Location, Location, Location: The Effects of Geographic Location On A Store’s Sales

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January 17, 2020
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Introduction

This report is a deep dive into the effects of geographic location on a store’s sales. To get an idea of how tastes and preferences change as you move from the city out to the country, we broke stores down into urban, suburban, and rural areas. 

We used a mix of subjective and objective criteria to delineate between the three categories, generally classifying areas as suburban that were directly next to large urban centers regardless of the overall population of those areas. Thus, a store in Renton, which abuts Seattle, would be suburban and one in Spokane would be urban, even though Renton’s population in 2016 was over 100,000, nearly half that of Spokane’s 216,000.

After sorting out the state’s cities that had reported active sales in 2016 and 2017, we dove deeper into the ways in which the zones differed, looking at everything from average item price to the popularity of edibles. Turns out, city slickers have the biggest appetite for brownies.

Beyond these specific breakdowns, this report provides broader insight into the ways location affects growth and sales for cannabis retailers. We think it will be invaluable for retailers across the country, as well as the producers and processors that sell to them. Except in cases of regional bans or moratoria on cannabis businesses, consumers don’t travel far for their pot. Knowing the local market is essential.

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 November 2016 to 2017. That data is cross-referenced with our catalog of over 150,000 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.

Where Are the Stores? How Are They Doing?

Of the stores that met the criteria for this dataset, 40% were Urban stores, with Suburban and Rural stores coming in at 24% and 36%, respectively. Though they remain the largest grouping of stores, total sales for Urban stores dropped slightly from 2016 to 2017, with -11% growth. Rural stores also dropped 4%, while Suburban stores grew 6%.

The majority of Urban stores have seen negative growth with 59% seeing sales growth less than 0% since 2016. This is compared to 54% in Rural stores and 50% in Suburban stores. Suburban and Rural stores also see a larger portion of the stores with a growth rate over 50%.

BREAKDOWN OF STORE TYPES

Where Are the Stores? How Are They Doing? Continued…

The majority of Urban stores have seen negative growth with 59% seeing sales growth less than 0% since 2016. This is compared to 54% in Rural stores and 50% in Suburban stores. Suburban and Rural stores also see a larger portion of the stores with a growth rate over 50%.

GROWTH BY STORE TYPE

What Are They Selling?

Urban stores tend to offer a wider array of products than Rural and Suburban stores, at about 650 products per store in 2016 and nearly 900 in 2017. There were 500 products per store for Rural stores in 2016 and 675 in 2017, while Suburban stores had 600 products on shelves in 2016 and just shy of 800 in 2017. While Urban stores consistently carry the widest variety of products, it should be noted that all stores saw an significant increase—about 30% across the board—in product options over the year.

AVERAGE PRODUCTS OFFERED BY STORE TYPE AND YEAR

What Are They Selling? Continued…

The average number of segments offered varies only slightly with 39 for Rural stores, 40 for Suburban stores, and 41 for Urban stores. While the selection within categories might not be the same the further out one goes, most product categories are at least represented.

CATEGORY SALES BY STORE TYPE (RURAL)

What Are They Selling? Continued…

All stores see a similar breakdown of total sales by category. Rural stores see slightly less of their total sales coming from Edibles (5% vs 7%) and slightly more in Concentrates, while suburban stores see the least amount of their sales coming from Flower at only 57%. In Urban and Rural stores, Flower makes up 59% and 61% of sales, respectively

CATEGORY SALES BY STORE TYPE (SUBURBAN)

What Are They Selling? Continued…

CATEGORY SALES BY STORE TYPE (URBAN)

What Are They Selling? Continued…

While the average sales for each category is similar across store types, there is a lot of variation in the zones themselves. For example, flower sales, which make up about 60% of sales on average, are distributed differently among store types. Urban stores see 50% of their stores with sales of Flower at 60% or less and 7% of their stores having 70% or more, whereas Rural stores see 13% of their stores with Flower sales over 70% and only 36% of their stores with 60% of less of their sales in Flower. Country folks prefer a good old fashioned toke, apparently

% SALES FROM FLOWER BY STORE TYPE

What Are They Selling? Continued…

Top brands vary widely by store type. Phat Panda, Artizen Cannabis, and Northwest Cannabis Solutions are widely popular and are all in the top four regardless of region. However, Ceres, the 6th most purchased brand in Suburban and Rural stores is only the 152nd most purchased brand in Urban stores. This makes some sense, as Urban markets have a larger selection of products, making it a much more competitive market for brands.

What Are They Selling

How Much Are They Selling it For?

The average item price varies quite a bit by city, but not so much across the zones. The top 5 cities in Washington State—Seattle, Spokane, Tacoma, Vancouver, and Bellingham—boasted a large range of Average Item Prices (AIP). Spokane is the most expensive at $16.74 while Vancouver is the cheapest at $13.14.

AVERAGE ITEM PRICE BY CITY

How Much Are They Selling it For? Continued…

However, the spread was much smaller when aggregated into Urban, Suburban, and Rural zones. AIPs are $14.69 in Rural stores, $14.82 in Suburban stores, and $14.46 in Urban stores. However, that’s only reflected in the overall average item price. Broken down into categories, prices vary quite a bit across the three zones, as evidenced by the chart below

AVERAGE ITEM PRICE BY STORE TYPE AND CATEGORY

A Breakdown of Urban Stores

The graph below looks at the AIP distribution among Urban stores in cities with multiple stores. The Spokane market has the widest range of AIPs among stores, with prices ranging from $11-22, while the Tacoma market stays between $13 and $16. Vancouver is similarly clustered, with store AIPs between $12-15. It is also interesting to note that stores with positive growth all fall in the center range of AIP. In fact, stores that offer higher priced items saw the most negative year over year growth, evidence of consumer price sensitivity.

URBAN STORES BY SALES GROWTH AND AIP

Who’s the Hungriest?

One category that really jumps out of the data is Edibles. The distribution of stores by % of total sales from edibles is very different across the three zones, with Edibles being much more popular in urban areas. Over 25% of Urban stores see more than 8% of their sales in Edibles, while only 15% of Suburban and Rural stores can say the same. Suburban stores still sell a fair amount, with 90% of those stores having at least 4% of their sales in Edibles, but only 71% of Rural stores sell more than 4%

EDIBLES AS A % OF TOTAL SALES

Conclusion

The data here show that consumers do have distinct preferences based on their geographic region. While Suburban consumers are unsurprisingly more similar to Urban ones, real differences emerge when you look at Rural stores. Rural consumers seem to be less interested in trying new or alternative consumption methods, as evidenced by their strong preference for traditional flower, lack of affinity for edibles, and an overall lower number of products in stores. The wide differences in category specific AIP from Rural to Urban for the Concentrate and Topical categories, with Rural prices much lower than Urban, speaks to this as well. Thus, anyone looking to introduce something a little more offbeat would be wise to visit their accounts in the city first. However, Rural stores also have more potential to grow, and are indeed the only stores currently doing so. This could indicate that sales in Urban and Suburban areas are approaching or have even arrived at a plateau, and that new products actually have a better chance at taking hold in Rural stores. It will be interesting to see if this growth trend continues along the same geographic lines into 2018!

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 and other states as the data becomes available.

About Headset

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