5 Tips for Purchasing from California Cannabis Vendors
By Green Bits
This article offers advice for California dispensaries who are looking for ways to ensure they purchase product from compliant vendors. Vendors are also known as distributors, growers, or suppliers.
We also show how to verify which vendors are licensed, optimize your inventory levels, and more. This is especially important as Track and Trace, or Metrc, is implemented due to the increase in the:
Level of inventory tracking needed
Employee overhead required
State reporting frequency
This advice can ensure you only purchase and sell compliant product to your customers and patients. In turn, this will help you keep your customers happy, and your California cannabis dispensary license.
Here are the 5 tips for purchasing from California cannabis vendors:
1. Verify all vendors are licensed
One of the easiest ways to lose your license is by purchasing from a vendor who doesn’t have a license to legally sell cannabis in California. We recommend vetting all vendors to make sure they are authorized sellers. You can do this by validating their business and cannabis licenses with the state, and make sure they are current.
In many states, there’s an excise tax that is collected when purchasing from wholesalers. In California, per the CDTFA, "the cannabis excise tax is imposed upon purchasers of all cannabis and cannabis products at a rate of 15% of the average market price when purchased at retail. Retailers are responsible for collecting the cannabis excise tax from purchasers at the time of the retail sale and for paying the tax to the distributor. The distributor reports and pays the cannabis excise tax to the CDTFA."
2. Barcode all products
We’ve seen and heard about new vendors in Washington, Oregon, Nevada, and many other recreational cannabis states making mistakes when it comes to compliantly and correctly transferring products to dispensaries. The same is to be expected in California, if you haven’t seen it already.
You might see incorrect labels, product counts, or test results. For example, a vendor may say they are transferring 50 units of a product to you, and only come through with 40. These vendors generally produce a lot of overhead in terms of time spent correcting mistakes. This doesn’t mean you should avoid new vendors, but budget more time for ensuring things like the quantities are correct.
We strongly recommend working with your vendors to produce scannable barcodes for all the products they sell and transfer to you. If they do not, you and your staff will be stuck with potentially hundreds of new products that you have to barcode or re-barcode. Barcoding all products and scanning them at checkout is a best practice to ensure you consistently make compliant sales.
3. Provide feedback to your vendors
A useful strategy to employ when dealing with multiple vendors is to create a vendor scorecard. Every time a vendor drops off a product, the scorecard can help you evaluate if the order is on time, the correct amount is delivered, everything is labeled correctly, and so on. This creates a personal history with each vendor to inform future decisions. It’s important to have quantitative data to support and grade your vendors in order to clearly determine which vendors are the most efficient and easiest to work with. We’ve seen dispensaries share the scorecards with vendors to improve their relationship and quality.
Plus, scorecards help vendors understand their impact on your business.
If you’re a larger dispensary, you might have separate people doing the purchasing, receiving, and managing of the inventory. As you’re likely aware, it’s important to have clear communication between these people. A good thing to do is to pass along vendor scorecards to the purchasing manager so they can provide feedback to the vendors, since they are the ones directly communicating with them.
4. Have a healthy balance of inventory
A major challenge of managing inventory is making sure you never run out.
However, having too much inventory means you might have to destroy the inventory you don’t sell before it expires. Much like Goldilocks, you’ll want to have just the right amount.
Although challenging, the most lucrative practice is to purchase the least amount of inventory as possible, but to make sure you never run out. So, how do you strike a healthy balance?
To strike a healthy balance between ordering and inventory in stock, we recommend rigorously tracking two things:
Physical inventory levels to ensure sure you never run out of a product. If that happens, you’re not purchasing enough, and it could negatively impact the customer experience. Using reorder and inventory reports from your Metrc compliant POS will help ensure you always know how much product you have on hand.
Track the store’s total inventory value in dollars. You want to minimize that number, while still having enough product available.
5. Understand and explain product variations
A challenge in the cannabis industry is that products tend to come and go pretty quickly. Plus, there are a lot of small-batch products with variations. A strain of one flower may have 20% THC, but the next time you order it, the product’s test results might show the potency at 22% THC. Depending on the harvest or the vendor, these test results change and create consistency issues.
As you may have experienced, consumers often consider products with different THC values as different products with different price points, meaning the same strain of flower with different potencies might have different pricing levels. Providing budtenders with talking points about why and how this happens will help educate them and the customer, if they aren’t aware already.
This is complicated by situations where vendors might have a strain or edible that’s only available two months out of the year. We’ve seen many compliant dispensaries who use Green Bits manage this by finding complimentary products to replace the seasonal ones, until the seasonals come back again.
Here are the 5 key takeaways from this article:
Vet all vendors and ensure they are licensed by the state before working with them. If you don’t, this is an easy way to lose your license and get shut down. Plus, you don’t want to sell any untested products to your customers or patients.
Barcode all products! Ensure all products from vendors come properly barcoded. We can’t stress enough how important this is to making compliant sales. If you combine barcoding all products with scanning all products at checkout, you’re immediately less likely to go out of compliance.
Providefeedback to your vendors. An efficient way to do this is through a vendor scorecard. We’ve seen dispensaries share these scorecards with vendors to improve their relationship. Scorecards help vendors understand their impact on your business!
Optimizeinventory levels so you don’t have too much or too little. We know this one is challenging and will likely take some research and trial and error. Running out of inventory is bad, but so is having to destroy lots of expired, unsold inventory.
Understand and explain product variations. Providing budtenders with talking points about why and how batches can have different potencies and price points will help educate them and the customer, if they aren’t aware already. Also, plan and prepare for seasonal products.