Industry Report: Data-driven holiday planning for cannabis retail

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October 14, 2020
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Introduction

We don't have to tell you that the holiday season is one of the busiest times of the year, and successful retailers plan for the season weeks, if not months, in advance. With the proper tools and reliable data, retailers can make more informed marketing decisions to boost revenue. But data must be compiled and analyzed to be useful and this can take a significant amount of time, especially considering everything else a cannabis retailer has to do to get ready for the holidays. Retailer Premium takes care of the analysis for you, serving as your very own analyst so you can continue to improve your marketing campaigns.

Executive Summary

This report uses retail data in effort to help you prepare for the holidays by examining last year’s sales and marketing performance from an example cannabis store called Emerald Valley. You'll be able to dig into what worked well for them and which strategies you can improve through data analytics. This analysis will be performed from the point of view of Emerald Valley’s Vancouver General Manager who is preparing for the holidays. The GM will use Retailer Premium to confirm what happened last year in terms of:

  • Weekly and daily sales patterns.
  • Category sales responses to the holiday season.
  • Discounts that were and were not successful.
  • Which referral sources were most effective at driving revenue, increasing basket size, and creating customers more likely to return.

Methodology

All data for this report comes from the Headset Retailer Demo account, which provides sales data for a hypothetical “Emerald Valley” retail chain with five stores across Washington and Colorado. While this data is not real, it is realistic and a valuable example of how this analysis can be used in practice.

Week over week revenue growth in 2019

WEEK OVER WEEK REVENUE GROWTH LAST YEAR

This graph looks specifically at WoW revenue which allows us to quickly identify which weeks or groups of weeks had high sales volume last year. For example, the week of 4/20 not only experienced the second-highest WoW growth, but also clearly brought in the most revenue. Later in the year however, we see that the week of November 25th, during Green Wednesday, Thanksgiving, and Black Friday, also had strong growth, with the following week bringing in even more total revenue. To examine this data more closely, all we have to do is change our date range and date granularity filters

Daily revenue growth in 2019

DAILY REVENUE GROWTH LAST HOLIDAY SEASON

Next, we examine which days of the week brought in the most and least amount of revenues. You can see a pattern during Thanksgiving week: a big sales day on Green Wednesday, miniscule sales on Thanksgiving, ending with massive sales on Black Friday (11/29).

The graph also shows strong sales during the last weekend before Christmas, on Saturday 12/21 and Sunday 12/22. Christmas Eve (12/24) was the third biggest day of sales across this entire time period. Only Green Wednesday and Black Friday experienced greater sales. From this, our GM knows exactly when to expect increased foot traffic and sales and thus when to ensure not only that products are properly stocked, but also that enough staff is scheduled to assist customers in timely manner.

Sales lift on Black Friday

SALES LIFTS BY CATEGORY BLACK FRIDAY 2019

The above analysis of 11/29/2019 shows us what product categories performed well on Black Friday. We can see that while Concentrates and Flower had the largest raw increase in total daily sales, Beverages, Tinctures, and Non-Cannabis products had the largest relative increase. That is, Black Friday was most different than the previous four Fridays for these categories, with Beverages experiencing a 66.9% increase.

Our hypothetical GM of Emerald Valley, Vancouver can see that Flower had the weakest relative increase among all categories, despite being the best-selling product category in the store. Considering its popularity, our GM might consider working to improve its performance on Black Friday this year through marketing, promotion, or other strategies.

Flower sales on Black Friday

FLOWER SALES LIFTS BY BRAND BLACK FRIDAY 2019

To continue our analysis of Black Friday 2019 sales, our GM next looks at the Flower brands that sold best last year. Comparing the sales on Black Friday to the average daily sales of the previous four Fridays, one brand stands out as the clear winner: House of Green. House of Green had an almost 1600% increase in sales on Black Friday last year, far surpassing the growth of any of the other top brands. However, it should be noted that House of Green’s average daily sales for the previous four Fridays was far lower than the next top selling brands. We next take a look at what caused House of Green’s big increase.

Discounts by day

HOUSE OF GREEN FLOWER VS STORE AVERAGE DAILY DISCOUNT

In the days leading to and throughout the weekend of Black Friday, House of Green’s discount was consistently higher than the store average. The brand maintained that advantage even on Black Friday when the store’s average discount nearly broke 35%, still 13.8% lower than House of Green’s 48.8% discount! This shows that the brand sold so well because of House of Green’s promotion strategy for Black Friday. Now our GM knows that a similar strategy is extremely successful when applied to certain brands and can attempt to emulate a similar promotion this year. Next, let’s look at who the customers are.

Customer analysis of Black Friday

FLOWER BRAND SALES SPLIT BY GENDER BLACK FRIDAY 2019 AND FLOWER BRAND SALES SPLIT BY AGE GROUP BLACK FRIDAY 2019

We can see that on Black Friday last year, the demographics varied considerably between each of the store’s top-selling brands. House of Green had a moderate over-index of females, meaning House of Green had relatively more sales share from female customers than the store average across all brands. This tells us that even though less than half of House of Green’s sales were to females, this brand was slightly more popular with females than the average brand in the store. It also sold particularly well to those aged 36-45 years old, who made up 43% of their sales. This is quite different from Rainier Gardens, which sold mostly to females and had a strong over-index to the 46-55 year age group.

Referral sources on Black Friday

REFERRAL SOURCE SALES BY AGE GROUP BLACK FRIDAY 2019

Next, we look at the customers who responded to our various marketing channels by looking at demographics sales data cross referenced with referral codes. Here we can see that those aged between 36-45 years old, the same age group that contributed the most sales to House of Green last year, responded best to Facebook and Weed maps campaigns, and were not at all driven by Yelp. Perhaps this year our GM should look at improving the performance of our Yelp and Leafly campaigns with this demographic since we know they were big discount shoppers on Black Friday last year.

Which channel drives the biggest baskets?

TOTAL SALES AND AVERAGE BASKET BY REFERRAL SOURCE BLACK FRIDAY 2019

It is also critical to understand how marketing campaigns are performing in terms of total sales and average basket, as this gives you an indication of the ROI of the campaign. If a campaign is driving hundreds of new customers to your store, but they get a huge discount and only spend a few dollars each, that is not an effective campaign for the bottom line of your business.

Here, we see that Leafly referrals brought in the most in total revenue for the day while Drive-by sales had the highest average baskets. The “Drive-by” referral code refers to customers who used a discount advertised on a nearby billboard who are usually first-time customers to the store. For Black Friday this year, our GM should prioritize marketing strategies that will increase average basket size to further increase revenues on the busiest day of the season.

Customer retention rate by referral source

CUSTOMER RETENTION RATE BY REFERRAL SOURCE BLACK FRIDAY 2019

This graph displays the percentage of customers in each cohort that returned within a certain number of months after their first purchase. For example, the retention rate in month 1 is the percent of customers that returned to your store within the first month of their purchase, retention rate at month 2 is the percent returning within 2 months of their first purchase, and so on. This information identifies which referral sources are successful in attracting customers long-term.

While all the marketing channels performed fairly similarly, we can see that Yelp had slightly stronger retention performance through the first two months than other channels. In the 8-10 months after the purchase date, both Weed maps and Yelp were still showing higher rates of retention than other channels. This means we can feel comfortable investing slightly more in Yelp and Weed maps, knowing that they lead to greater sales in the long run.

Conclusion

While some level of uncertainty will always exist when planning future promotions, these analyses should arm the General Manager of Emerald Valley Vancouver with data to drive and support decisions in making the 2020 holiday season even more profitable than last year. For example, she may decide to use lightly-discounted and frequently-rotating promotions to attract holiday shoppers across the entirety of the season instead of concentrating margin-shrinking deals around Black Friday. Given what she’s learned about the sales lift in Flower, she may utilize a cross-category promotion to encourage customers to add more Flower to their baskets. This could be something like a 10% discount off an Eighth of their choice when they purchase a Beverage or other high-margin product. Now that our GM understands how we each referral source is performing, she knows to use all marketing channels (aside from Drive-by billboards in this case) to drive larger baskets and might even consider offering a discount like 15% off any basket over $60 to further encourage customers to purchase more in a single transaction.

Our GM can also use the Customer Analysis module to dig deeper into customer demographics data. With this tool, she can decipher which of her current Flower brands are most popular with the 36-45 age bracket and offer an enticing promotion to those brands in an effort to capture this deal-hungry demographic. She now also knows that her youngest customers responded best to Weed maps promotions last year and thus to promote Flower brands that are popular with such customer son that channel.

Holiday planning is strenuous for everyone, and planning without data makes the season all the more difficult for retailers. Retailer Premium provides an excellent suite of tools to better understand the performance of your business’s past promotions so that you can strategically plan better ones in the future. To learn more about how you can do more with your store’s data, sign up for a demo with us today.

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Please fill out this simple form to get access to the full report. Headset industry reports provide vital market insights to help you make truly informed decisions. Get perspective into the following areas:

Retailer Specifics
Brand Specifics
Category Data
Basket Trends and Analysis
Top Selling Products
Purchasing Patterns
Buying Cycles
Demographic Trends
Segment Analysis
Fastest Growing Segments
New Brands and Products
Sales Analysis
Sales by Weight
Product Profitability

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