and their impact on the overall business. They become insights when you start to understand how these numbers are generated and what can be done to improve them. 

Why you need a performance tracker

“But we can easily just download similar reports from the POS” ~ overheard in way too many meetings.

This is true. Some of these metrics can be easily pulled from the POS to evaluate a retail business's performance. These are the base metrics to help you define if you have a healthy retail business.

But without having your store manager(s) input these numbers into a template such as the ‘performance tracker’ your team won’t have the buy-in nor develop an intimate understanding of the information. Your goal is for managers to be able to identify what impacts what, when.

Managers who have input each of these 7 metrics into the tracker from various reports will then get a better look at the cannabis retail business holistically. They’ll be able to speak confidently of the wins and opportunities and offer solutions for improvement.

This mixture of quantitative metrics and qualitative insights from the team will open up solutions you can’t tease just out of the data. Better yet, if you’re pulling the store manager team together weekly and reviewing these trackers as a team, they’ll start offering insights into each other’s issues after a few weeks of doing the meeting. 

Every time the Vetrina team has implemented a retail tracking tool into a business, gross sales have jumped by 5% in just under 4 weeks. 

The numbers are inputted, now what influences do Cannabis Retail Managers need to be aware of when looking at KPIs? Creating the ‘so what’ or adding the qualitative insights into the weekly performance tracker report. 

Many aspects of the business such as:

- Salesfloor merchandising
- Assortment and inventory pricing
- Budtender product knowledge
- Budtender sales skills
- Retail promotions and deals
- Marketing advertising  

All of these inputs should be considered and reviewed before the weekly team meeting. 

This will ensure each manager comes prepared with data-backed insights that ladder up to weekly and monthly sales goals, allowing for your leadership team to have a better handle on quarterly and annual goals. It will also offer insight for the leadership team on what issues or areas of the business need focus. 

Let’s Dig Into Cannabis Retail’s 7 Most Important Sales KPIs

1. Gross Revenue (Sales):

What it is:

Gross Revenue, often referred to as Sales, is the total income a retail business generates before any expense deductions.

Why it matters:

This KPI is the lifeblood of your retail operation. It provides a snapshot of overall sales performance and indicates the business's financial health.

How to improve:

As a retail manager, enhancing budtender sales strategies, optimizing product placement, and supporting targeted promotions can help drive gross revenue. Ensure your team is well-trained to deliver excellent customer service, driving repeat business.

2. Net Revenue (Sales):

What it is:

Net Revenue is the income a retail business retains after accounting for discounts, returns, and other expenses.

Why it matters:

This KPI reveals the actual earnings, offering insights into the profitability of your sales after considering various costs.

How to improve:

To boost Net Revenue, refine pricing strategies and explore cost-effective ways to provide customer incentives without compromising profitability.

3. Gross Margin (Inventory):

What it is:

Gross Margin, related to Inventory, represents the profit made on each product after considering the cost of goods sold (COGS).

Why it matters:

It indicates how efficiently your inventory contributes to profit, helping assess pricing effectiveness and product selection.

How to improve:

Retail managers should optimize inventory turnover, ensure inventory isn't aging, and regularly review product margins to ensure they align with market demands.

4. Average Per Customer (Sales & Inventory):

What it is:

Average Per Customer measures the average amount a customer spends in a single transaction.

Why it matters:

It offers insights into customer behaviour, helping to tailor sales and inventory strategies to maximize revenue per visit.

How to improve:

Implement targeted upselling techniques, personalize promotions based on customer preferences, and optimize product displays to encourage add-on purchases.

5. Units Per Customer (Sales):

What it is:

Units Per Customer calculates the average number of items a customer purchases in a single transaction.

Why it matters:

Understanding this metric helps inventory plan and tailor marketing strategies to customer preferences.

How to improve:

Offer bundled promotions, incentivize multi-item purchases, and analyze customer data to stock popular products.

6. Discount Percentage (Inventory & Marketing):

What it is:

Discount Percentage represents the amount deducted from the list price of products.

Why it matters:

This KPI impacts inventory and marketing and influences sales, customer loyalty, and overall brand perception.

How to improve:

Strategically plan discounts during sales events, monitor the effectiveness of promotions and consider loyalty programs to maintain customer engagement without compromising profit margins.

7. New Customer Rate (Marketing):

What it is:

New Customer Rate measures how quickly a retail business gains new customers.

Why it matters:

It reflects the effectiveness of marketing efforts and indicates the potential for business growth.

How to improve:

Optimize marketing strategies to reach new audiences, leverage social media and online platforms, and ensure a positive first impression to encourage repeat business.

What about IRL?

Want an example of how these 7 fundamental Sales KPIs can affect everyday cannabis retail businesses like yours? Read below:

Alex opened Green Horizon, a cannabis store focused on quality service and competitive prices.

Despite initial challenges, Green Horizon grew quickly due to its curated cannabis offerings and exceptional customer service.

The team was excited as Alex's dedication and strategic mindset began to pay off. Week over week, the dispensary saw an uptick in gross revenue, signaling growth in awareness of the dispensary and its curated assortment.

However, a concerning pattern emerged as Alex started using the performance tracker. While the gross revenue kept growing, the net results remained frustratingly flat. 

By tracking the 7-week-over-week KPIs, Alex could see a growing discount percentage eating the net results. 

Green Horizon implemented a series of promotions and discounts in its zealous pursuit of customer acquisition and loyalty. While these promotions aided in attracting a steady stream of customers, the discount percentage proved to be a double-edged sword, leaving the dispensary with a margin that couldn't sustain the pace of growth.

Recognizing they needed a pivot, Alex and his team recalibrated their discount strategy to balance customer attraction and maintain a healthy bottom line. 

The team implemented alternative approaches, such as loyalty programs, targeted discounts on specific products, and coaching the team to encourage multi-item purchases without always relying on discounts as a lever.

Fast-forward a few weeks, this refined strategy was implemented and tracked within the retail tracker. The results were promising.

A gradual reduction in the discount percentage, accompanied by sustained gross revenue growth and, most importantly, an uptick in net revenue.

GreenHorizon learned to balance customer acquisition with profitability, ensuring its long-term financial success.

Vetrinas, you didn’t include Conversion Rates!

Did you know that retail cannabis stores haven't historically been keen on monitoring their conversion? You might be wondering why, although tracking a retail store's conversion rate might seem like a basic Key Performance Indicator (KPI), the relatively new legalization of cannabis led retailers to assume that every customer would leave with a purchase. 

As the Cannabis Retail landscape has matured, with increased store density and shifts in product differentiation strategies, missed opportunities are now more in sharper focus than ever.

What it is:

Conversion refers to turning a potential customer into an actual buyer, those who transact in-store.

Why it matters:

Conversion rates don’t just reflect the efficiency of a sales team in connecting customers with the right products; they also reveal the shadowy realm of missed opportunities arising from assortment and sales strategies. Simple conversion formula here. 

How to improve:

Empower your staff through training (the art of greeting, speedy engagement, implementing cross-selling and upselling techniques), Elevate in-store appearance, and match inventory with demand (use an inventory funnel here).

 Even if conversion rate didn’t make the list as a ‘core’ Sales KPI, it’s still a helpful tool and a key part of your overall retail strategy. 

Implementing a performance tracker is critical to your success

Why? Not only has the Vetrina team witnessed a 5% increase in gross sales over a 4-week window, but your team will be able to discuss their retail store results confidently with data-backed insights. This investment and intimacy with the data allows them to motivate their teams to meet weekly and monthly sales goals. 

With each data point meticulously recorded and analyzed, the tracker ensures your teams are having the right conversations about their sales goals, prioritizing the help they need, and driving fact-based discussions the norm.

It's not just about tracking numbers; it's about greater intimacy with retail sales data, which in turn drives informed decisions that meet and exceed sales goals.

Need a bit more help to get started?

Everyone talks about running a better cannabis dispensary, but no one talks about how! 

Vetrina has created Cannabis Retail Management courses focused on how to think about the problem and what tools are part of the solution. 

Delivered in:

• Bite-sized video lessons
• Infographics for visual learners
• Printable resources to use in-store
• Templates to build strategy and plans
• Test your knowledge quizzes

To make learning about retail easy and engaging. 

Get the experience without investing hours. Learn about Vetrina Cannabis Retail Expert courses here.