Cannabis industry reports

Customer wallet share: a deeper understanding of cannabis demographics

July 8, 2020

Executive summary

This report introduces the concept of customer wallet share — the amount a group of customers spends on a brand, product, or type of product — and demonstrates how it can be used to gain deeper insight into cannabis consumer preferences. It examines category preferences by generation and gender, looks at generational affinity for inhalable products, dives deeper into concentrates, and more. The report is based on tools available in the new Insights Demographics dashboards, which allows subscribers to view detailed market data for nearly any combination of products and people.

Introduction

Market share is a fairly self-explanatory concept. It is, as the name suggests, the share of the total market that a given product or brand or product category commands. But while looking at the overall performance of a product is important, it doesn’t tell the whole story. Even at the level of individual SKUs, market share just tells us broadly how something is selling. At Headset, we’re always interested in why, which is why we think demographic data is so important. Enter the concept of customer wallet share, which marries demographic data from our new Insights Demographic dashboards with the concept of market share. This gives us a whole slew of micro-markets, divided up by age, gender, product, and other parameters.

Looking at these micro-markets tells us a lot about how consumer groups behave. We start with a broader look at category sales, broken down both by age and gender. Concentrates and Flower are overrepresented among men, telling us that something about smoking and dabbing appeals to them. Edibles, conversely, are more popular among women. The same phenomenon occurs generationally, with Edibles becoming significantly more popular as we move from Gen Z to the Silent Generation, while the Concentrates customer wallet share drops precipitously. To really understand the generational and gender divide, we’ve included a somewhat cheeky chart comparing the male Gen Z cohort to the female Silent Generation cohort, possibly the two most different demographic groups. Despite our tasteful color palette, the differences really pop.

Speaking of inhalable product trends, we’ve also looked at what other products inhalables customers purchase. Perhaps not surprisingly, this tends to be other products from the same inhalable category they first came in for (i.e. if they bought a Vapor Pen, they buy more Vapor Pens). To drill down into this, we broke out the Concentrate customer base and compared their customer wallet share to overall market share. This chart really illustrates the familiar product affinity phenomenon, as Concentrates customers by nearly three times as many Concentrates as the average customer. Interestingly, despite that affinity being real, the aversion to Concentrates still increases generationally, with Silent Generation Concentrate customers (yes, they exist) buying the least amount of Concentrate products of any generation.

While the Insights Demographics dashboards offers the ability to look at these affinities and associated products for nearly any customer base, be it one based on gender, generation, or just products purchased, we didn’t want this report to be hundreds of pages long. The data on Concentrates and inhalable products will be useful, we hope, for anyone operating in that area, but the main point is that this type of data now exists for the cannabis industry. And, with the rollout of Insights Demographics, so does a simple but powerful way to access it.

Methodology

Data for this report comes from real-time sales reporting by participating cannabis retailers via their point-of-sale systems, which are linked up with Headset’s business analytics software. Sales data are cross-referenced with our catalog of over 500,000 products to provide detailed information on market trends. Demographic information comes from loyalty programs at Headset retailers. This information includes birth-year and gender for many customers as well as a customer number (much like a loyalty card number when you shop at QFC or Safeway). 

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. For this report, the data are also self-reported by loyalty program participants. Thus, there is a slight margin of error to consider.

What is a customer wallet?

In this report, we are introducing a new term: customer wallet share. For our purposes at Headset, customer wallet share or wallet share is the portion of an individual consumer’s or a group of consumers’ total purchases devoted to a particular product, or type of product (category, segment, brand, package size, etc.). This is in contrast to market share, which is the percentage of total revenue a particular brand, product, or type of product captures. Customer wallet share information is sourced from Headset’s new Insights Demographics dashboard.

Customer wallets are also interesting in that they’re much more diverse than aggregate market shares. More simply put, while there are plenty of people who strongly prefer Flower, no one comes in and buys only Flower. The more granular of a customer base you isolate in the data, the more diverse their buying patterns.

Early adopters and old schoolers

This chart, pulled straight from Insights Demographics, shows us how analyzing smaller customer groups can really offer additional insight. Breaking category wallet share out into separate generations corroborates a lot of what we might describe as “soft” trends — the type of speculative stuff you’re likely to hear around the proverbial water cooler. For example, all the kids are actually vaping. The Vapor Pen wallet share for Gen Z is 27.1%, a full seven points more than even the notoriously tech-friendly, early adopting Millennials.

Flower, the most low-tech form of cannabis consumption, and perhaps the most iconic as well, is popular with Baby Boomers. They are, after all, the generation that made it iconic. Here again, however, breaking out the different generations tells a more interesting story, as the preference for Flower doesn’t extend neatly into the Silent Generation. At 43.8%, they smoke nearly as little as Gen Z. Instead, they prefer Edibles, presumably because they don’t require you to inhale anything to feel their effects. Indeed, Tinctures & Sublinguals, Topicals, and Capsules — all very wellness-oriented, non-inhalable products — are far and away more popular with the Silent Generation, clocking in at 8.7%, 4.6%, and 2.4% wallet shares, respectively. That’s more than double the wallet share of the next oldest generation, Baby Boomers, for the same categories.


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