Dispensaries are not ordinary retail operations. Because cannabis is a Schedule I substance under the Controlled Substances Act, businesses involved in the regulated sale of cannabis must pay taxes according to Internal Revenue Code § 280E. This creates a variety of issues, including problems with staff morale and retention.
Most businesses pay an effective tax rate of approximately 30 percent. Cannabis businesses, on the other hand, pay about 70 percent because 280E prohibits entities that “traffic in controlled substances” from deducting most operating expenses—including salaries and health insurance premiums. So, for example, a $15-per-hour cannabis employee costs the business as much as a $22-per-hour employee in other industries.
Consequently, people working in the cannabis space frequently feel undercompensated. At Ajoya, we have determined four ways to help increase employee compensation while growing, instead of depleting, the bottom line.
Vendor cash incentives
Vendors know a store’s staff holds the keys to their success. A recent survey determined cannabis customers value a sales consultant’s input 91 percent of the time. So, work with your vendors to establish time-constrained sales incentives for your staff. This can increase trial, sell-through, and staff income. A basic example could look like this: The sales consultant who sells the most units of XYZ Brand products during the month of April will receive a $100 Visa gift card. The associate with the second-highest total will receive a $75 card, and the third-place associate will receive a $50 card.
Team goals work great too. For example, if the team increases sales of XYZ Brand by 50 percent during the month of May versus last year, every team member will receive a $25 check from the vendor.
Vendors often offer product samples or swag bags as prizes. Keep in mind your staff won’t be able to pay their rent or buy groceries with a branded T-shirt.
Performance incentives are an obvious way to increase sales associate compensation. That said, there are a number of important elements to consider when building an effective program. The first element to keep in mind is matching the incentive program to your business goals.
Some incentive key performance indicators to be cautious about include transaction time, number of transactions, and average transaction value. For transaction time and number of transactions, encourage staff members to be efficient and enthusiastic about completing as many transactions as they can as quickly as possible, but be aware this could lead to customers feeling rushed or unhealthy competition between associates. Average transaction value (ATV) programs must encourage responsibility. For example, if an older adult comes in for a sleep product, recommending a higher-dose product might increase the transaction value but also could create a negative experience for the customer and a negative reputation for your brand.
At Ajoya, we have seen transparency about each individual’s numbers be the key to success for incentive programs. Each week store managers send ATV, number of transactions, average margin, and discount dollars by sales associate to the group. This promotes healthy competition, team accountability, and the opportunity for members to reach out to each other for advice about improving their performance.
We all appreciate the importance of reviews for new customer acquisition. Employing a proactive outreach platform like EyeRate creates a win-win situation. EyeRate utilizes a store’s customer data to send a text message after a consumer visits. The outreach text includes the name of the sales consultant who assisted them and asks the consumer to rate the transaction. If the customer enters a four- or five-star rating, they’re prompted to leave a Google review; the sales consultant receives a $5 incentive if their name is mentioned. The system allows companies to actively gather reviews, proactively address negative experiences, celebrate team members, and provide additional income for the staff.
Tip jars are common sights at bud bars. While tips can provide an extra boost for sales associates, be sure to provide clarity for your tip program if you establish one. Are tips individual, or are they pooled? Do tips benefit only sales associates, or do support staff members such as reception and inventory receive a payout? How frequently are the tips distributed?
Be aware tipping has a problematic history: The practice began in feudal Europe and took hold in the United States after the Civil War as a way for businesses to avoid paying former slaves. In an industry working hard on the equity and representation fronts, let’s avoid putting all our eggs in the tip basket.
This segues into the need for consistent, structured training. With sales incentives and prioritizing customer service, your staff will need regular, intentional training. At Ajoya, the sales consultants do onboarding training as well as refreshers throughout their tenure. A refresher session might include mock conversations about how to sell a specific product or how to work with a specific type of customer. Ajoya also utilizes brand-produced training through platforms like LearnBrands.
The better trained staff members are, the more effective they will be at strategically suggesting products, delivering best-in-class service, building brand reputation, and growing the bottom line. They also will be better compensated and motivated, which can lead to stronger morale and retention.
As the director of operations for Ajoya, Kate Heckman oversees the company’s retail, cultivation, and marketing teams and is responsible for the execution of exceptional cannabis experiences. She aims to connect people with plant medicines to aid with wellness and quality of life.