Cannabis price matters: A look at average item price data

Executive Summary

While no store can ever sell a product for less than it paid at wholesale, there aren’t many rules or regulations governing retail prices beyond that. Thus, prices vary quite a bit between stores, which provides some very interesting data. Consumers are clearly shopping around.

This report looks at price variance data and compares it across segments and categories, giving us a good idea of what types of things perform best for promotions and specials, as well as what consumers might be willing to pay a premium for. We’ve also compared current year data with data from 2016, to give you an idea of how price variance has evolved over time. As might be suspected, given the market’s continued maturation, the percentage of items sold outside of the average price range (99-101% of average price), has increased from 2016 to 2017. Finally, we’ve pulled out snapshots of four individual products, to provide a more specific example of price variation.

This data should prove useful for those looking to understand how much consumers are willing to pay for various products in the cannabis market, and will be especially useful to retailers looking to craft precisely targeted promotions. However, it should also be interesting to anyone curious about what’s going on with the cannabis market, as it provides proof that, contrary to popular belief, potency numbers aren’t the only things consumers base their purchasing decisions on. Clearly, if price can vary so much across a single item, factors far beyond just simple “bang for your buck” are coming into play.

Methodology

Data for this report comes from real-time sales reporting by participating Washington State cannabis retailers via their point-of-sale systems, which are linked up with Headset’s business analytics software. This report is based on data collected in the state of Washington from June 2017 and June 2016. That data is cross-referenced with our catalog of over 50,000 products to provide detailed information on market trends.

Headset’s data is very reliable, as it comes digitally direct from our partner retailers. However, the potential does exist for misreporting in the instance of duplicates, incorrectly classified products, inaccurate entry of products into point-of-sale systems, or even simple human error at the point of purchase. Thus, there is a slight margin of error to consider.

Categories

Different categories have different amounts of price variance. The graph below shows Edibles, Capsules, and Beverages with just over 50% of the units sold inside a range of +/- 10% of the average price, while Concentrates, Flower, and Pre-Roll seem to have the least price variance with only about ¾ of their unit sales within +/- 10% of the average price. This could be because extracted oils and flower products are more popular, and are less likely to be offered as specials, whereas consumables like Edibles, Capsules, and Beverages might require more price breaks to get customers interested. Indeed, Edibles and Capsules each have 6% of their products sold at over 25% less than their average price.

Segment Data

Moving past the broader categories into the various sub-segments, more interesting trends emerge. Certain categories have different products with very different price variance. Capsules and Flower, for example.

Within Capsules, there is a big different between Indica and Hybrid, with the price of a Hybrid product varying far more than that of an Indica product. Suppositories, probably because there aren’t too many of them on the market, are all pretty close to the segment’s average price.

Segment Data Continued…

Flower generally has less price variance within a product, probably because of what a popular category it is and how familiar consumers are with it. This could also be because consumers have historically bought Flower products based on fixed metrics, like THC content and price-pergram. Popcorn variations of each type have the least price variance—they’re usually already quite cheap!—while sativa is the strain type with the most variance

Product Examples

We selected four popular products and created charts of their sales prices in the month of June 2017. On this chart, the blue box in the middle is the interquartile range, which means that 50% of the sales were for products in that range. With Moxey’s Mints, for example, the interquartile range was between $21 and $23. So if you’re buying Moxey’s Mints you are most likely to find them between $21 and $23. However, it’s not rare to find them to be sold between $17 and $26.

Blue Dream is a little different—it seems as though there is a floor for discounts. There are very few instances of Blue Dream products being sold for below $17. However, there is a lot of variance on the high end, which suggests that this is a product that is rarely on sale or special but is often marked up.

Phat Panda is unique as well. We see that the price is pretty tight around the $4-$4.50 mark but there are lots of examples of it being sold at well over $5 and even a few where it dips below $3. Even though, for a lower priced product, the variances are comparatively small in terms of dollars, they represent significant percentage changes. While these dollar amounts are small they represent nearly a 20% markup for the product.

Conclusions and Predictions

Clearly, price variance trends are shaped by some of the broader trends of the market, like the prevalence of flower products. However, this is a two-way street. Price variance trends can also tell us a lot about overall market trends, in that the products which see lots of sales at a deep discount might be products that are difficult to move on their own, or are great complementary products to drive up overall purchase totals.

It is interesting to note that price variance increased from 2016 to 2017. This seems to suggest that the market is maturing, as consumers would have initially had fewer cues to guide their purchasing decisions. It seems like producers and retailers have evolved their marketing techniques, and are able to sell certain products for higher prices, or have begun using discounts more regularly. In short, it seems that consumers are less in awe of the simple fact of being able to buy cannabis at a legal retail outlet, and are beginning to react more and more to traditional retail cues.

To harness this trend effectively, smart cannabusiness entrepreneurs will look at what categories and segments see the most below-average sales and consider those for promotions or specials. They will also note what items are selling for higher than average, as those items are likely good candidates for the metaphorical top shelf. In our next report, we break this data down further into geographical regions and even individual stores, offering you even more specific insight into the moving parts behind customer price sensitivity. Stay tuned!

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About Headset

Headset is market data and business intelligence for the cannabis industry. Our extensive Industry Report deep-dives into specific brands to help businesses better monitor the competitive landscape and perform exhaustive category analysis. Reports are generated via aggregate,real-time transaction data to get a unique and thorough analysis of what’s happening in the Washington market