Holidays on Hiatus
Within the US, quarantine restrictions continue to curtail holiday celebrations. The latest Nielsen data shows that St. Patrick’s Day, Easter and Passover have all seen sales sour during traditionally sweet sales cycles. In March, social distancing brought a buzzkill to St. Patrick’s Day with the closing of many bars and restaurants across the country. As a result, the highest grossing day of the year for US bars and restaurants, which in 2019 saw a triple digit rise in sales compared to the average week, essentially went dark. Adding fuel to the fire, Nielsen data shows that Easter candy sales also took a hit. For the three weeks leading up to Easter this year, compared to the same time frame last year, sales of chocolate was down (-27%) as were sales figures for holiday confections which was also down (-36%).
With April 20th (4/20), the biggest and most lucrative cannabis holiday just around the corner, how will the cannabis industry fair?
As the most popular and lucrative holiday in the cannabis industry approaches this year, retailers across the country are surely wondering how to best prepare their inventories and staff for 4/20. In light of nationwide social and business restrictions brought on by the COVID-19 outbreak, dispensaries must take every safety and business precaution to ensure a successful 4/20 for customers, staff and surrounding communities. Luckily, cannabis retailers are essential businesses in several states and will have the opportunity to serve eager consumers this year at a safe distance.
Breaking down 4/20 sales performance by state
Retail data collected from Headset markets in California, Colorado, Nevada and Washington on 4/20 last year show that sales increased by a staggering 112% compared to average sales generated in the prior month. According to these figures, every state experienced a sizable uptick in sales. California had the largest of 122%, followed by Washington with 117%. Colorado had the smallest increase of 97%, and Nevada was in the middle of it all with a 101.1% sales increase.
In order to stay competitive and compliant with local health regulations this year, dispensaries in every state must be prepared to transition to a digital or contactless 4/20 retail model to continue this upward sales momentum. Delivery for recreational and medical orders are legal in California and Nevada, while only medical delivery is allowed in Colorado for now. Washington unfortunately prohibits all cannabis deliveries, meaning that dispensaries should have a seamless order ahead or curbside pickup strategy in place ahead of 4/20. Dispensaries should consider offering exclusive promotions on 4/20 online or phone orders this year to boost sales while encouraging social distancing. Retailers that are encouraging customers to shop in person on 4/20 should have logistics such as store capacities and queueing systems ironed out to ensure a safe and efficient shopping experience for customers.
The products that matter
When it comes to the highest performing products on 4/20, flower reigns supreme, generating $15 million dollars and a 122% increase in sales across all Headset markets. In terms of growth, beverages emerged as the dark horse among retail products and experienced a 145% increase in sales compared to the prior month. Among the cannabis beverage segment, carbonated beverages were the most popular among consumers and saw a sales increase of 170% during the holiday.
With these sales figures in mind, cannabis dispensaries can design their store and website layouts to cater to proven high performing products. Retailers can display products like flower, vapes and edibles in easily accessible areas of their stores or even offer pre-packaged bundles of popular products so customers can be in and out of the store as quickly as possible. Since more consumers may be spending 4/20 alone this year, retailers can also promote cannabis products that can still be enjoyed solo. Nielsen’s cannabis consumer research finds that the most popular products to consume alone include topicals, concentrates, tinctures and beverages. Dispensaries taking online orders can also redesign their landing pages to feature highly demanded 4/20 products and offer lower-performing products as discounted add-on items at checkout.
How Much Should Retailers Discount?
Customers expect attractive discounts on 4/20, and retailers should be prepared to offer fair promotions without hurting their bottom lines. Last year, the category that experienced the largest discount amount across all Headset markets was concentrates, which were discounted at around 19% Aside from concentrates, each category had a discount rate between 14% to 16%. Additionally, the category with the largest increase in discount rate was capsules, and the lowest difference was seen in concentrates. This reflects that concentrates are usually discounted rather heavily compared to other categories around the year.
Since the industry may not experience the same levels of foot traffic that they are used to this year due to social distancing rules, retailers should be prepared to offer these product discount rates on 4/20. Consumers are likely buying more products with less frequency during this quarantine period, so retailers may also benefit from offering tiered discounts depending on individual cart values. For example, dispensaries can offer customers a 10% discount on purchases of $50 or less, 15% off purchases of $100 and 20% off purchases over $200. Nielsen data also reports that 37% of cannabis customers have purchased legal products on behalf of friends and relatives in recent months. Retailers should be cognizant of these emerging consumer habits and encourage their customers to stock up not only for themselves but also for their friends and family.
Stepping away from the data, one thing is clear about 04/20/2020 - and that is the importance of responsible consumption. We don't mean to preach or come off bossy, but it's more important than ever, especially as we move into an election year, that consumers and businesses support social distancing throughout 4/20. We need to do this the right way to legitimize our industry while still honoring the plant. As always, we'll be here to report on the numbers and let you know how this year's major holiday unfolds. Till then, cheers and Happy 420 from the entire Headset team.