For retail stores, selecting products to carry should be a deliberate process
Supply and demand has been a roller coaster within the states that have legalized and regulated marijuana as the market evolves and matures.
Colette Thomas, an advisor with Recreational Marijuana Management and a regular contributor for Marijuana Venture, recently spoke with Green Thumb Industries CEO Alen Nguyen about how licensed cannabis businesses can manage their supply chain.
“I have wanted to address this issue for quite some time without discussing prices,” Thomas said.
Green Thumb Industries is a business-to-business distributor for the cannabis industry, supplying equipment and consumable goods to licensed businesses at wholesale prices.
Colette Thomas: What advice would you give to producer/processors looking to grow their shelf space with the retailers?
Alen Nguyen: As a producer/processor you should have a diversified portfolio of your products to present to the retail stores. Do you have a clear understanding of what products the market is currently demanding? Don’t try and dictate what the market needs are and/or think the market needs are aligned with your interests.
If you listen to the market purchases and apply that data to creating and managing your product portfolio to address a mass audience, you’ll be much more successful. Your portfolio should consist of products that are described by quantitative and qualitative metrics. Examples are photos of your various flower strains, supporting growing methodology information, unique packaging, etc. Your sales metrics won’t lie and will tell you what products you produce sell, and which do not. Pay attention to these and tailor your business to your market.
Thomas: How do you proceed with establishing that relationship with a retailer?
Nguyen: Processors need to develop relationships with the product line managers and buyers at the retail stores. Outside sales reps should research specific demographic needs for each retail store, prior to presenting your portfolio.
They will report back to your headquarters with their developments. If they are constantly listening and accommodating these demands, you will have greater success. Think of what incentives the retailers have to buying your product. Is it exclusivity, private labeling, specific strains or territory-based sales? Once you understand your buyer, you have a better chance of selling more product to them.
Thomas: Can you elaborate more on the product line manager and buyer positions so our readers can have a better idea of what they are dealing with?
Nguyen: A retail store has two extremely crucial positions on its team to ensure a smooth and successful flow of business. One is the product line manager and the other is a buyer. In a small organization like a retail store, these positions are often held by the same person.
The PLM would be responsible for learning the products and local competitors’ pricing. They also understand which categories of their business sell the most compared to others. For example, if edibles were a raging market in one store, a PLM would develop their inventory based on the majority of those types of products. They would instruct the buyer to purchase certain types of products based on historical sales data and inventory levels.
Your second key position is your buyer, someone who is a cannabis expert. They can simply look, smell and feel the product, then provide an accurate analysis of the quality. Your buyer should develop a vendor management process that includes visiting various grow sites to ensure consistent quality, packaging and pricing.
Does the processor have the capabilities of producing the same consistency of product at the same price that you will promote them at? You should also be evaluating them in their entirety as a company. If your demographic is screaming for oils or vape pens, you need a vendor evaluation program in place. If you developed a supplier scorecard for each vendor, it would allow you to easily pinpoint vendors who can fulfill your immediate needs when supplies were low.
One example of a supplier scorecard is based on a point system, with a maximum score of a 10. There are three points allotted to each of the following: price, quality/customer service and delivery. Those categories max out at nine points collectively. The extra point is available to add to one of the above categories. For example, if maintaining low cost is extremely important, you would apply an extra point to pricing and pricing would have a value of up to four points, while the other categories would still be worth three. It is a quick and easy way of evaluating your vendors when it comes time to purchase product. But it is also important to allocate a certain amount of purchasing dollars to new vendors and/or products. This keeps your store at the leading edge of product offerings and continuously drives competitive evaluation of supplier scorecards.
Thomas: In closing, I would recommend having specific days and times to meet vendors, such as Tuesdays and Thursdays between 11 a.m. and 4 p.m. This will eliminate daily distractions of random vendors visiting your store when it is not convenient.
Follow the 80/20 rule, with 80% of your product offerings staying consistent, while leaving 20% of your inventory open for new products/vendors to test out the market.
If you developed a supplier scorecard for each vendor, it would allow you to easily pinpoint vendors who can fulfill your immediate needs when supplies were low.