When my company was founded in 2014, our goal was straightforward. We set out to build a point of sale product that met the unique needs of cannabis dispensaries and adult-use retailers in states where cannabis was newly legalized and markets were beginning to form.
LAS VEGAS, NV – JULY 01: A customer pays for cannabis products at Essence Vegas Cannabis Dispensary … [+]
2017 Getty Images
My colleagues and I saw tech as a tool for addressing the hurdles that cannabis businesses face, particularly varying state-level regulations and the inability to work with federally-backed banks. We talked to shop owners about their pain points and priorities and learned that they needed a product that would manage workflows, process transactions, record and report data, track products, and process customers. At the time, all of the above was possible through a software product that was, in its core functionality, a point of sale system.
As more states legalized cannabis in some form and regulatory schemes became more complex, the needs of dispensaries and adult-use retailers evolved with the market. They started requiring a product that was more than a point of sale system with enhanced features. Instead, they were looking for a full-service platform that ran every aspect of their business, from the back office to the front of the house.
In many ways, this progression is representative of a growing problem for the cannabis industry at large, along with countless other sectors. In the beginning, the challenges came from a need to manage sales. Today, they are the result of a need to manage data. With the cannabis sector projected to grow to nearly $30 billion by 2025, according to New Frontier Data, retailers must think more broadly about who they choose to work with when selecting a platform.
Below are three questions to consider:
1. Does the platform integrate with my state’s compliance system?
Because there are no universal national cannabis regulations, every state devises its own set of rules to govern its industry. No two states have the same regulations and the rules often change. While some states build and operate their own systems, others rely on third parties, such as Metrc. When choosing a platform, shop owners should ensure that the system syncs up with their state’s regulatory framework. This enables the appropriate data to be collected and transmitted and helps the store meet its compliance obligations.
2. Does the platform handle both customer-facing and back office services?
In recent years, dispensaries and adult-use retailers have found that the data that must be collected and reported often cuts across the entire business. In some states, compliance involves a track-and-trace system in which every product sold must have a complete, auditable chain of custody that can be followed back to the seed. Other states require customer information be collected and reported to the state system instantaneously. Platforms have different strengths and capabilities. For example, some software can manage the collection, paying, and reporting of taxes for the business, its employees, and the products it has sold. Cannabis shops should assess their needs, consider their state’s regulations, and determine which platform is the best fit.
3. Will this platform help with inventory?
Inventory is one of the most cumbersome tasks for any cannabis business. A proper inventory count, however, is critical. Dispensaries and cannabis retailers must know what they have sold, what they have on hand, and what they need to purchase. Cannabis is among the few industries where incorrect inventory counts can have serious legal implications, and even get a shop shut down. Inventory is always burdensome. With a wide variety of products, heavy traffic, and little room for error, store owners need a platform that automates as much as possible and makes the rest of the process simple and efficient.
The growth of siloed services into whole-of-business platforms is a positive development for regulators, the industry, and the patients and customers it serves. It is a sign of progress, signifying that the industry is maturing, gaining credibility, and trending in the right direction. The smarter and more efficient the platforms, the smarter and more efficient the cannabis shops they serve will be.
With total sales of cannabis in current legal states projected to grow at a compound annual growth rate of 14 percent over each of the next six years, according to New Frontier Data, the industry is only becoming more lucrative. As more states legalize and more entrants look to join the sector, shop owners will have more platforms to choose from. With this glut of options, they need to consider their options and choose wisely. The software they select is, in many ways, as important as the products on their shelves.