This report examines the ways in which pay periods and major expenses like rent affect consumer purchasing habits in the cannabis industry. It looks at growth during these weeks versus regular weeks, changes in total items purchased and overall spending, and demographic differences in “rent week” habits. Read it to better understand where cannabis fits into the modern consumer’s financial planning, and how to capitalize on this crucial time of month.
That cannabis sales are seasonal is no secret. However, if you look deeper into the “when” of purchasing pot, a more nuanced picture emerges. Our data have shown that days of the week and even times of day make a difference in what people will spend and what they buy. This report asks an even more specific question: How does the end of the month affect sales? In other retail sectors, the week in which people pay rent and themselves get paid definitely plays a role in how people spend, so we wanted to see if the same is true for the cannabis industry.
Turns out, it definitely does affect sales, and that effect is a noticeably positive one. Rather than tightening their purse strings, consumers seem to be more willing to shell out at the end of the month. In 2019, growth during rent week — classified as any week containing the last day of the month — almost always increased over the previous week. Consumers also bought more items per visit, and had higher basket totals overall. This was driven, to some extent, by discounts, but not as markedly as a big holiday like 4/20 or Christmas. The discounts given are not enough, for example, to meaningfully shift Average Item Price (AIP). Speaking of 4/20, it should be noted that this report does not include the week of 4/20 or the week after, as the data is too skewed by the holiday to be relevant. It also doesn’t include data from Nevada, outside of one state-by-state chart, as Nevada’s market is very tourism driven, and data from there don’t have much to tell us about regular consumer spending habits.
Interestingly enough, what people buy doesn’t change much. Categories, usually one of the most illuminating ways to look at our sales data, don’t change much during rent week. And the demographics of rent week aren’t too distinct, besides the fact that Generation Z isn’t really affected by the phenomenon. It could be that the gig economy doesn’t really have one fixed payday, per se, or perhaps that cannabis is a more normal part of their life than for older folks, and thus not a payday luxury item.
Overall, the rent week phenomenon is very worth paying attention to, as consumers seem to be significantly more willing to spend money on cannabis. For manufacturers, this could mean doing vendor days in the days leading up to payday, or running ads around the change in months. For retailers, this could be a good time to push products that haven’t been moving quickly enough, or try to grow interest in some new vendors. And for both, it’s a great time to communicate effectively with each other, as rent week is an especially bad time for an out-of-stock event.
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. The data included are for all of 2019 (excepting the week of and after 4/20), and span Colorado, Washington, and California, except where otherwise noted. Those data are cross-referenced with our catalog of over 400,000 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.
The year in weeks
Plotting 2019 sales by week reveals regular spikes during — you guessed it — rent week. Nearly without fail, sales peak at the end of the month and then drop to baseline or even below baseline levels. Indeed, we found that growth is often negative in weeks besides rent week, meaning that a given months sales numbers are essentially “carried” by rent weeks. This should be some comfort to store owners who stress out about slow sales. If numbers are low during the first, second, and third weeks of the month, that’s nothing to stress out over. Faltering sales in the final week? That’s something to worry about.
Rent week is good for growth
Drilling further down into how rent week affects growth, we see significant differences in average growth across all states. California and Alberta don’t see negative growth during the other three weeks of the month, but Washington, Nevada, and Colorado definitely do. Washington has the worst average shrinkage, although this is offset by slightly higher rent week growth than the other states. California’s relative immunity to regular week shrinkage may be due to the fact that it’s still a relatively new market, and interest should be growing steadily for some time to come. The same is certainly true of Alberta.
Selling more things more often
What does the rent week sales increase look like day by day? It turns out that it’s driven more by increased sales volume than by increased transactions, although both play a role. The toppling sales increase of 5.8% is driven by a 6.3% increase in units sold and a 5% increase in total transactions. So it’s partly that more people are making purchases, but more so that people are buying more each trip. This suggests that the sales bonus is driven partly by people who don’t normally shop coming in and partly by people who do normally shop splurging. Both are treating themselves, probably in relation to payday, but for different reasons.
Fuller baskets, if not bigger ones
Looking at basket sizes, we see again that rent week has a more noticeable effect on the average number of items per basket than on the basket total. The total spend is increased from $36.86 to $37.15, a change of only $0.29, whereas the number of items per basket goes from 2.09 to 2.11, proportionally a much larger shift. While a price change that small might seem to belie the notion that rent week is a sales bonanza, it’s important to remember that there are more baskets overall during rent week, even if they aren’t massively more lucrative.
Do discounts do anything?
Some sales events are entirely discount driven, like 4/20, but rent week is not. AIP drops a mere $0.09, from $17.66 to $17.57, with discounts only increasing from an average of 10.3%to 10.8%. As we saw above, the total amount spent per transaction doesn’t increase much, which lines up with the trend of relatively stable prices. And while a half percentage point of discounting is not nothing, it’s a far cry from a coordinated promotional effort on the part of retailers. Rather, these numbers suggest that consumers do not need to be induced to spend more towards the end of the month. Excluding discounts, we can conclude that some other motivation is involved.
New month, same product mix
While the end of the month might signal an uptick in sales, it doesn’t really change what sells. Even aggregated over the course of the whole year, the differences in category sales during rent week are extremely slight. Edibles, Tinctures & Sublingual's, and Topicals see slightly lower sales. Both Topicals and Tinctures & Sublingual's are associated with older and wellness-aligned shoppers, so this could suggest that end of month shopping is more focused on recreational use, although Capsules — another wellness adjacent product — sell just fine. The one category that sees the biggest bump is Beverages, which definitely fits with the idea that end of month purchasing is more recreational.
How does age affect payday spending?
Most generations participate in the rent week festivities, with Baby Boomers and Gen Xers spending the most. The one generation that doesn’t really show up for rent week is Gen Z,who actually spend a bit below their average that week. This could be because cannabis is a much more normal part of their lives, not something worth splurging on or even getting excited about. Indeed, at least one survey confirms that Gen Z is far more comfortable with cannabis than any other generation. And while the idea that younger generations do more gig economy work, and are therefore less likely to have a regular payday, it isn’t exactly borne out by the data. While they might have grown up in a world of steady monthly paychecks and pensions, Boomers are actually more likely to be a part of the gig economy nowadays.
Sales growth is significantly higher during rent week and significantly lower during all other weeks, except in Alberta and California.
• The uptick in sales is driven mostly by volume, with a higher average number of transactions and a higher number of units sold.
• While overall sales are noticeably different between rent week and normal weeks, prices are not. They are higher on average, but only by a few cents.
• On the other side of the same coin, discounts don’t seem to be a major motivation for consumers during rent week.
• The same is true of basket size, meaning that people are coming in more and buying more things, not spending more. Price sensitivity applies as normal.
• Similarly, there is no real difference in what people buy. There is a possible trend away from buying wellness adjacent products at the end of the month, but the overall product mix is essentially the same as other weeks.
• Demographically, rent week affects all generations except Gen Z, which may have something to do with how normalized cannabis is for that generation.
Rent week will, for the time being, continue to be big. But it will do so likely without much concerted effort on the part of cannabis businesses, besides making sure they’ve got enough of the right products in stock. To wit, it appears to be a good time to hype beverages, which fits with the narrative of people having more disposable income after all their bills have been paid.
Either way, we think the rent week effect will continue independently of any discounts, as they don’t seem to make much of a difference. It appears to be more driven by the way we’ve structured our pay schedules and rent collection than a race to cash in on promotions. That said, because this phenomenon is driven by increased volume, watching stock levels towards the end of the month will be an important part of successful cannabis retailing going forward.
The only thing that could change this dynamic is if Gen Z’s apparent immunity to end of month purchasing fever proves to be an enduring one. If cannabis is indeed so commonplace to members of Gen Z that they treat it like a household staple, not an end-of-the-month luxury, rent week could mean a lot less going forward. But even if that’s the case, it’s not necessarily bad news. Given how enthusiastic Gen Z is about cannabis, it would likely mean more sales overall, just spread over the entire month.
Headset is a consumer data analytics platform that provides market intelligence for the cannabis industry. Our extensive Market Reports deep-dive into specific categories and aspects of the industry to help businesses better monitor the market 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 cannabis industry as the data becomes available. Headset offers three distinct products that help retailers, dispensaries, brands, product manufacturers, distributors, and investors move ahead in the industry