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At Happy Cabbage, we talk to cannabis retail buyers all day, every day. We rack up quite a sample size that experience roughly the same problems across the board.
In that time, we’ve amassed a list of the top 10 ways things go wrong in the inventory management process. We’ll list them here and then explain them further below.
Before we get into it, a little caveat: we’re not saying you, as a buyer, are doing it wrong and you suck and should quit your job. Quite the opposite. You’re working with what you got, what you know, and what you’re able to do.
You’re doing your best! That’s what we’re here for, to help ease the burden using a tool you’ve likely never been able to use in the cannabis industry: Happy Buyers.
Ok, on to the list of the top 10 ways you’re ordering inventory wrong:
- If you're a multi-store operator and have 1 buyer per retail store, you're doing it wrong
- If you're ordering every product that runs low, you're doing it wrong
- If you’re not paying your vendors on time, you’re doing it wrong
- If you spend over 10 hours a week ordering, you're doing it wrong
- If you're ordering the same amount you ordered last time, you're doing it wrong
- If you’re not reviewing profit contribution before ordering, you’re doing it wrong
- If each store is using different data to order, you're doing it wrong
- If you're buying based on your personal preferences, you're doing it wrong
- If you have more than 30 days of prerolls on hand, you’re doing it wrong
- If you're buying from a spreadsheet, you're doing it wrong
You may experience all of these at once, or just a few. Most of these are symptoms related to the same “disease”, so you expect to see more than one at a time.
Let’s break ‘em all down.
If you're a multi-store operator and have 1 buyer per retail store, you're doing it wrong
This problem is indicative of a lack of systems. This is inefficient at a time when being efficient is necessary for survival.
We work with many organizations where one buyer manages anywhere from 6-15 stores at a time. Clearly some stuff gets missed or is inaccurate, because most of them do this from a behemoth, Frankenstein’s monster of a spreadsheet managing multiple POS reports for each location.
However, that’s still a system, and it makes their buyers more efficient. Less is more in this regard. Find ways to give your buyers better systems, spreadsheets, or tools.
We’ve saved those buyers metric tons of hours by making them even more efficient through Happy Buyers, and freed up large sums of cash by tightening up their data and decision making.
If you're ordering every product that runs low, you're doing it wrong
Just because a product is running low does not mean you should be reordering it. We get it, many buyers we talk to are overwhelmed and sometimes just make a decision to keep moving forward. It’s low, reorder it.
Doing this without being able to quickly analyze whether you should reorder it based on run rates, sell-through, aging, or profit margin is a real problem.
This leads to the largest cash flow problem in cannabis retail: overstocking.
Some products move fast with almost no margin. Some the opposite. Some SKUs from a brand sell better than others. The only way to reorder well is with fast, accurate predictions on hand.
If you’re not paying your vendors on time, you’re doing it wrong
This one is juicy. Hot take from the entire industry, right?
Here’s the thing: inventory management is a direct contributor to paying vendors on time. Overstocked inventory means cash locked up on shelves until products sell. If it takes a long time, like 60-120 days to sell that product, you don’t have that cash to move around (and relationships get strained over missed obligations).
In fact, you’re likely either eating margin at that point, forcing the brands to reacquire the SKUs or covering the discount themselves. They still aren’t getting paid until you have that money available.
Managing a tight 14-21 days on hand reordering cycle keeps your inventory stocked to actual demand without over committing funds onto your shelves. Having that cash liquid will help you pay your bills, whether to your brand partners or the tax man.
If you spend over 10 hours a week ordering, you're doing it wrong
We see this in single location retailers as well as the larger multi-state chains with a few buyers on staff. Most of them are spending an enormous amount of time ordering.
In larger, multilocation retailers, almost all of that time is spent in spreadsheets, pivot tables or Tableau. Updating equations, updating inventory, managing each store’s POS data and collating them, the list goes on.
In smaller retailers, almost all of that time is spent in discussions with brand reps and spreadsheets (those are unavoidable, everyone’s got 'em).
Happy Buyers routinely saves time by automating the data and equations to provide buyers direct, clear insight into what and how to reorder (so less time spent getting unnecessarily influenced by brands).
If you're ordering just how much you ordered last time when products run out, you're doing it wrong
Any number of things can go wrong here. Seasonality matters. Holiday sales may be skewing your numbers. Products go out of favor. The products you’re reordering may not have ever been that popular. Your original volume of ordering may have been fundamentally inaccurate.
This is ultimately a data-crunching problem. How good are you at data science?
That’s not a provocation, it’s essentially a requirement to do this job with hyper accuracy. Or you just use a tool to help you cover those gaps, particularly one built by data scientists!
Using Happy Buyers, we can calculate run rates considering holidays and other “blockout dates” like special promotions or one-time events. We calculate the True Demand™ of your products based on hourly equations running on automated, updated inventory data.
This makes sure that no matter when you’re ordering, you’re using the most accurate prediction of demand at that point in time … which may mean not reordering at all.
If you’re not reviewing profit contribution before ordering, you’re doing it wrong
There’s some nuance at play here. Keep in mind that we’re not talking about “profit margin” exactly. We’re talking total profit contribution, the total amount of dollars a given SKU generates your store in profit.
This matters in a profound way. If you reorder using profit margin as your guide, you may end up with a ton of high margin, slow moving product. You may greatly diminish your total profits because it is likely your lower margin products contribute more to the bottom line.
In Happy Buyers, we knew it was important to include both numbers as columns in our tool for you to always have available and sortable.
We’ve seen too many buyers not understand the true profit put back into the bank from each SKU, and from each brand. This means removing discounts given in a transaction AND taxes paid. You don’t get those dollars to spend, and if your reporting doesn’t consider them, your understanding of profits is going to be wrong.
Now you can see and prioritize which products are providing your organization the most profits in total, rather than basing it on other factors. Maximizing profits right now is critical, and that’s what we positioned the tool to help you do lightning fast.
If each store is using different data/spreadsheets to order, you're doing it wrong
This problem may be manageable for retailers with only 2 stores (although it still represents a time, efficiency, and accuracy problem), but it quickly becomes unruly beyond that many doors.
There’s power in being able to manage multiple locations in the same place using all the data sources together and individually. This is how one buyer can manage more than one store’s inventory: they’ve built a central spreadsheet of information from multiple sources at minimum.
But even they have to take multiple POS exports and bring them into their spreadsheets, and that’s where the rubber hits the road.
You see, when POS reports need to be exported and imported into a spreadsheet, that takes not only a ton of time, but it also only represents a certain point of time in the data. How many exports per day or per week are you able to manage per store?
Using a tool like Happy Buyers allows you to bring all POS data into the tool via API which updates that data every single hour. You don’t have to export and import anything. Happy Buyers crunches all the numbers and predicts demand, suggests allocations, and gives you actionable insights at your fingertips.
THAT is how you get one buyer to manage 15 stores and still have time for vacation or brand collabs.
If you're buying based on your personal preferences, you're doing it wrong
This one should be obvious. It shouldn’t need to be stated. But you’d be surprised how often we encounter this.
Buyers often do make “gut feel” decisions and bring their own personal bias into their product assortment. Those biases and feelings may be based on any number of factors, but rarely are they based on the financial health of the inventory.
Those buyers may also be making decisions based on the culture, considering themselves “culture buyers.” What culture, exactly, though? Cannabis culture is wide and diverse.
Customer demand should guide your buying decisions, through the lens of your company’s brand positioning.
It doesn’t matter how much more you prefer rosin to distillate, customers still buy it and you may find a disty AIO pen generates more profit contribution to your org than any other product.
But you will only know that if you’re crunching the True Demand™ of those products and properly analyzing how products move in your stores, in those communities.
If you have more than 30 days of prerolls on hand, you’re doing it wrong
We recommend all of our buyers reorder between 14-21 days, keeping their days on hand stock within those windows.
For one, it keeps cash liquid and available while still maintaining a reasonable cadence for brands to deliver new product before you run out.
For two, it keeps your product fresher. Prerolls get stale really quickly, and while they’re popular, they get reviewed very poorly quite often because they tend to be the cheapest, least quality product customers encounter.
These items are best sold as fresh as possible, and cash is best managed in tighter reordering windows. You don’t want to get stuck with a bunch of prerolls that just don’t end up moving because you bought too many over a too-long period of time.
If you're buying from a spreadsheet, you're doing it wrong
Last but most importantly, spreadsheets gotta go. They are what you got to work from, and they’re way better than nothing, certainly.
However, no matter how much of a spreadsheet sorcerer you are, you’re going to be 20-30% inaccurate in your analyses. There’s no way around it. We see it in every single case.
Spreadsheets are slow, cumbersome, and require constant maintenance to get close to accurate numbers. There is data that doesn’t make it to the spreadsheets available in the POS, there is timeliness to that data, there are functions the spreadsheet doesn’t allow you to perform.
You can’t blackout certain dates from your sales data to get truer demand numbers on a recurring, automated basis. You can’t auto generate purchase orders from your spreadsheets. You can’t detect groups of SKUs that move similarly and easily lump them together for demand analysis.
Happy Buyers is the only tool in the cannabis industry that can provide this to retailers at ludicrous speed. We close that 20-30% inaccuracy gap for you while saving you time and money.
Try it for free today for 14 days, using your live store data, no commitments to purchase necessary.
See it for yourself, and start ordering inventory correctly!
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