MJBizMag July 2021 - 72

BestPracticesInRetail | Solomon Israel
Calyx + Trichomes, a licensed retailer in
Kingston, Ontario, relies on a high-volume
strategy to make up for limited margins
in a competitive market. Courtesy Photo
Getting Prices Right
W
hether they're shopping in
a newly legal market and
comparing prices against
illicit-market marijuana or weighing
prices between a variety of regulated
stores in a more mature market,
cannabis consumers can be highly
sensitive to pricing.
Retailers don't always have much
leeway to set their own prices, which
might be heavily influenced by supply
and demand as well as other external
factors. Even so, using a variety of
overlapping price strategies can help
a marijuana store win customers by
appealing to their wallets
while keeping the balance
sheet in the black.
Cost Approach
and Market Approach
One common method for
pricing products involves
finding a balance between
the " cost approach " to
pricing and the " market
72 MJBizMagazine | July 2021
Covering expenses is priority No. 1 when setting prices, retail veterans say
approach, " explained Daniel Sabet, an
accounting and finance manager with
Los Angeles-based cannabis industry
accounting firm GreenGrowth CPAs.
Starting with the cost approach,
a retailer tallies up the non-fixed
costs of obtaining and selling a given
product-taking into consideration
things such as wholesale prices and
transport costs-then marks up the
product to establish a profit.
As a starting point, Sabet suggested
a 100% retail markup.
" Let's say you're buying flower
Daniel Sabet
from a distributor or from some other
wholesaler, and that
product's cost to you is
$50. You'd want to sell
that in the store for at
least $100, " he said. " If
you can't price it at that
point, then it's just not a
good buy at all. "
After determining that
initial markup, Sabet
said, retailers can move
For many marijuana shoppers,
pricing is the most important aspect
of product selection and customer
satisfaction. Price environments vary
by market, and there's no single
" right " way to price marijuana.
However, successful dispensary
operators and industry experts
suggest:
* First ensuring that your prices
cover costs and provide profit, then
comparing them to competitors'
prices to discover opportunities for
higher margins.
* Considering the illicit market in any
price analysis.
* Understanding that cannabis
shoppers are price savvy and
will quickly discover and take
advantage of price differentials.
* Seeking out supply deals that
can unlock competitive pricing
opportunities.
* Using tiered pricing to extract value
from different types of shoppers.

MJBizMag July 2021

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