Tuesday, June 28, 2016

Dispensaries Make More Money Per Square Foot Than Whole Foods

Move over, kale — there’s a new leafy green in town. According to industry data, medical dispensaries and adult-use cannabis retailers now make more revenue per square foot than Whole Foods. 

On average, cannabis storefronts bring in $974 in revenue per square foot of retail space each year, according to the Marijuana Business Factbook. Whole Foods, meanwhile, brings in $930 per square foot. Cannabis retailers also saw more revenue per square foot than specialty tea stores ($893), pharmacies and drug stores ($676), and department stores ($180).

As Marijuana Business Daily explains, “Revenue per square foot is a commonly used metric to determine how efficient a retailer is in using its assets to generate sales. It is driven in large part by the size of the operation, the price point of the product and overall sales levels.”

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Topping chart was Apple, whose industry-leading retail shops generate about $4,800 annually in revenue per square foot . The large dollar amount reflects both the steep price of Apple products and the relatively small size of the average store. 

As you may have noticed on your most recent dispensary trip, cannabis retailers operate similarly, cramming a lot of product into a relatively small amount of space. That tends to make it easier for shops to operate in high-rent areas, as it allows a respectable income to be made from a tiny storefront.

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Given analysts’ promising forecasts for the cannabis market over the next few years, stores’ annual revenue per square foot are to increase. But as the market matures, MBD reports, rents are likely to rise, too:

Karl Keich, an industry consultant who runs a Seattle recreational marijuana store, said strict zoning rules on cannabis companies in many areas of the country have led to a scarcity of available property.

As a result, many dispensaries and rec shops are stuck in buildings that are too big to merchandise effectively or too small to maximize revenue. Their annual revenue per square foot is therefore lower than the industry’s average.

Furthermore, savvy landlords who know their property is suited for the cannabis industry can command higher rent, increasing the revenue per square foot needed to operate in the black.

In 2015 alone, the industry generated just over $3 billion sales, according to the Marijuana Business Factbook, with sales this year projected to run from $3.5 billion to $4.3 billion — a 17 percent to 26 percent year-over-year increase. By 2020, some estimates put nationwide sales at $11 billion.

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by Gage Peake at Leafly News & Culture

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