Building the Perfect Retail Tech Stack

July 28, 2023 · MG Magazine

In the increasingly competitive retail cannabis market, constructing the right tech stack for your dispensary is mission-critical. Your dispensary’s technical infrastructure, along with data management and use, can create a significant competitive advantage when carefully selected and strategically integrated. On the other hand, a haphazardly assembled tech stack without proper attention paid to integrating multiple systems can severely hamper dispensary operations, stemming the flow of revenue and needlessly limiting opportunities for growth.

Unfortunately, there’s no such thing as “the best” dispensary tech stack. Identifying the optimal technology requires mapping out your customer life cycle. Start with the buyer’s journey, whether it begins with them entering your store or visiting your website. Put yourself in the shoes of your customer and consider the experience you’d like to have. You would want easy-to-make purchases, efficient order fulfillment, and minimal time spent waiting in line. You’d expect a stable, fast-running website that works hand in hand with the store’s inventory management. You’d appreciate a loyalty program that offers significant rewards without demanding much from you in return, other than continuing to frequent the dispensary.

The goal in assembling your tech stack isn’t to select the best individual tools; it’s to create the best possible system. Not all dispensaries are created equal, and the technical infrastructure that makes sense for an extensive, multi-store operation likely isn’t feasible for a smaller shop or startup business. Grounding your choice of tech tools in the perspective of your customers, while also taking into account the needs and budget of your business, will help guide you as you compare and contrast the available software, platforms, and services we’ve listed for your consideration.

Point-of-sale systems

An effective point-of-sale (POS) system is the cornerstone of a well-operated dispensary. The POS system is used to track cannabis products from arrival at your store or warehouse to the moment of purchase by your customers. A good POS offers detailed inventory management, enabling efficient order fulfillment and assuring items are removed from available inventory properly. Your POS should work well with state-mandated compliance-tracking systems like BioTrack or Metrc. POS systems should work seamlessly with your customer relationship management (CRM) and loyalty program software, allowing you to easily set up “BOGO” offers, senior discounts, markdowns for returning customers, incentives for new customers, and other promotional campaigns.

If you have ambitions beyond running a single dispensary, your POS system should be scalable to support multi-store inventory management and flexible enough to grow with your business. The POS should support management of more than one store at a time and offer easy compliance with varying regulations and laws across multiple markets.

If you haven’t already optimized your dispensary’s POS system, upgrading it could result in increased sales, improved insight into sales and inventory data, and a better experience for customers, both in-store and online. Customers who know they can rely on your dispensary to fill their orders quickly and accurately are more likely to return. They’re also more likely to recommend your dispensary to their friends, providing valuable word-of-mouth marketing.

Point of sale software providers:

Cashless payment options

There was a time when many dispensaries had little choice but to operate as cash-only businesses. Thankfully, those days are fading. Dispensaries offering their customers only cash as a payment option are needlessly cutting into their profits, putting their employees at risk, and inconveniencing their customers at the same time.

According to data from cannabis industry vendors like Treez, dispensaries that embrace cashless payment options see increased revenues and improved customer retention. Convenience is a major factor for consumers of any product, and the data shows many consumers are willing to drive farther to shop at dispensaries that offer cashless purchase options.

Automated clearing house

With automated clearing house (ACH) transactions, customers link their bank account to their customer profile, allowing them to quickly transfer funds from their bank account to make a purchase. Typically, consumers can use ACH for in-store purchases, online orders, and to pre-order for pickup at stores. ACH generally is favored by customers who make larger purchases or who tend to return to the same store repeatedly. It can be a bit cumbersome for walk-in customers, so dispensaries should offer other cashless options, as well.

Cashless ATM

Cashless ATMs are a payment workaround solution in which customers withdraw funds from their accounts using their debit cards. Late last year, several major ATM transaction providers shut down cashless ATM transaction processors, and thousands of dispensaries were left scrambling. Cashless ATMs remain in use at some dispensaries, but most are opting for other, more stable methods of payment.

PIN debit

Another payment workaround, PIN debit systems allowed customers to use their debit cards and provide their PIN number to authorize transactions. Until late July, PIN debit was a popular option among dispensary operators and customers alike because it was easy to use, felt familiar, and did away with most of the risk of fraud and chargebacks. On July 26, Mastercard notified payment processors and banks they must cease processing payments for cannabis businesses immediately. “The federal government considers cannabis sales illegal, so these purchases are not allowed on our systems,” the card network told The Washington Post.

Credit cards

For many years, there simply were no viable credit card solutions for cannabis dispensaries to explore. With new payment providers entering the cannabis space and established processors starting to offer compliant solutions, the risk to a cannabis company’s overall transaction flow is becoming less of a concern.

Rather than trying to skirt the rules set by credit card networks, some payment solutions have begun processing credit card transactions through “closed loop” systems. In a closed loop system, processors accept credit card payments in exchange for tokens or credits, which consumers then use to pay the merchant.

Closed-loop systems are familiar to consumers who shop with major mainstream brands like Starbucks, whose use of closed-loop debit cards has contributed greatly to the company’s impressive banking of cash over the years.

According to Aeropay, “Millennial and Gen Z cannabis consumers account for 63 percent of all tracked sales” in the United States, while a Tallwave survey showed consumers aged 25-35 are the most likely to have made a digital payment, with 80 percent of respondents reporting they have made such purchases. An expressed preference for digital payments over cash transactions among younger consumers is nothing new, either: a 2017 survey by LivePerson found 61.8 percent of global consumers aged 18-34 are so comfortable making purchases digitally that they would “choose to leave their wallet at home instead of their phone.”Taken together, these statistics suggest any dispensary not offering a digital purchasing option of some kind is failing to meet the expectations and preferences of an important slice of its customer base.

Cashless payment services:

Ecommerce solutions

While it’s certainly possible to operate a dispensary without an online presence, it would be foolish to do so. Consumers of nearly every product expect to be able to order the goods they seek online, if not complete the entire transaction.

Showcasing your dispensary catalog online provides consumers with a convenient means to browse inventory, as well as an ideal environment for promoting special offers, introducing potential members to your customer loyalty program, and collecting valuable data from those who visit your website. Dispensaries with online stores have greater geographic reach, higher average order values, and enhanced brand loyalty compared to those offering only in-store sales.

Some key elements to consider when choosing an ecommerce solution include the question of data ownership, website performance speed, flexibility/customization, and ease of integration with other elements of your tech stack.

Dedicated vs. marketplace ecommerce solutions

When choosing an ecommerce approach, cannabis operators essentially have two options: a self-owned and dedicated system, or a “marketplace” solution that’s akin to Amazon in hosting numerous third-party sellers under a large umbrella brand.

While a marketplace solution comes with certain advantages, including exposure to an existing traffic base and the visibility that comes along with being part of a platform which has top placement in search engine responses for commonly used cannabis search terms, it can be difficult to make your brand stand out in such a venue. The primary umbrella brand has every incentive to increase consumer awareness of and loyalty to its own marketplace rather than drive consumers toward the individual vendor brands.

Operating in a marketplace also generally means the company that operates the platform owns the data collected from consumers who use it. The amount of this data shared with individual vendors and dispensaries varies greatly from one marketplace to the next, and without greater transparency than the marketplaces generally offer, it’s difficult to say what sort of potentially useful information is being omitted.

Consumer data isn’t merely a set of statistics, demographics, and contact information; it’s the lifeblood of dispensary’s marketing efforts. Collecting data from customers enables you to better target your advertising and more effectively tailor your marketing materials. Without this data, it’s far more difficult to establish a fruitful relationship with customers and craft a marketing strategy that keeps them coming back for more.

A dedicated ecommerce solution allows you to own all your customer data, enabling stronger customer relationship management and giving you full control over your online presence and branding. Instead of being one face among many in a large marketplace, your brands will be the focus of users’ attention.

Dedicated ecommerce solutions also benefit your bottom line. According to a white paper published earlier this year by Treez, cannabis industry data shows consumers who shop on a dispensary’s dedicated website tend to make larger and more frequent purchases than those who buy through other digital means, including large marketplaces.

Ecommerce software for cannabis retail:

Data and retail analytics

Every interaction you have with a customer, from the moment they first visit your website or physical store to the pickup of their order, offers an opportunity to collect important, useful data. But collecting the information is just the beginning. For that data to have real value, it must be contextualized and rendered in a way that enables managers to identify patterns and spot correlations between data points.

Enter analytics, a term tossed around in contexts ranging from professional sports to microeconomics. For a dispensary, analytics software demystifies the raw data your systems collect and presents it in an easily understood way using familiar visual representations like charts and graphs. When applied correctly, analytics help take much of the guesswork out of dispensary operations, enabling owners and managers to more effectively track the results of promotional campaigns and discount offers and use those results to inform future decisions.

In addition to carefully considering your options in analytic tools, you also need to consider which type of data you want to collect. Broadly speaking, there are four types of consumer data collected by digital marketers: “third-party,” “first-party,” “second-party,” and “zero-party” data. Each variety has utility, and understanding the difference between them is important when deciding which to prioritize for your business.

Third-party data is the easiest to come by, as it can be purchased. But it’s also the variety that provides the least information about an individual customer. Third-party data generally includes publicly-available information, like age and/or gender, employment types, and general audience behavior.

A good example of first-party data is the information you collect from customers who visit your website. This information can include a great deal about their activity on the site, including what they clicked, searched for, signed up for, purchased, or even merely viewed. First-party data can tell you significantly more about the individual customer than other types of data.

Second-party data essentially is first-party data you don’t collect directly. Rather, the data is purchased from another company that has sourced it on your behalf. If a store sells its customer loyalty data to a credit card company, for example, then the credit card company has purchased second-party data.

A data type that has become highly valued by digital marketers in recent years, zero-party data, requires customers to offer specific information voluntarily and directly, helping the platform, store, or merchant understand the customer in greater depth and cater to their specific preferences. A simple example of zero-party data is when a customer answers a post-purchase question, like “How did you first hear about our dispensary?” or “Do any of these related product categories interest you?”

Zero-party data comes directly from the individual customer, so it has the potential to tell you the most about that individual. Zero-party data is also harder to collect than first-party, which can be collected passively by tracking user behavior. But when it comes to data collection, the question isn’t which type you should collect, but how you use data from each category to better understand your customer base and deliver them an optimal experience.

Data and analytics software:

Loyalty programs and customer engagement

There’s a reason nearly every business you set foot in these days offers a loyalty program for its customers: Loyalty programs work, but strategically sound loyalty programs work much better.

Cannabis industry data indicate the average loyalty program member spends 15-35 percent more per purchase than non-members. However, 40 percent of new loyalty program members make only an initial purchase, then never return to the store.

A good loyalty program is nimble enough to enable quick response to your customers’ tastes and offer a variety of incentives, allowing you to appeal to consumers with varied priorities and preferences. A simple points-based system that offers discounts in proportion to purchases might be all some customers are looking for, but your loyalty program should facilitate customization, rather than commit you to a one-size-fits-all approach.

Whatever form your loyalty program takes, make signing up for the program as simple as possible. Don’t require your customers to provide a lot of information to join, particularly if you anticipate people signing up while at the register. A lengthy signup process won’t just deter new members from joining; it will also slow things down for the next guest in line.

Another crucial point to consider when selecting a loyalty program is compatibility with your existing CRM and POS systems, along with other elements of your tech stack. Seamless integration goes a long way in enabling smooth operation of your dispensary. Clunky, inefficient, or buggy integration will have the opposite effect.

Loyalty program software and platforms:

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