Dispensary KPI #4: Return Rate

Your dispensary's Return Rate is a critical metric that reveals how effectively you build customer loyalty and maintain a stable revenue base. Based on our analysis of single-store, multi-store, and multi-state dispensaries across the United States, this key performance indicator directly correlates with long-term profitability and sustainable growth.

Return Rate measures the percentage of monthly orders from existing customers (those previously purchased from your dispensary).

For example, if your dispensary processes 1,000 orders in a month and 600 are from returning customers, your Return Rate is 60% (600/1,000 = 60%). Based on our proprietary BNCHMRK dataset, here's how we categorize dispensary Return Rate performance:

• Great: Return Rate ≥ 70%

• Average: Return Rate between 30% and 70%

• Needs Improvement: Return Rate < 30%

Author Note: this target will evolve as our dataset grows. An individual Return Rate is highly dependent on the maturity of the location's market, local competition density, demographics, customer acquisition saturation, and the effectiveness of retention programs.

Our latest data from October 2024 shows minor variations in Return Rates across dispensaries in our dataset; we expect the variance to increase as retail locations open up more budget for acquisition-related marketing efforts. We currently have data from dispensaries in 9 U.S. markets; below is the performance distribution by percentage:

Dispensary Performance Distribution:

• Dispensaries Scoring 'Great': 100% of dispensaries scored in this range with an average Return Rate of 86%

• Dispensaries Scoring 'Average': 0% of dispensaries scored in this range

• Dispensaries Scoring 'Needs Improvement': 0% of dispensaries scored in this range

To accurately calculate your dispensary's Return Rate, follow these steps:

#1. Track Total Orders

• Count all orders within the measurement period (typically monthly)

• Include all sales channels (in-store, delivery, online)

• Account for:

  • Returns and adjustments

  • Cancelled orders

  • Failed delivery attempts

#2. Identify Returning Customer Orders

• Flag orders from customers who have previously purchased

• Consider:

  • Loyalty program members

  • Email/phone number matches

  • Delivery address matches

  • Online account holders

3. Formula

Return Rate = (Number of Returning Customer Orders / Total Number of Orders) × 100

Several key factors influence your dispensary's Return Rate:

Market-Specific Variables

Competition Density

• Areas with high dispensary concentration naturally experience more customer switching

• Dense urban markets typically see lower return rates compared to suburban or rural locations

• Successful dispensaries in competitive markets focus on:

  • Unique product selection

  • Superior customer service

  • Compelling loyalty programs

  • Consistent pricing strategy

  • Community engagement

Market Maturity

The age of a legal cannabis market significantly influences customer loyalty patterns:

New Markets:

• Higher customer experimentation

• Focus on education and trust-building

• Emphasis on first-time buyer conversion

• Basic loyalty program implementation

Growing Markets:

• Increasing customer sophistication

• Enhanced loyalty program development

• Focus on personalization

• Competitive retention strategies

Mature Markets:

• Established customer habits

• Advanced loyalty programs

• Deep personalization

• Premium service offerings

• Innovation focus

Operational Factors

Product Selection and Availability

• Consistent stock of popular items

• Regular menu updates

• New product introductions

• Clear product information

• Competitive pricing

Customer Experience

• Staff knowledge and training

• Store atmosphere and layout

• Wait times and service speed

• Problem resolution

• Communication consistency

Loyalty Program Effectiveness

• Reward structure

• Point accumulation rate

• Redemption options

• Special member benefits

• Program communication

Based on our experience working with dispensaries across multiple markets, we've identified key areas that drive improvements in Return Rate performance:

Customer Experience Enhancement

• Staff training programs

• Service standardization

• Feedback collection systems

• Issue resolution protocols

• Store environment optimization

Loyalty Program Development

• Multi-tier benefits

• Birthday/anniversary rewards

• Points acceleration events

• Member-exclusive products

• Early access opportunities

Communication Strategy

• Personalized messaging

• Purchase reminder systems

• New product alerts

• Educational content

• Community building

Product Strategy

• Inventory consistency

• New product introduction

• Bundle offerings

• Price optimization

• Quality control

To get a complete picture of customer retention performance, monitor these related KPIs:

• Marketing Efficiency Ratio (MER)

• Average Order Value (AOV)

• Customer Lifetime Value (CLV)

• Net Promoter Score (NPS)

• Marketing Opt-in Rate

• BNCHMRK Monthly Reports: Access the latest insights on dispensary performance.

• Marketing Performance Scorecard: Get your free BNCHMRK scorecard to assess your marketing efficiency.

• Consultation with Growth Experts: Schedule a free consultation with one of our cannabis growth experts for personalized advice.

To improve your Return Rate, focus on providing an exceptional customer experience, developing a compelling loyalty program, and maintaining personalized communication with your customers. Successful dispensaries emphasize ongoing customer engagement, consistent service, and value-added loyalty offerings to foster long-term loyalty.

Last Updated: November 10, 2024. Data sourced from BNCHMRK's proprietary database of dispensary performance metrics.

What is a good Return Rate for a dispensary?

A good Return Rate is 70% or higher, meaning 70% or more of your monthly orders come from existing customers. Top-performing dispensaries achieve 80-90% return rates, while the dataset average is 86%. It's important to note that an increasingly effective customer acquisition program can drive down the return rate for a defined period, which is good but may drop the overall return rate for that period.

How often should I calculate my dispensary's Return Rate?

Track Return Rate monthly to identify trends and adjust strategies. Also, quarterly and annual rates should be calculated to account for seasonal variations and long-term retention patterns.

What's the relationship between Return Rate and loyalty program membership?

While high Return Rates and loyalty program membership often correlate, they're not identical metrics. Focus on both acquiring loyalty members and encouraging repeat purchases through value-added experiences.

How can I improve my Return Rate quickly?

While sustainable improvements take time, quick wins can come from:

• Launching targeted win-back campaigns

• Implementing purchase reminder systems

• Offering returning customer incentives

• Enhancing the in-store experience

• Improving product availability