The battle to drive margin, getting an extra point or two and a half is incredible, and it is enormous.
How to go to a 40% gross margin to a 42.2% gross margin on a product?
Assuming we have an original gross margin of 40%.
You have a cannabis product that the initial price is $52.99, and you rounded up to $54.99. This is only an additional $2.00, but now you have a gross margin of 42.2% on that particular product.
If you have a non-price sensitive product that is priced at $ 9.62 and you now round it up to $9.99. This is an extra 37 cents. Now your gross margin is 42.2%.
Go around the dispensary and figure out what your products you can round up that will not hurt how many you can sell.
This is your battle to drive up margins.
This is merchandising, and enlisting technology becomes critical for increasing profitability.
Be the master of variable pricing and be tough on pricing.
A Simple 3 Step Retail Equation:
- Traffic = people who come into your dispensary and check-in.
- Conversion rate percentage = the number of customers who buy divided by the number of people who checked in.
- Average ticket sale = the total sales divided by each transaction
Example Conversion Rate:
One hundred people come to your dispensary (traffic). Of those hundred people, 32 customers buy.
Your Conversions Rate is 32%.
Example Average Ticket Sale:
32 customers buy products totaling $1,600 of revenue for the day
32 divide by $,1600 in sales for the day
Your average ticket price for the day = $50.00
You can improve one or all of the steps, and you will increase your ticket sales.
Any percentage increase in traffic, conversion, and higher ticket sales will raise your gross revenues.
Do you own a traffic counter? I guess you do by checking everyone into your dispensary.
Stop just giving away product.
There are some products you may not be able to raise prices from regulatory requirements, or they are just price-sensitive products.
If it’s price-sensitive and you’re not going to sell as much as you have been selling, then don’t do it, but that doesn’t apply to most of the products that are in your dispensary.
Check what your prices look like, make more money rounding up.
Walmart, for example, is the master of variable pricing.
We all know they are very price sensitive. They have the best price products on the end caps, but when you end up in another aisle, you’re assuming that this is probably a reasonable price.
What you do not know is that they are diligent at pricing strategies and rounding up non-price sensitive products you usually arepaying a little bit more than you would at a different store for the same product. They’ree not going to gouge you, but they’re going to make another 2, 3, 4, or 5% margin.
Here’s your pricing process that drives your profitability.
This is not about anything that guarantees success; it is about the possibilities and what could happen in your dispensary.
You make money on the sales floor, and you spend money in the back room.