Be proactive by considering these three tips.
The cannabis industry is currently in a land-and-expand motion, with a projected compound annual growth rate of 32% between 2021 and 2028. Even though sales have fallen lately, the future is still bright. This means many things for cannabis retailers.
Topping the list will be commercial real estate decisions. It’s become essential to strategically reevaluate your real estate expansion goals. As new markets continue to crop up and consumer interest expands, an increase in competition to secure desirable locations is only natural. If you’re not proactive in your cannabis real estate strategies, you’ll quickly find your business at a disadvantage.
Data and Consumer Purchase Behaviors
Though this should go without saying, the key to any cannabis real estate strategy will be data involving the real estate market and consumer purchase behaviors. Both will be crucial in evaluating the potential of any storefront. By analyzing this data, cannabis retailers can better understand potential foot traffic, market trends, and adjacent retailers where their ideal customers shop.
All this data can be aggregated to help inform decisions about where to open new stores, how to design these stores, and which targeted marketing efforts to deploy to ultimately support cannabis sales. Marketing, in particular, can be a dicey proposition, as it can be a balancing act to meet local, state, and federal laws and regulations around advertising while still driving potential customers through your doors.
This data will also be essential in determining your retail sales capabilities at a given retail site, especially considering that seasonal trends influence sales in different geographic and socioeconomic areas. If you capture the right information, you can make data-driven decisions about what products to stock at which locations at what time of year. It’s important to monitor category performance to continually improve individual store performance—which brings us back to the real estate decisions you need to make.
3 Tips to Ignite Your Retail Cannabis Strategy
Poor real estate decisions are often the biggest mistakes retail cannabis businesses make as they enter the industry. They can even impact those currently operating dispensaries. These mistakes don’t just entail choosing the wrong locations (though this, too, can be problematic). Several factors will affect your decision about where to open your first, fourth, or 20th storefront.
Keep the following in mind as you develop your cannabis real estate strategies for this year and beyond:
1. Implement a cluster retail model. Analyzing real estate and consumer data trends can help identify new markets for growth opportunities. Take something like a multiuse development. It offers a great way to orient a storefront with adjacent brands. Perhaps a certain development could position your dispensary near makers, creators, and artists. Or maybe a better option would be to open your doors next to a health and wellness spa. Your target market’s differentiators will dictate the optimal cluster approach for you. Just remember that some zoning and city regulations could prohibit you from opening a storefront within 1,000 feet of schools, public parks, playgrounds, transit centers, or even other retail cannabis dispensaries.
2. Become a neighborhood hub. More and more retailers are working to build their local community—and for good reason. Consumers want connections to brands, especially those they shop at locally. Your retail cannabis shop is uniquely positioned to craft a retail experience that caters to your clientele. Standing out from the crowd is a good thing. Cannabis retailers are creatively branding themselves and stitching themselves into the fabric of their neighborhoods.
3. Power your cannabis real estate strategy with software. After payroll, real estate is often the second largest expense for many organizations. The same is true for cannabis retailers. However, real estate can also be a revenue center. So, ensuring every storefront you open is profitable is critical. Lease management software enables your real estate and finance teams to track rent payments, rent escalations, and additional expenses to ensure your monthly storefront spend has a strong ROI.
Don’t take the forthcoming retail cannabis market for granted. You’re still operating in a regulated industry with varying application procedures and conditional use permits per market. From marketing to real estate, all your strategies will be informed by this fact.
However, technology can help navigate your proposed sites for cannabis sales.
Start capturing the data if you haven’t already, get the right lease management system in place to ensure your team never misses opportunities, and think more strategically about where you open your next storefront. Take a page from Starbucks and McDonald’s, two companies that are more real estate companies than peddlers of coffee and burgers. They know where to open their next storefronts, and it all comes down to consumer and real estate market data.