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Tommy: Setting up a profitable cannabis retail. let's talk about that. Tell me more.
Chris Reid: Challenging one's assumptions is a good first place to start. So one of the things that I've seen people do when they set up a new cannabis retail is they want to stock it with the things that are most exciting to them. If I look at myself, I would be tempted to do that as well. I'm into sativa. I love super lemon haze tr cookies. If I look at what most consumers in Colorado where I'm located are buying I would be doing myself a disservice if I stocked my own preference because indica dominant hybrids, indica leaning concentrates are selling much. Better than sativa is where I'm from. A lot of people like sativa. So that's not universally true across all markets. Just an example or an anecdote from where I'm located. But it's all the more pronounced if you're thinking about somebody who's getting into this industry because of their passion for cannabis flour, but they're opening a cannabis retail [00:01:00] in, suburban Minneapolis. If your target demographic is, heads of family, between 25 years old and 50 years old, and largely the people making the buying decisions for those families are gonna be women. If you're stocking your store to your own preferences, you're probably missing the mark probably by a pretty wide margin. You wanna let the data inform this. Look at, there's a ton of data out there about who's buying what. There's US census data to help inform you who is actually in the communities that you are going to be serving. So take the guesswork out as much as possible.
Look.
Tommy: So where would I go to find the data on what are the buying trends of different demographics?
Chris Reid: So there are a number of services out there, a number of data aggregators in the industry that provide that information. We're partnered with some of them, so I'd feel weird kind of calling any out. But, certainly there are players that have that, that data available whether it's, headset or BDSA or [00:02:00] um. Leaf link, any of these companies have information and insight into that. You can also get anecdotal with it, but it is, and just go talk to people who are running successful retail. A lot of them are happy to chat about what products are selling to what types of customers.
Tommy: What should my inventory strategy be? I have never opened a store before. How much should I carry? And do you think what's your take on that? 'cause some retailers they wanna carry a month. Some retailers say, Hey, no, a week is okay. Let's just keep it short so I can learn. What's your take? I.
Chris Reid: It depends on where you're at in the life cycle of the industry in your space. If you are, if you're planning on opening a retail in Minneapolis, Minnesota. You should probably plan on stocking every product that you can get into your store when you're opening, because there's not gonna be an abundance of supply. So that's how I would start in a new market if I was coming and past that. I think it [00:03:00] depends on what your value proposition is and who you're targeting. If you are looking to be the budget brand in your area, then carrying fewer skews and moving them more efficiently is gonna be a lot better strategy because your whole business model is somewhat contingent on not having too much inventory, right?
Like you don't, that's just cost that you haven't built a business to sustain. Whereas if your value proposition is that you have. The most high-end cannabis products you probably wanna stock as many of those high-end brands as you can so that when people come to your store to have that need met, you can meet the expectations you've set with your brand promise.
If that makes sense. And there's a large delta in between those two extremes, but letting the data inform how you continue to reorder is really important. And I think one of the areas where people make mistakes is they'll give [00:04:00] up on a product too quick and then they'll, eventually have to reorder it down the line when they keep getting requests for it because they haven't enabled their team to speak to that product. I think we look at. Sell rates or run rates on products, and we go, oh, this one's not moving. It must be a bad product. Reflect on whether or not you've enabled that product to move first before giving up on it, especially if it's something that you believed in enough to make the buying decision on yourself.
Tommy: That's so insightful and I see that so often. It's so often. Oftentimes what we found is a product doesn't sell. It's because the sales associates aren't selling it. It
Chris Reid: Yeah,
Tommy: has nothing to do with the product.
Chris Reid: nothing. In some cases it could be location on the shelf, it could be, there are a number of factors that can influence that. But I think the leading cause from my vantage point has been we're not giving people the tools they need to speak. [00:05:00] About that product?
Tommy: How can a retailer work together with their, with the brands to sell through?
Chris Reid: That's a great question and I think, it's interesting 'cause it's one of the things that I love talking about during the seminars we do or these, speaking opportunities at some of these trade shows, the people who make these products are fanatical about them. If you've ever met a head grower, they will talk to you about their approach to growing until you tap out. It's beautiful. Like they're so obsessed with the science, but also the the nuance and the they particular approach. And what makes it better, at least from their perspective, that I would always start by reaching out to those brands or those cultivators and saying, Hey, would you be willing to come in and educate my team on how to represent your brand? First of all, you're doing them a service because you are going to then be [00:06:00] representing their brand more closely aligned with how they want it represented. So there's something that they're interested in this equation as well. But second of all, no one's gonna speak more passionately to their products than they are.
So your team's getting it firsthand from, from the horse's mouth, so to speak, what makes their products better and how to position those to an end user or a customer.
Tommy: Yeah I've heard. The importance of making sure that your suppliers have road game. So what is, what are the, what is the support that they're gonna give you to help to enable your sales associates to really sell through their inventory? It's so important.
Chris Reid: Yeah, it's, it's super important and I've seen everything from cultivators or manufacturers coming in and doing a popup booth and talking to customers in front of the staff so the staff can learn via osmosis to. Having people come in and talk to your staff on their break or throughout the day and just inform the staff directly [00:07:00] on, on how to represent the product. I think both of them can be really impactful. I think if you're gonna have them come in and speak to your customers directly, need to do something to incentivize or encourage your staff to pay attention to what they're doing. Otherwise, it can be easy to, for the staff to go, oh, they got this handled.
I am gonna go do this thing.
Tommy: Chris, anything more about inventory strategy that you feel retailers should know?
Chris Reid: There's so much, but in terms of, I think we could spend a whole day, if not days, talking about inventory strategies. Make, making sure it aligns with your, your business model and your brand promise like we talked about. But,
Tommy: what are some different business models that you can touch base on?
Chris Reid: Yeah I'm happy to. We have some customers where they have really low skew count, really small footprint stores, and they, their whole thing is we want to [00:08:00] touch the most customers every day. I possible. We've lowered the barrier to entry as far as we can in terms of our pricing. We've made it really convenient. We've made it really easy to get in and out, and so we're just that's our business model. We have some operators who are just so fanatical about the data that they carry high number of skews. But they could tell you everything about each one of them where they are. If you are set up to, to work like that and understand your business in that at that depth, then really, you can do whatever you want, but I'm thinking specifically of an operator in Ontario, Highland Cannabis and Owen there he knows his business just impeccably and the way that he can identify. Top moving products and get them reordered and the way that he can manage it so that there's very rarely a gap between having products that are selling well and also move out the product that's not selling well so efficiently is just [00:09:00] really something cool to see. And then, obviously there are people who just want to have everything for everyone and that's a much more difficult business model to manage.
But we see people do that as well.
Tommy: Yeah, that's a tough one for sure.
Chris Reid: Yeah,
I think it, it,
helps to have big backing to run that kind of business.
Especially 'cause your overhead just, it gets so high. I think it's really, especially in the cannabis space, it's really hard to make money taking that approach right now.
Tommy: Yeah I always think the business of a retailer is how many times does your money turn over? So I think of it, I think of inventory as money
Chris Reid: Yep.
Tommy: can you exchange money for money? Can you turn over your money four times in a month? Four times in a month with lower margins is probably better than once a month with high margins.
Chris Reid: Yeah I would agree with that. I think it's really, I, and it's really important to know how fast you are turning over your inventory. And I don't know that a lot of retailers do it. This in this industry gets so, [00:10:00] and I don't mean to. Demean anyone? I think this industry is so hard and so difficult that a lot of times people are gasping for air before they even have that thought.
Tommy: So what? What are the other tenants of running a successful store?
Chris Reid: In enabling your staff, keeping your staff is hard in this space. You guys know that better than anyone. So making sure that you have systems in place that. Keep your staff not only engaged, but happy and communicating well with the customers and having oversight in that.
I think making sure you have hands-on management, and if you're more of a silent. Partner in the business, then stepping back and putting someone in place who is fanatical about your business is really important. Because, one thing that we see is a disconnect between ownership and the people on the front lines.
And it's easier to have that happen the bigger your business gets. But I've seen it with small businesses as well, where. [00:11:00] Employees feel like the owner doesn't care when they start feeling that their loyalty is to each other and to themselves, not to your business. And that's a really precarious position to be in. So staying close to your business or putting someone in place who will and then being fanatical about it. I talk about during our seminars, I always talk about how it's really important to have a diverse team. It's important to have cannabis specific accountants. It's important, if you've never done this before, especially to work with consultants. It's important to have people on your team. No one should know more about your business than you though, and just because you have somebody on your team who will know about this aspect of your business or just because you have an accountant on your team and they're gonna better understand. All of the intricacies of the financial situation doesn't mean that you shouldn't know the, your financial situation, your inputs, your outputs, and your inventory terms like you're talking about. Maybe the accountant can do more with that information. That's why you have them on your [00:12:00] team. But you shouldn't rely on anyone to, to fill in gaps in your own knowledge about your business.
Be fanatical about your business.
Tommy: You're preaching and I've actually never, it's very hard for a business in general, let alone in this industry to be, to have a successful business with absentee ownership. I. It's impossible. And you mentioned that, hey, hire somebody that is fanatical. If you're not, that's really hard too.
Chris Reid: It does.
Tommy: I think that's even more difficult than if you were fanatical yourself. Yeah. I've actually never seen that work more often,
Chris Reid: I think it only works if you're willing to, if you're willing to incentivize that role with equity.
If they've got skin in the game, I think you can make that work.
Short of that, no. 'cause the better they do, the more attractive they are to someone else, or the quicker they tell themselves, I could do this without him.
Tommy: Yeah. It's that's a tough one. So that is that is so tough. If you if I was [00:13:00] starting up and, we talked about having extreme ownership. Over the business. What are some key performance indicators that a business owner should leverage when making decisions?
Chris Reid: I like that. I like that Jocko reference there. Did the key performance indicators, I would say, when you're looking at your retail staff profitability, and I think it's easy to look at revenue generation, but over discounting is such a big problem in this industry that if you're just looking at how many orders somebody puts through or how much revenue somebody's generated, you might not be seeing the full story there. Because your most profitable employee is not always your most productive one in terms of the numbers. So that's I think one, one KPI to really look at. There are also some intangibles that I would consider, and this comes back to, not being an [00:14:00] absentee owner and spending time in the store, but. When somebody walks in, if you don't have a designated order in which people are engaging with them, which employee is the first one up there to engage with them? Who's shying away from that? That's a coaching opportunity to really enable your staff to feel comfortable engaging with people or to help find a better way for that employee to be. Contributing. So I think that, that's really meaningful as well. And then how fast are you putting are people coming in and getting out of your store? What, from the time that they check in until the time they leave how efficiently are you moving people through the process? One of the things that I always talk about, and this relates to like the design build of a dispensary, is people. Paint these stories about, oh, I'm gonna have this dispensary with this couch and this TV and people are gonna be really comfortable here and or I'm gonna make it like an Apple store and. Apple's got a [00:15:00] different business model. They're
fine with someone being in their store for four hours because, and I was saying this just a couple hours ago. 'cause their genius can then upsell someone from a $2,000 computer to a $4,000 computer.
When you're dealing with CPG, the longer that consumer is sitting in your business, the more they're thinking, eh, today at least I really only need that pre-roll.
I don't know if I need all this other stuff. You want people in and out. You want to, and the person standing at the register is blocking the next person from standing at the register. I would definitely track that, how efficiently I'm moving people through my business. And then how effectively are cart sizes increasing by employee over time? If making a point to encourage my staff to upsell or to maximize each transaction, I should track that progress. My boss always calls it inspect what you expect. That's Gary's whole thing is you, if you're, if you have an expectation, you better inspect it. Otherwise, you're not really holding people to those [00:16:00] expectations.
Tommy: That is, you mentioned being in line and pushing people through as fast as possible, and that reminds me of. How the store is set up, is it set up for success? Oftentimes when I go to a store and I try to visit as much as possible, and there's no bud tenders on the floor, and I'm in line and there's a line behind me and I'm talking to the bud tender the cashier, and I'm just asking questions.
I feel pressure to make a decision as soon as possible because there's people behind me waiting. So in that environment I can imagine that it's really hard to upsell or really hard to dig in, Hey, what do you like? And so the bud tenderers in that situation, they have to be so slick and so fast, and so efficient, and that may not be the best environment for everybody.
Chris Reid: It might not be, and it might be good to have a policy of, hey, limit product suggestions when [00:17:00] you know we're at this volume of people in the store. Because you also don't want to frustrate people in
Tommy: Everybody
Chris Reid: You don't want the person at the front to feel anxious about God. I might. Not everyone will.
There are plenty of people out there
who don't care. I'm similar to you. If there was a line behind me, I'm like. Okay, I gotta get going right now. But the other thing that can help is training your staff to leverage the information that they have at their fingertips and working with the system that will put this information at their fingertips so that they're making smart suggestion as opposed to just scattershot. So you're working with the system that tells you, oh, this is Ryan. Ryan likes Death Star, and you can see Ryan's past purchases and you can see what he's just put in his cart, being able to say. Hey, I don't know if you saw those new pre-rolls from seven 10 Labs, but they've got a Death star I think you'd love that is gonna have a much higher success rate than, Hey, we got some new edibles in. And you're saying that to somebody who doesn't buy [00:18:00] edibles. If
you've got that information right in front of you, then train your staff how to make the right product suggestions as opposed to just, Hey, make a product suggestion.
The other thing I'd say is. Don't, train your staff to look at how close that person is to their purchase limit so that they're not making a product suggestion that somebody can't purchase. If you've got two grams left to your purchase limit, and I'm telling you that you should check out these eights from Free World Genetics. Guess what? I'm just introducing frustration now. I'm actually slowing things up because if I've done a really good job at selling you on that eighth, now you're thinking, all right, what do I have to take outta my cart?
And now we're pissing everybody off even more. Whereas I could have made a suggestion on, Hey, we've got buy one. Get one grand Prix rolls. Boom, you're at your purchase summit. Here we are. We're out the door. Customer's happy. People behind 'em are happy, and I've maximized the transaction.
Tommy: That's so true. I didn't even think about the purchase limits. That's a big one.
Chris Reid: It is, it's a big one. You [00:19:00] don't want to frustrate people, but you also, you have queues in
other industries. They don't have that. There's one upside to having purchase limits. It at least gives you a container to fill. You're like, oh, okay. I've got a goal here.
Tommy: So you mentioned a few features that Covid has that could help sales associates upsell, and I gotta say, congratulations. You guys won best POS of the year last year at the mjs.
Chris Reid: Yeah. Best best retail technology, I think. Something like that.
Yeah.
Yeah, it's really exciting.
Tommy: So let's talk about technology. What do you guys have down in the pipeline 2025?
Chris Reid: Yeah, it's a great question. So again, looking at what. We, we want to define our North Star, right? And our North Star has always been compliancy. And getting back to the conversation we had earlier, I don't, that's not enough anymore. So how do we make retailers more profitable? And there are a number of ways we can do that, right?
One is enabling more efficiency. One is [00:20:00] better enabling dispensaries to make product suggestions to their customers. And one is to, streamline operations and make things easier for operators so that they can focus their time and energy and their staff's time and energy on what will generate.
More revenue. So we're working on a number of initiatives to cover all of those angles. We're working on improving our functionality as it relates to state traceability systems and giving people the ability to do more in cova that currently they might be doing in metric or in BioTrack to, to not only to streamline those operations, but also to allow them the. Convenience of having staff work on those problems that they might not want to provide with login credentials for metric or BioTrack so that they can get more efficiency out of their entire staff. We're looking at tools like our e-commerce tool and how can we make this something that [00:21:00] enables retailers to capture a larger audience and to convert at a higher rate. And to set a good customer or to create a good customer experience. Because I think oftentimes we look at e-commerce as a box. We have to check, but that is often the first impression that your company has on a new customer. So making sure that we're putting retailers in a position where if they're using our e-commerce product, they're converting new customers out of that as opposed to just servicing their existing customer base or, transient business and really helping them make that a tool that helps drive profitability. And, we're always looking at how do we improve our current technology as well, just to make it faster, more reliable, more dependent more dependable. And of course, this time of year we're spending time getting ready for four 20, we've gotta, I got a knock on wood.
We've got a perfect track record on four 20 and we wanna make sure we keep that.
Tommy: So tell me a [00:22:00] little bit more about the e-commerce. When's it live and what are the core functionalities of it?
Chris Reid: Yeah, so the e-commerce is live in Canada. I think one of the most important things to us was knowing. Knowing our lane, e-commerce is a, it's a Pandora's box. There's so much you can do with it. But there's also so much that can go wrong if you're doing too much. Understanding that there are players out there who are doing a really phenomenal job at the big builds and the enterprise level sites at the sites that are truly generating SEO and all of that, those. We don't want to compete with that. They're doing a better job than we could, and our whole approach has always been best in class. At the same point in time, there are retailers out there who need better than what they have now. They need better than an I frame. Where their products are indexed to an aggregated marketplace.
And [00:23:00] by sending people to their website, they're effectively advertising for their competitors. They don't want that, but they can't afford, or they don't have time to invest into a bigger e-commerce platform. So there needs to be a middle lane. And so we've created an e-commerce product that is, um. The functionality, the speed of the integration with the point of sale is second to none. That's been really important to us, is to make sure that the functionality is seamless but it's not trying to be something that's not so it's enabled for SEO it's not gonna generate SEO for you automatically, but if you are working with the team or if you have an employee, they can help. To truly leverage the platform to build SEO. It's not, we're not putting you behind the the eight ball, like you are with an iframe or one of these descendant of iframe technology platforms out there.
Tommy: Got it. You hit the nail on the head too. Is. And I [00:24:00] love where the industry is going because it shows the maturity of the industry where there's niches now. There's niches, sorry. And the industry has grown to a point where they're, it's funny 'cause we were talking about some payroll platforms and like a Gusto for example.
They're a massive payroll platform, but they don't use their own product. Because they're not made for a company that has thousands of employees. They're made for a company that has 20 employees, so they use Workday. So it's just like that. And I see that in the cannabis industry more and more, which is great to see.
I.
Chris Reid: I think so. I think so. I think knowing who your core customer is really important.
Tommy: It drives down the focus. Chris, I know we don't have much time left. Is there anything else that you, that's happening in Covid 2025 that you want our listeners to know?
Chris Reid: Is [00:25:00] there anything else that's happening in Covid this year that I want customers to know? I think one thing that. It is not new to Cova, but let me think of a better way to put this. In addition to all of the exciting new things that are coming to to play with Cova in 2025, I don't want to lose sight of the fact that altruism for the retailer has always been. Center and completely central to what it is that CO's doing. So I think it's easy when, and I've seen this with my competitors we're working on this. We're bringing in that we're gonna add this new functionality or this new technology or this new line of business and what suffers is customer support. And so while we're doing all of these other things, we've also. Added a day of support. We have seven day support now. We've increased the hours of our support. We've increased staffing for our support so that our [00:26:00] customers are not just getting new things to frustrate them, they're getting new things that are supported at the same level that COVID is known for.
Providing support at our KPIs on the support that we provide our customers have never been better. Right now is an average, I think 11 second wait time. If somebody calls into our customer support line, we have almost an 80% first call resolution. These are metrics that everyone at Cova knows because we talk about them all the time because that's how important customer support is. So it's easy to get lost in the weeds when you start adding. Adding things and to get really excited about that stuff is great. But if you lose sight of the things that have helped you get where you are, that's when you stumble, I think so.
Tommy: That's beautiful. Customers come to you for technology and they stay because of customer support. Before I let you go, where can our listeners find you?
Chris Reid: I'm in the dark right now. I should have had more light. So hopefully they can see me. They can find cova@covasoftware.com. We're on LinkedIn. [00:27:00] I'm at chris r@covasoftware.com. Yeah, reach out to me on LinkedIn. I'll give you my phone number too. If you have any questions, call us.
We're happy to chat. The other thing I'd say is in, and I've said this a lot but in the cannabis space, there are a lot of people trying to be everything to everyone. Consider the options that you have for every piece of technology, for everything that you're bringing into your retail, and make sure that you're vetting it and you're not just making a choice that marks all of your criteria. But you're making the right choice that marks all of your criteria. Don't settle for the first one that checks all the boxes, because you're always gonna have questions. Then get that peace of mind for yourself by checking out all of your options and making the most informed decision you can.
Tommy: Chris, thank you so much for joining us today.
Chris Reid: Thank you, Tommy. It's always a pleasure.
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