Like any other retail business, most of the capital in a cannabis dispensary is tied up in inventory. Strategies like Open-to-Buy (OTB) and ABC analysis can help you develop an efficient and effective inventory buying strategy that ultimately minimizes the amount of dead stock in your cannabis retail business.
Nevertheless, without an effective plan to leverage your A-grade inventory, you might miss out on the chance to maximize profits. And in the worst-case scenario, you might end up holding slow-moving inventory.
Here are a few tips to help you leverage your A-grade inventory.
Get Your A-grade Inventory From Multiple Vendors
It’s very tempting to stick to one vendor. However, even the most dependable vendors face unexpected circumstances that prevent them from fulfilling orders. When this happens, retailers often have to scramble for replacements at the last minute.
Therefore, even if you already have a favorite vendor for your A-grade inventory, don’t be afraid to look for others. Working with multiple vendors serves as a backup for whenever your regular vendor fails to fulfill their order. You might also get better deals on products, not to mention the peace of mind you get knowing that you don’t have all your eggs in one basket.
Build Better Relationships With Your Vendors
Vendors are the backbone of the retail industry. Without them, getting A-grade inventory would be next to impossible unless you can buy directly from the manufacturers. These manufacturers often deal in bulk orders – much larger than most cannabis dispensaries can handle.
Fostering good relationships with your vendors is especially important when dealing with vendors you buy your fast-moving inventory. When you solidify your relationship with these vendors, you can smoothen the reordering process, improve communication, and mitigate supply chain delays. Moreover, if vendors like working with you, you are more likely to get to faster turnarounds and better prices.
These best practices can help you foster better relationships with your A-grade vendors:
Pay on Time
Every business likes customers who pay on time. To make your vendors even happier, you can also pre-fund your orders. Then release payment once you get your delivery.
Being respectful can go a long way in fostering a good relationship with your vendors. ‘Respect’ in this context means paying on time, responding to calls and emails, and avoiding returns at all costs.
You should always be clear about what you want to order and when you want it delivered. For the best results, you should put your order in writing and give your vendors adequate lead time for all orders. Online orders also work better than calls and emails.
Keep Track of Your Next Reorder Point
Your A-grade stock accounts for most of your sales. As such, running out can cost you hundreds or even thousands of dollars worth of sales. To avoid falling into this predicament, you should always maintain an ideal stock level. The best way to achieve this is by coming up with a reorder point. You can come up with a reorder point by simply deciding on the lowest amount of inventory you should have before you restock.
Stock up on Extra A-grade Inventory
Another way to maintain an ideal stock level is by keeping an extra load of your fastest-moving inventory on hand at all times. This extra stash of A-grade inventory is called ‘safety stock’ and can serve as surplus inventory whenever you experience a change in market demands. Or when you have an issue with your supplier. This way, you can avoid stockouts that would otherwise cause you to send your customers running to your competitors.
Invest More in Your Fastest-moving Inventory
Investing in your A-grade inventory doesn’t just stop at ordering extra inventory and creating a reorder point. You should also invest more in your fastest-moving inventory by increasing your marketing efforts to drive more sales to the inventory. This way, you can better take advantage of the already popular products to increase sales and profits tremendously.
Take up Loss Prevention Measures
At its core, your A-grade inventory is just like any other inventory in your cannabis business. The only difference is that it is extremely valuable to your business. It faces similar problems to other inventory, such as theft, damage, and loss.
To minimize the possibility of profit loss and stockouts, you should take extra measures to ensure that it is safe and in a sellable condition. For starters, you could try installing new security measures and conducting inventory counts regularly. You can also ensure your inventory against theft and damage to mitigate losses.
Increase A-grade Prices
This might sound risky, especially due to the fierce competition in the cannabis retail business. But when done right, slight price increases could increase your profits significantly.
If you think your customers are willing to pay more for certain products, you can increase your price margins slightly over time. However, while you’re at it, ensure that you don’t overprice them since that would ultimately drive them towards your competitors.
Before we get into it, you should note that drop shipping only works if you have reliable vendors. Suppose by any chance you run out of A-grade inventory or shelf space. In that case, drop-shipping offers a low-cost means to fulfill customer demands without actually having the stock in hand.
Typically, your vendor owns, stores and ships the products. While you, the retailer, set the selling price and make sales. When you get orders from your customers, you forward the orders to your vendor along with the wholesale payment for the products, keeping the remainder as profit. Your vendor then ships the products to the customer as though they came from you.
However, as we stated earlier, this model has a few drawbacks. If your vendor fails to fulfill the order, you get the blame. You should, therefore, only use it as a backup means whenever you don’t have your A-grade stock in hand.
The Bottom Line
Inventory management can be tricky, especially when leveraging your existing inventory to maximize profits. But, once you’ve figured out what your A-grade inventory is, you can utilize the strategies above to maximize profits and ensure that you never run out of your best-selling stock.