Deli vs. Prepack in Cannabis Retail

Depending on license type, New Mexico Dispensaries have two primary methods of selling flower products: deli style and prepackaged. Each method has its own advantages and disadvantages, impacting aspects such as quality control, consumer experience, and operational efficiency.

Deli Style

In deli-style sales, flower is stored in bulk and weighed out for customers at the point of sale. This method is similar to how traditional delis operate, where customers can see and choose the exact product they want before it is packaged and sold.

Pros:

• Customer Experience: Allows customers to see, smell, and sometimes even touch the product before purchasing, enhancing the shopping experience.

• Flexibility: Retailers can sell in any quantity the customer desires, offering more customization.

• Freshness Perception: Consumers often perceive deli-style products as fresher since they are weighed and packaged on the spot.

• Cash Flow: Retailers can make their money back before net terms have lapsed, aiding in cash flow management.

Cons:

• Quality Control: Maintaining consistent quality can be challenging, as products are handled more frequently, which can lead to degradation.

• Labor Intensive: Requires more attention to detail from the retail team, including regular quality checks, proper handling, and compliance with hygiene standards.

• Inventory Management: More complex inventory management and higher risk of discrepancies due to manual handling and weighing.

Prepackaged (Prepack)

• Prepackaged products are processed solely by the manufacturer before reaching the retailer. These products are sold in fixed quantities, usually eighths (3.5g), and are sealed in tamper-evident packaging.

Pros:

• Quality Control: Manufacturers have more control over the quality assurance process, ensuring consistent product quality, potency, and packaging standards. This aligns with creating a true Consumer Packaged Goods (CPG) product.

• Branding: Allows for more sophisticated branding and packaging, which can enhance product appeal and marketability.

• Compliance: Easier to maintain regulatory compliance with consistent labeling, dosing, and packaging.

• Operational Efficiency: Simplifies inventory management and reduces the labor required at the point of sale.

Cons:

• Cost: Generally more expensive due to the costs associated with packaging, branding, and quality control processes.

• Reduced Customer Interaction: Customers cannot see or smell the product before purchase, potentially impacting the purchasing decision.

• Inventory Turnover: Retailers might have slower inventory turnover compared to deli-style sales, impacting cash flow.

Comparison

Cost and Pricing

• Prepackaged: Higher costs due to packaging and branding but allows for premium pricing due to perceived quality and consistency. Suitable for customers who value convenience and branded products.

• Deli Style: Lower costs in packaging but requires more investment in labor and retail infrastructure. Can offer competitive pricing and appeal to customers who value the sensory experience and customization.

Quality Control

• Prepackaged: Manufacturers can ensure product quality through controlled environments, standardized processes, and thorough testing. This results in a consistent product that meets regulatory standards.

• Deli Style: Quality control relies heavily on the retail staff. Proper storage, handling, and regular checks are crucial to maintain product integrity and comply with regulations.

Consumer Experience

• Prepackaged: Appeals to consumers who prefer convenience, branding, and assurance of product quality. Suitable for creating a strong brand identity and targeting a broader market.

• Deli Style: Appeals to consumers who appreciate the traditional buying experience, the ability to inspect the product, and customized quantities. Creates a more interactive and engaging shopping experience.

Operational Considerations

• Prepackaged: Streamlines operations, reduces the burden on retail staff, and simplifies inventory management. Ideal for high-volume retailers looking for operational efficiency and consistent product offerings.

• Deli Style: Requires a well-trained retail team to manage inventory, maintain quality, and provide excellent customer service. Suitable for retailers who want to offer a personalized shopping experience and maintain flexibility in product offerings.

Conclusion

Choosing between deli-style and prepackaged products depends on various factors, including the target market, brand strategy, operational capabilities, and cost considerations. While prepackaged products offer more control over quality and branding, deli-style sales provide a unique customer experience and greater flexibility. Retailers should weigh the pros and cons of each method to determine the best approach for their business model and consumer base.