How Digital Payments Can Help Cannabis Retailers Fight Inflation + Boost Business

By Dan Muller, CEO & Founder, Aeropay

With consumers around the country reeling from the ongoing inflation crisis, retailers are becoming especially proactive about providing affordable and efficient checkout experiences. In June, the inflation rate surged by 9.1%, amounting to the largest annual increase in over 40 years, according to the U.S. Labor Department. 

Simultaneously, challenging market conditions are still impacting dispensaries’ bottom lines. According to a recent survey, 37% of U.S. cannabis operators reported being not profitable due to increased operating costs and competition in saturated markets. This reality, coupled with more consumers curtailing non-essential spending, has prompted more cannabis retailers to invest in ancillary services to help them maintain their competitive edge and establish lasting customer relationships. One of the most effective but overlooked strategies to enhance cannabis sales during inflation is to offer accessible, convenient and secure digital payment solutions in this progressively modern retail landscape.

What is causing inflation, and how does it impact the cannabis industry?

In the most basic terms, inflation is often catalyzed by prices changing due to a sudden spike in the supply and demand of goods and services or the amount of money circulating within the economy.

While the price of legal cannabis products has remained consistent compared to mainstream consumer goods, the wider industry is still vulnerable to inflation’s wider repercussions. In fact, these affordable product prices can be attributed to plummeting wholesale rates that have dipped as much as 70% in California and other West Coast markets over the past year. Additionally, cannabis may be grown and manufactured domestically, but the industry depends on machinery, packaging materials and other critical resources from the global supply chain. 

For now, it is imperative that dispensaries do not pass along any additional costs to consumers. Shoppers are more value-driven in periods of economic downturn and should not have to compromise their health and safety by resorting to the illicit market. 

Digital payments keep cannabis sales affordable and customers happy

When customers are met with sticker shock at every turn throughout their day, they are less forgiving of additional or hidden fees. Legal cannabis purchases are already subject to significant sales taxes, and any ATM or processing fees on top may prompt consumers to take their business elsewhere. 

Allowing customers to pay through a free, digital and compliant platform in lieu of cash pulled from fee-based ATM machines or pass payment costs onto customers, bolsters their overall satisfaction and likelihood of returning. Retail studies show that even a five percent increase in customer retention can increase profits by 25% to 95%. And as more cannabis consumers turn to e-commerce, it is more important than ever to eliminate unnecessary fees, particularly considering how extra costs are one of the primary reasons for cart abandonment at checkout.  

These convenient solutions also play a valuable role in winning over new customers, as over 58% of Americans are reportedly more likely to support businesses that offer contactless payments. In competitive markets, fostering customer satisfaction is critical to both long-term loyalty and new customer acquisitions. When consumers are invested in a brand, they’re more likely to tell friends and family where they’ve had a positive experience, leave positive reviews online or give valuable feedback for improving products. Retail surveys have found that over 90% of customers say that the most trustworthy way of learning about new businesses and products is by hearing about them from someone else. 

Digital cannabis payments can maintain customer spending even during inflation

Adopting digital payments eliminates the most prominent cannabis retail friction points –handling cash and unwelcomed fees –which ultimately incentivizes shoppers to spend more. On average, businesses that utilize mobile payment platforms have experienced over a 23% increase in the total number of transactions. Additionally, Aeropay’s internal insights report a 30% increase in completed online orders and 25% increase in customer spending among dispensary clients. 

As cannabis becomes an increasingly mainstream consumer product, dispensaries can provide more desirable shopping experiences and increase profitability by moving away from relatively antiquated payment methods. Further, improved sales will also allow retailers to optimize their internal operations, minimizing the possibility of raising product prices to stay in business. With nearly 70% of conventional retailers currently offering contactless payments, legal dispensaries must evolve alongside its rapidly modernizing peers or risk forfeiting a vital competitive advantage for good. 

As more consumers prioritize spending, retailers are tasked with finding sustainable ways to keep product prices affordable while providing compelling retail experiences. At this juncture, dispensaries are positioned to take full advantage of compliant, contactless payments without paying hefty credit and debit swipe fees currently afflicting mainstream stores. Over the past decade, the legal cannabis industry has continued to forge ahead amidst market headwinds because of its unique ability to identify growth opportunities in challenging circumstances. Despite new and ongoing challenges, dispensaries can leverage this current period of economic downturn to embrace innovation to maintain profits while continuing to build a community of loyal, happy customers.