If you're new to retail cannabis, chances are you're new to business in general. So the whole meaning and value of analytics may elude you. If analytics are new new to you, you had better get a grasp of what data means to you and your business potential.
Let's explore the effect of analytics on the cannabis economy.
Briefly, analytics refers to the study of data looking for patterns in transactions that might predict future business and/or recommend specific business moves on your part. Reliability improves as a function of the volume of data. Analytics tools automate the data analysis, making it easier to handle those large amounts of data and delivering conclusions faster.
The potential demand
Cannabis presents a potential economy so large that it's driving more cannapreneurs and startups to provide business intelligence in the form of descriptive and predictive analytics.
As reported by The ArcView Group, "No longer will pricing decisions, retail locations, and product mixes be driven purely by instinct and anecdote. The ability to analyze multiple tiers of historical and relevant market intelligence will allow companies to base their strategies on a critical mass of data regarding prior performance."
The keys to keep in mind are that:
Descriptive analytics report on historic transactions updating retailers on what has been selling at what cost and when.
Predictive analytics mine the data for patterns that extrapolate into growth or decline modes.
Both help decision-making on purchasing, pricing and marketing. That's why there is value in exploring the effect of analytics on the cannabis economy.
Behind the curve
Analytics depends on a large volume of data. But while there has been a long history of financial transactions involving marijuana, those transactions have rarely been recorded, verified or archived. Any data is only word-of-mouth.
Valued usable data has only been available since the advent of legal retail sales and managed distribution of medical marijuana. The relatively few years of records on point-of-sale transactions have provided the data on which advocates have forecast the huge economic potential of the cannabis industry. Additional data will effectively correct (though not necessarily deny) those forecasts.
But to improve the predictive promise, retailers, growers and processors all need to gather and store data, identify key performance indicators and opt for analytics.
"The cannabis industry is coming along at the perfect time to take advantage of analytics already developed and advanced for retail of consumer products," says Tom Adams, managing director and principal analyst at BDS Analytics, a company focused on marrying of cannabis point-of-sale tracking with modeling, and projecting the future with analytical reports. "That's why we've seen the amazing increases the past 30 years in productivity from data and analytics."
An influx of talent from other industries is helping fulfill this need. Analysts, engineers, data scientists and even accountants are flocking to the flower. "It's like an exodus from other industries into cannabis," says The Marijuana Times editor in chief Nick Phillips. "I get a lot of attorneys coming to me all the time in Los Angeles. Entertainment industry folks, too."
All parties in the cannabis process need to know what moves at what time of season. This involves tracking farming from seeding forward. Some regulators even want plants tagged for tracking from seed to sale. Such tracking monitors unauthorized processes and tracks contamination to the source.
But seed-to-sale tracking also reveals what varieties are selling, what stages the growth has reached and what each crop costs. Strain origins and genetics provide informative data for the retailer, dispensary and customer.
For example, BioTrackTHC makes a seed-to-sale marijuana tracking system that tracks plants as well as sales, buying trends and employee handling of the products.
In addition to tracking data, rich analytical information pertaining to cannabinoid content, terpene (flavor and effect manipulators) and product cleanliness is now being provided by independent testing laboratories. This content-rich information helps provide a better understanding as to why a particular product, especially a flower or concentrate, may no longer be providing continuing sales or simply wasn't going to be a good mover to begin with.
Old trends and insights were based on only a name. We are now seeing specific chemical information being produced for those named products, and this will further sharpen buying selection by the dispensaries and ultimately the end consumers.
Jeffrey Raber, Ph.D., of The Werc Shop has long been an advocate of labeling and of providing detailed information to patients through testing laboratory services. I spoke with him at the State of Marijuana conference, a landmark event in Southern California that attracts influential entrepreneurs, advocates, investors and government officials.
"We are now entering a time where regulations are requiring laboratory testing on the products and that these test results be accessible to the general public and those buying cannabis products," Raber told me. "It will be an exceptionally useful tool for patients to make better product selections and improve their conversations in meaningful ways with their doctors. Everyone will benefit tremendously from this shift toward better information about the products."
Data gathered from point-of-sale transactions helps retailers manage inventory, selectively market products and substantiate financial reports.
"We recognized the need for comprehensive analytical data from the beginning," says Amercanex CEO Steve Janjic. "That's why we built two platforms: ACE Marketplace for buying and selling cannabis online, and the Electronic Transaction Tracking & Audit System (ETTAS), a back-end system that allows government and regulatory officials to monitor transactions in real time. The benefits of these analytics are endless, from being able to recall contaminated strains to accurately predicting tax and sales revenue."
Analytics report on sales history by product and strain, peak traffic days and hours, as well as the percentage of new customers versus old. Other analytics programs do the same for transaction data for farm management, inventory management and patient demand, and cannabis product development.
"Information technology has improved the tracking of industry activity and the tracking of consumer sentiment to the point that financial projections of the future are so much more accurate than they were before," Adams says.
Growers, wholesalers and retailers are in discovery mode regarding marketing skills and technologies. The industry and transaction volume are relatively new. They are just beginning to appreciate brand movement, market trending and return on investment.
They're exploring SEO strategies, social media communities and online advertising. They are also learning from other supply chain behaviors and adapting what works for them.
What's the future?
Future cannapreneurs may have an easier time navigating the modern cannabis market than their predecessors did, because it has become more acceptable to do so. As noted by Scott Greiper, president at Viridian Capital Investors, "The industry is losing its taint as a drug industry and is becoming a much more sophisticated market."
The quality of analytics depends on the size of the database, the quality of the input and the mining of the information. It's very similar to how Google or Amazon impact your browsing.
For example, based on your history of input, Google can anticipate how to finish your sentence, or Amazon can anticipate your shopping choices. If you build up traffic with a cannabis retailer buying a certain strain, the store is positioned to predict when and at what price you will buy again.
These analytics will influence the cannabis market, improve its sales, track its performance from farmer to user, and more accurately forecast the impact on the cannabis economy as a whole. This all adds value to exploring the effect of analytics on the cannabis economy.
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