Having less flexibility with money, getting slim profits from discounts, and topping it off with customers expecting a discount every time they step foot inside your dispensary are just some issues that come with slow-moving SKUs.
But understanding why slow-moving SKUs are a bigger problem aside from occupying space on your shelves it’s just the first step. The real challenge comes when you ask yourself, “how can I deal with slow-moving products?” Or going a step further, “how can I prevent slow-moving inventory?”.
Well, here are three tactics to prevent, or clear out, slow-moving inventory and free up the cash flow at your dispensary.
#1. Trial New SKUs for 30-45 Days
If we’re realistic, you may already have tons of SKUs on your shelves. And that may be because a lot of inventory managers and purchasers rely on market data and haptics to buy inventory. The problem with these haptics is that they leave buying decisions to chance.
When we talk about haptics, these are some of the most frequent ones you should avoid:
- Industry reports: Like the ones offered by Headset.io or market data inside platforms. Industry reports have proven to be insightful in understanding market trends. Still, these studies are broad and might not include your specific area. So, they aren’t the best resources when making purchasing decisions.
- Opinions from brand reps: Seems like a reasonable option. Your brand reps care as much as you about making revenue for your dispensary. The thing is, opinions are just that if they’re not backed up by data.
- Opinions from customers: It has to be a big portion of your regular customers asking for the same product if you want to make purchasing decisions based on that (very unlikely).
Rather than using haptics to end up with inventory worth 60+ days of supply, buy enough products from a brand to last up to 30 or 45 days by SKU. A month's worth of supply it’s enough to help you test a new SKU and understand its sales metrics while ensuring a quick turnover rate.
Once your 1-month trial for a new product ends—and you have collected enough data—you can decide either to re-order it or try again with a new product. But to ensure your new SKUs have a good chance of being sold, you should develop a launch cadence.
A launch cadence for a product is what you would call a scheduled marketing momentum. This technique is effective to keep your audience engaged with your business, as they’re waiting to see what comes next.
Here are some tips to develop an effective launch cadence:
- Plan the messaging: The trick here is to talk about your new product by listing its characteristics or any aspect to achieve visibility. You can also use segmentation to send more personalized messages and increase the chances of people buying from you.
- Choose a channel of communication: In cannabis, one of the most effective marketing channels is text messages because of their high open rate. Still, it’s important to pay attention to your website layout and email list.
- Plan the duration of the cadence for each new product: The ideal duration of a launch cadence is between two to four weeks. This is enough time to give your new products a push considering that it also fits with the 30 to 45 days of inventory you should have available.
- Test and collect data from the launch cadence: You can make minor changes to the messages you send out to your audience or even the copy on your landing pages. Then collect data about how effective the change was. This will help you understand what works and what doesn’t, so you can keep optimizing the reception of your new products.
#2. Evaluate Currently Held SKUs That Are in Low-Supply
When you get a notification informing you it’s time to re-stock, it doesn’t necessarily mean you should do it. Rather than re-stocking products that have less than 14 days of inventory, use these notifications as a reminder to evaluate your SKU and see if it’s worth to re-stock.
Otherwise, you could be re-stocking unsellable products that you’ll have to deal with—again—during the next 60+ days. And as a result, you’ll have money on your shelves you can’t use, carrying more cost or expiring.
To make sure you get alerts about low-supply SKUs, use your POS system PAR level notifications. As you may already know, your PAR level is the quantity of product you want to keep at a minimum and maximum. So when you get a notification that you’re at your minimum, it’s time to evaluate that SKU.
Another option is to use Happy Buyers to identify low-stock products. Rather than just sending you notifications about the number of products you have left in stock, it accesses historical sales data and gives you recommendations about which products to stock and which ones to remove.
Now, data points that will prove useful to evaluate your SKUs are the percentage of sales, sell-through rate, share of total basket, average discount, and information about your customers. These paint the full picture of how your products are performing.
Percentage of sales, sell-through rate, and share of total basket tell you if the product has a high turnover. But average discounts make sure the high turnover isn’t biased by the urgency of discounts. And your customer data it’s something you should focus on to offer better deals and better your chances of making a sale.
#3. Run In-Store & Digital Campaigns without Over-Discounts
If you already have slow-moving SKUs and have been reading through this post looking for a solution rather than how to prevent them, this is it. The best way to clear out your slow-moving inventory is to run a digital campaign (to promote these products harder) and offer discounts (to make them more appealing).
Here are the steps to create a discount campaign:
- Adjust discounts based on your profit margin: Find the average profit margin for each of your SKUs. Based on that, adjust your discounts in a way the price looks appealing, but you don’t risk losing too much revenue per sale.
- Create a relevant campaign: What makes a campaign relevant is the personalization of its messages. When you send out an SMS to a segment of your customers, think about order preferences like effect, brand, or category.
- Run in-store promotions: Run these promotions with the corrected profit margin from the first point. There are many options for the promotions you can offer in your dispensary aside from cutting a percentage of the price. Some of these promotions include bundling slow-moving and fast-moving SKUs together, or offering a slow-moving SKU for free when customers spend a certain amount of money.
Remember that creating urgency for any of your products comes down to how you engage with your customers. There’s more than one touch point your customers have to go through to buy from you and if you don’t offer something targeted, your customer experience is affected negatively.
- When you try a new SKU, buy enough of it to last 30 to 45 days. This will give you plenty of time to collect data about its performance.
- Develop a launch cadence for your new products to give them momentum while keeping your audience engaged.
- Use PAR level notifications as reminders to evaluate an SKU when they’re low supply.
- Create a discount campaign to clear out your existing slow-moving inventory.