SaaS Technology is repositioning POS software for the cannabis industry

Shop owners facing tightening margins and increased competition can turn to powerful SaaS products designed for cannabis retailing.

The evolution of software-as-a-service (SaaS) technology for mainstream retail also is occurring in the cannabis industry, with one big difference. As an immature industry with its entire future before it, legal cannabis has the rare opportunity to incorporate SaaS products from the get-go. Doing so would help individual retailers succeed while at the same time assisting the industry to scale for the future by allowing retailers, cultivators, processors, manufacturers, and distributors to improve individual and collective efficiency (and profitability) via real-time communication and automated intelligence. Yes, AI likes weed, too.

Consumers are in on the tech action, too, of course. They are the Holy Grail, after all. There are apps for everything cannabis, most of them focused on helping the consumer identify what products they want and where they can find the goods…now. But apps and websites are just the tip of the tech iceberg available to today’s cannabis retailer, who is free to employ the same SaaS solutions every other large industry uses to great effect.

“All major markets now, even medical, are run off SaaS platforms,” said Gary L. S. Allen, Director of Operations for New Frontier Data. “The difference with the cannabis industry is that SaaS platforms will be instrumental to its growth, but faster.”

It’s precisely that sort of prognostication by a bona-fide technologist, not a cannabist, that has made the cannabis industry so attractive to tech developers who want to bring order to chaos via an astonishing number of point-of-sale systems. According to Allen, New Frontier has identified more than eighty POS solutions targeting the cannabis industry, though only half are on the market. But even forty sounds like too many options.

Not so, said Allen. “Like every emerging market, there needs to be a healthy amount of competition, and a healthy number of new upstarts in every quarter makes the inevitable consolidation possible and equitable to the marketplace itself.”

The relatively stately pace of state-be-state legalization efforts likely means the “inevitable consolidation” is a few years down the road, leaving a marketplace full of POS contenders vying for your business. Or the shakeout could happen much more quickly, the result of open-source architectures that ultimately reward only those complementary SaaS products that provide demonstrable value to the retailer. For Jeannette Ward, MJ Freeway’s vice president for global marketing and communications, no matter how the retailer wants to configure her POS system, she’ll assess its value by return-on-investment.

“The leading trend in POS is ROI,” said Ward. “Which solution is allowing you, as a business, to be more efficient and effective? The way we [at MJ Freeway] talk about that, the way we think people should be thinking about it and, frankly, the way our most sophisticated clients have been holding us accountable, is as ROI. We think the trend also is being able to calculate with your POS software what the return on that investment is. The average technology investment for a company should be about six percent of your revenue, and if you’re not doing that you’re really missing an opportunity to capitalize on that ROI.”

The consequences could be even more dire, Ward warned. “Margin and reducing your cost of overhead is going to be the name of the game for success in the cannabis industry,” she said. “Who can serve with the least amount of cost? Who can get the most margin dollars by driving down those costs? ROI is going to be your critical way of getting there, and POS—how you measure the ROI—is the first thing. How much time does this system save me in the checkout process versus that system? It could be forty-five seconds or a minute-and-a-half, but that calculation added up over all the customers you serve a day, the number of customers you serve a year, adds some serious dollars to your bottom line. You should be looking at that—at how long it takes to do patient checkout—and whether one system saves time over the others.”

Looked at that way, it’s no wonder new POS solutions continuously try to engage the retailer with promises of greater performance and reliability than what’s currently available. One such newcomer is Cova, a POS solution that shares its back-end infrastructure with a parent software company called iQmetrix, which has been building POS and ERP for wireless and general retail clients for more than nineteen years.

“In our ongoing conversations with owners, managers, and budtenders, we regularly hear complaints about software design and user experience, [along with] a lack of in-depth reporting and sophisticated marketing tools,” said Cova Chief Executive Officer Gary Cohen. “Cannabis retailers have to deal with peak time queues, staff turnover, shrinkage, finding new customers and keeping the ones they have. Dispensary operators also face challenges unique to the industry, like compliance and federal prohibitions. Shaky internal systems with POS leading the way are another headache. That’s why system reliability, performance, and software stability are the most important features to cannabis retailers and, quite frankly, it has been a major headache in this industry so far.”

Indeed, the budtenders we spoke with concurred. System reliability—or what they called “glitches” that occurred while they were serving customers—is their biggest peeve. Even if the transaction was interrupted by only a few seconds, the glitches created a lack of confidence in the stability of the software. According to Ward, however, the explanation is simple. “All SaaS software, any cloud-based software—which basically all the current POS software is except for BioTrackTHC—is going to have moments when you’re not happy, because you’re on the internet,” she said. “Just like when things get glitchy at home, you’re going to have some of those experiences.”

Understandably, Ward is sensitive to the subject of stability. In January and again in June, MJ Freeway suffered breaches of its network. The first was far more serious than the second, bringing the system down, throwing hundreds of clients offline, and even impacting Leaf Data Systems, the company’s government tracking system. The breach was costly to retailers and MJ Freeway’s reputation, and is still used by competitors as an example of what to avoid. As Ward noted recently, “We’ve made a lot of infrastructure upgrades since our problems in January.”

We use deep machine learning and artificial intelligence algorithms that not only give you your key performance indicators, but also allow you to see predictive analysis of what should be selling better next quarter versus what sold last quarter. —Gary Allen, New Frontier Data

The upgrades have paid off. The company recently scored seed-to-sale government contracts with Pennsylvania and Washington state. It’s the sort of growth that allows MJ Freeway to improve its other products. “We still have the cannabis industry’s largest store of data, so we have a data product that shows our retailers what’s selling in their market, for what prices, trending strains or edibles, what categories are adding the most value to retailers,” said Ward. “We have that data, but we also have a product for cultivators and processors, which gives us the ability to do things with inventory. Once I have information about what’s hot or trending, we have the ability in our system to communicate with cultivators and processors, to order more product, or put it on automatic reorder.”