Jessica Jansasoy

3 Mistakes When Evaluating SKUs at Your Cannabis Dispensary

Inventory management is the heart of the operations at your dispensary. And if done wrong, it can surely harm your business in the short term. Even so, many operators and inventory managers in the cannabis industry have admitted to using very questionable tactics to make purchasing decisions.  

As incredulous as it sounds, you might have done something similar—at least at the beginning. But we’re not here to shame anybody. The history of the cannabis industry is still short, and it has only ramped up in the last five years, so there’s not much information to work with.

In this article, we’ll go through three “tactics” you should avoid when evaluating SKUs for your dispensary.

Are you also making these SKU evaluation mistakes?

An Overview of Dispensary SKU Evaluation Errors

Forecasting is the first step to effectively managing your inventory, ensuring you’re able to cover expenses and generate profit. There’s a tendency in retail in which only 20% of your products, the best-selling minority, drive significant revenue.

With this in mind, picking SKUs for your cannabis dispensary is linked to your demand volatility and consumption value. These metrics are clues you can use to analyze how many products you should buy and if you can afford them.

Still, there’s much more to it than analyzing trends on these metrics, looking at what competitors are doing, and replicating something in the middle. Here are the three tactics you won’t be caught doing again.  

#1. Relying on Gut Instinct & Haptics

If choosing the right mix of products feels like a series of unfortunate struggles, you’re not alone. Inventory management isn’t easy, especially at the beginning. There are tons of data you need to analyze before buying a product, let alone a dispensary’s inventory. In fact, the average buyer spends five hours per week in front of a spreadsheet.

When time isn’t on your side, it’s easy to resort to a gut feeling (or your brand rep's opinion) and buy what you believe is sellable, instead of keeping an eye on your data. And often these opinions and “gut feelings” come from haptics like:

Purchasing beliefs like those can be leading indicators if you observe commonalities with what your data suggests. But ultimately, you should resort to using your first-party data to make informed decisions.  

#2. Only Using Broad Historical Sales Data in POS

Broad historical sales performance data like Total Sales, Total Units, MoM (month-over-month percent change in sales) and WoW (week-over-week) aren’t effective in making purchasing decisions. Reports on these metrics tell you how you’re performing financially. But just your business in general.

That’s why going to your POS (Point-Of-Sale) and looking at your data is a square one tactic. But have in mind that these systems are designed to process transactions. So your POS system influences you to repeat those fulfilling transactions.

That’s why POS systems include:

These factors can aid your analysis and be leading indicators. But again, you should focus on first-party data like your consumer demand for each product to avoid mistakes.

If you have trouble putting together this data to generate insights, you could use a POS system that has inventory analysis features like Dawnstar. With this product, you can get insights according to historical sales data on SKUs like which ones are in-demand, when to re-stock, which ones should you substitute, and more.

#3. Using Market Data to Inform Purchase Decisions

Not all data comes from tracking your dispensary internally. Industry knowledge helps you understand how you should do compared to your actual performance. However, following a compilation of trends across your region isn’t the most reliable way to purchase your SKUs.

You can’t make choices based on industry reports showing a big number. To be able to use these studies to your best advantage is vital that you read the methodology and understand how this data was collected. What if the data in the study includes a bunch of states but not yours?

And even if that were the case, there’s a different demand according to the location of your dispensary. Sales regional metrics don’t reflect customer demand at your store. You have to collect and re-shape that data to get the most accurate results.

The actionable here is to use a POS system that’s scalable and data-driven. With this, you can create custom reports and be confident when purchasing SKUs for your dispensary. Plus, the more you analyze your data, the easier it gets for you to make decisions based on experience.

Key Takeaways