Intro: [00:00:00] Welcome to the Kaya Cast, the podcast for cannabis businesses looking to launch, grow, and scale their operations.
Tommy Truong: So Scott, when should somebody think about delivery?
Scott Prisco: yeah, so I think someone should think about delivery after they have their tech stack, correct? Like right after they open, um, they have their operations down, their bud tenderers trained, they're driving revenue. They build a solid customer base. You know, they start their loyalty program. They were starting to retain customers and, and give them a little something extra so they don't shop with a competitor.
And, you know, ultimately they're, they're buttoned up and they're in, you know, month five to six where things are ironed out. And, uh, they're, you know, they're, they're able to take on more and start to look at. Other revenue streams and, and what, what we can do, you know, dispensaries looking at what, what they can do to, to retain customers, drive, uh, more lifetime value and, and, you know, lower their [00:01:00] customer acquisition cost.
I, I think is, is a perfect time. And you know, you can look at that in, from a revenue standpoint, right? You can look at it from a revenue standpoint where you can put a revenue mark on it where you know, you generally know if, if you're doing about a million dollars worth of business a month, you can generally, with minimal marketing drive about.
10 to 15 delivery orders a day. 80% being returning customers that have bought at least once at the store and then around 20% new customers. Our data shows, um, with higher lifetime, I mean higher average order values of around, one 50 to one 60 instead of, you know, $95 in store. So you're making more money than the same ticket.
So I, I think, I think that it really goes back to that piece, what you're doing in store, how much revenue currently driving, and what, what's your ultimate what's your ultimate goal as a business, right? What's your, we talked about, we talked about this a little bit in our pre what podcast but what's your ultimate goal?
What are you trying to [00:02:00] do? 'Cause there's so many different avenues that these retailers can take, come out with their own products, do manufacturing you know, start to cultivation to get vertically integrated to squeeze more, uh, margin and better unit economics outta their products.
Um, right. So there's so many routes these people can go. And with funding being tough in the cannabis space right now, and, and money being limited, you know, what are you gonna tackle, right? Um, and I think that all comes back to what's your end goal or is your goal just to build this, build a couple stores and sell it.
Where, you know someone, someone like me, uh, I'm more interested in the future of retail and can I use cannabis as just an entry point for that? That point of like, how can I create the best user experience possible? How can we create, you know, the shopping. Of tomorrow. And, and, and so, you know, from my perspective, that's my end goal and I'm working backwards, right?
And I, I think the retailers need to do the same thing with, with, you know, what they're trying to accomplish.
Tommy Truong: Got it. I, that's interesting. That's, it's so true. If, if I was a retailer and I'm [00:03:00] just starting my business today and I'm only two months in and I'm still trying to figure out the retail operations, adding on a delivery service, I will dilute resources. You kind of have to get things straight first, is what you're saying from an operations perspective.
Scott Prisco: Yeah, because any issues that you haven't solved will get magnified for sure.
Tommy Truong: What are some of those issues that, that you've seen?
Scott Prisco: yeah, I mean, like customer service issues, right? Uh, you're looking at tech Stack when it comes to, putting orders through, managing your inventory, the inventory flow, your per your, your AR and ap. You know, you're looking at you know, and it's funny, KayaPush like, there you go, your ar, ap and then you're looking at, um, I.
You know, you, the, a big major thing that will get messed up is your reconciliation. Um, if you don't have that piece, do down the way you reconcile on your, your, your orders on the, on the POS and your e-comm, and then, you know, on [00:04:00] your payment processor that whole thing could get really ripped up and, and become pretty tricky.
Um, and, you know, all these. Cannabis tech companies have their own quirks. You know, they're all, they all have different issues and everything's so new. So, you know, that that's one thing. And also the compliance aspect of it, the tracking for metric or BioTrack is another, another issue, making sure the, the compliance is straight.
If that's all that stuff is not in line, then delivery maybe is not the first thing you should think about.
Tommy Truong: So once an operator has those things lined up and controls are, are good, there's baseline numbers, what they, what can, from your experience, what can they expect from delivery? What is that jump in sales on average, I.
Scott Prisco: Yeah, I mean, I think I, I think that if you're doing pretty well, I mean, I think 50 to a hundred grand, uh, if you're doing a million dollars, uh, a month, I think is realistic.
Tommy Truong: So a 10% increase, really?
Scott Prisco: I think so. Yeah.
Tommy Truong: yeah, if you're doing a 100K a month, you'll do another 10 [00:05:00] to 15,000
Scott Prisco: I think so. I think so. And, and whether, whether that comes from, whether that comes from people that would shop at a competitor now shopping at you because you provide a great delivery service, or they're transferring from the black market or homegrown. Are there new customers in in, in general and they're, they're new cannabis consumers because they don't like the stigma and they, they don't wanna go to the store and be seen in the store.
So I think, you know, that nailing that down would require a lot more in-depth analysis. But yeah, I think you can, you can judge a 10% you know, increase is fair to say. And I think that. I think there's a lot more potential if you really do it and you create a user experience that's in parallel, like with a DoorDash and Amazon and Uber Eats.
You know, I think that, I think that if you can turn orders quickly, and I think you can even expect more than that.
Tommy Truong: Do you see an an increase in average order size from delivery versus in store?
Scott Prisco: Yeah. Way more like 50 to a hundred percent more.
Tommy Truong: Wow.
Scott Prisco: Yeah. [00:06:00] People are buying more on the same ticket. And I don't, yeah. I mean, I, people are buying more on the same ticket. And whether that equates to people buying more at one time and shopping less overall or buying more and just smoking more altogether.
I. Uh, and spending more altogether as, as a total in an aggregate over, like, look, say you look over the course of a year. It's tough to say because we don't have access to that data when, when it comes to retailers in store com in comparison. And that customer, what those customers do, um, before they do delivery, we don't have access to that data.
So it's tough to say, but, you know, the retailers would have more, more insight on that. Uh, when you look
Tommy Truong: I wonder if it's, uh, splitting orders. I wonder if you, you know, you have a few friends over, you're like, Hey, I'm gonna order some cannabis, wanna hop on? It's kinda like ordering food.
Scott Prisco: Yeah. People, yeah.
Tommy Truong: of that is that.
Scott Prisco: Yeah. I mean, or, or you just, the perceived, I think a lot of it has to do with the perceived value of delivery. Like, you're getting an extra service, so, okay, I'm gonna spend a little bit more. And then some of the different [00:07:00] dispensaries. You know, we, we set a minimum where, they get free delivery over a certain value.
So people are spending like, oh, I'm gonna add one more thing in my cart so I can get the free delivery. So that's, that's another thing that, that helps too. Another trick. But yeah, I think it's a combination of a, a bunch of different things.
Tommy Truong: What is the economics of starting a delivery service? So let's say I'm a retailer. I do a hundred KA month. I'm going to expect top end, maybe 15 K more. I'll net 75, right? Low end. Maybe I'll net five. How much does it cost to actually start a delivery service so that you know, somebody can really work through the math on, okay, what is the risk reward here?
Scott Prisco: Yeah, so I think, I think you gotta look at a couple different things. You gotta look at the price of the vehicles, depending on the state. So the price of labor, you have to pay people even when they're, you're not really making deliveries. You have to you have to compensate people because if you don't, they'll go, you know, you will have a high turnover and they'll go do something else, [00:08:00] and you'll never get your feet out under you.
And then I think you've gotta look up the technology. There's some, outta the box solutions that are out there. They're not great. But if, you know, depending on what your tech stack already is, you might have to do some custom dev work. Uh, on top of that, there's insurance that can run up about $10,000 a year.
Uh, or a more you know, you, you look at, so the technology insurance, of course the marketing. So there's, there's a couple different factors in that piece. Uh, main maintenance of
Tommy Truong: say we're talking about New Jersey and then New York, two states that you operate in. If I wanted to start my own delivery service, what would you say? Uh, the startup cost would be
Scott Prisco: I think, I think you can budget for around 30, 40 grand.
Tommy Truong: 30 40 grand. Wow. Okay. So 30, $40,000. I. So let's say it's $40,000 to make things simple. And if you net $4,000 a month, your payback period is 10 months. But that includes also the upfront risk involved. So [00:09:00] that's like, that's really the math that somebody really needs to consider is, okay, well it's, it may take you close to a year before you break even if you're starting a delivery service.
If you do.
Scott Prisco: Yeah. It might, might take a year and, and it might not be great. It might go downhill. You might not do a good job. There's a bunch of different factors, right? So there's no, there's no guarantee.
Tommy Truong: Yeah, definitely. Well, it's risk and reward, right? So if, what would it, what is, why should somebody consider a third party provider for the delivery?
Scott Prisco: Well, I think you get the benefit. With that without with less, you can still get, you still get some upside, not as much as if you did it on your own. But without as much downside. Right. So you're, you're, it's a, it's a more plug and play solution. And you, you have someone like, like a Presti who can come in and understands the business and has been doing this for years and have, have seen what works and what doesn't work and adjusted their operations and their technology and their [00:10:00] product based on that.
So you're, you're getting the experience, which ultimately. Could take a long time to learn and then could, make your, your program fail before it even starts, right? So you're, you're setting yourself up for more success and I think you still get the upside long term and you still get the offer, you still get that, that retention for the customers offer them that service.
You know, we have, we have a, a white label solution we call it. It's almost like a das, like a delivery as a service I call it. It's their customer base, their platform. Our operations our SOPs our wherewithal, our technology on the backend for the delivery infrastructure. You know, so you get, you get everything you need.
It's a plug and play solution to, you know, retain customers. And then, you know, you also get a lead gen solution in the biscotti virtual retailer that's gonna help drive more sales that you might have not otherwise had.
Tommy Truong: What's the typical cost per transaction on, on those two?
Scott Prisco: For our services, we charge around, around 20% for the marketplace, for our [00:11:00] lead gen marketplace. And then around 15% for the white label.
Tommy Truong: What's the minimum order? Do you guys have?
Scott Prisco: 70. 70, no, $70. Yeah.
Tommy Truong: Okay. So I'm just working through the math. So if you are if call it a hundred, a hundred dollars order, unit 50. 15 goes to delivery. So 35, so your margins are 35, but then again, 35, your, your labor costs in store is roughly 20%. So if you don't have to pay labor costs, so your, your delivery service covers really covers the labor costs.
So your, your running on economies of scale really.
Scott Prisco: Yes. So we we're able to, we're not just with the labor costs, but with, um, with the technology cost as well. And then, then the operations, the cost to run that. Yeah, absolutely. So we, we we're able to spread that out across,
Tommy Truong: so what, what if somebody asks you this? Okay. Customer service. I am a stiffler for customer service. That's why [00:12:00] we, we never export our customer service or any we want. We wanna control to make sure that we have control over providing exceptional customer experiences. If when somebody relies on a third party.
They kind of give away that control. So how does customer experience work? What are you looking for? And what happens when, um, an order is say, delivered late or, maybe wrong?
Scott Prisco: Yeah, I mean, I think, I think there's, there's multiple different pieces in the flow of delivery, right from the point of the order being placed to the point that the order being delivered and if you know, the same party is not in control of that whole flow. You're outta the loop, right? So you're getting someone if you don't, if you don't handle, if you're not, if you're not managing the whole flow, you just don't have the best insight into what's going on through the whole process, right?
So, I, I ultimately agree with you, user start experiences, [00:13:00] everything. And I think it's a bad move to outsource customer service. In a whole, like you said, you lose control and you don't have insight into the operation. And to split that up, like we have some dispensaries that want to come in and, you know, handle more than we want them to, and we're just like, look, this is our solution.
Take it or leave it. You know, we know it works best And we, we, we've done this for a long time and, and you know, we know that giving up that piece will create issues. For the operation. And ultimately our business will suffer and people won't get delivery. And because we charge on a percentage base, you know, we'll make less money.
So we're not willing to make that, that ag, that agreement. So ultimately, customer service is everything. And it takes someone to understand the whole flow, how the technology's intertwined, you're dealing with. A an e-com, A POS a state tracking system. You're dealing with bud tenders, you're dealing with fulfillment people, you're dealing with drivers, you're dealing with customers, you know, there's like between the technology and, and then the, the people, there's like eight or nine [00:14:00] different parties involved in the transaction.
It's a lot of moving parts.
Tommy Truong: So if, if, where do. Customers call if their order is late, and who do they talk to and how does that information go back to the dispensary owner?
Scott Prisco: So it depends on what platform. For us, it depends on what platform they're placed, but if the order's placed on the Dispensary's website, we come in and we train the staff on how to handle that, and they take care of that issue. The staff would ha, there'd be a point person in each location, but they would handle that.
Tommy Truong: got it. So somebody that's what is that? What is that word that I'm dispatch? Not a dispatch person, obviously, you know, you have your own dispatch, but somebody that understands where the driver is, can communicate with your team and can be the lead liaison between the customer and, and you guys
Scott Prisco: Yeah. And we have, we're about, we're actually about to launch, like. Uh, one, like a, a better interactive business dashboard and portal where dispensary owner, like dispensary staff can see where the drivers are at all times. So location tracking. [00:15:00] So having that visibility into the operation, they still have that, um, they still have that transparency even though it's, it's, you can say it's outsourced.
So, yeah, it's, it's, it's understanding the flow and there's so much going on. You, you really need to have the people that understand that are, have been involved from start to finish.
Tommy Truong: Got it. You know, that's interesting to me and you know, it's, it all really depends. In my opinion, on the volume. And when you're first starting off, you don't understand the volume. There's an upfront cost, and the service that you guys provide is 15%. So 15% in a dispensary that goes to labor. If you're operating a very, very well run dispensary, your labor cost will be 15% of sales.
That's a very optimal ran operation if for retail now. Delivery may be different, but if, if I was to compare delivery in terms of labor costs compared to say for example, in store, and if it's [00:16:00] consistent, then there may be something there. Obviously, you know, you can have a driver work in the dispensary.
That's probably not optimal. That driver needs to be a driver. Like what do, what are you doing in the back? If you're not, you need a full-time guy driving. Right. So then that, that, that. Then breaks down to how much are you paying a driver? Probably say, say all in $30 or $25, or whatever the case may be with insurance.
And then you just work off the math from there, right? How many orders I'm getting, what is the size of the order? What am I paying this person from a daily perspective? And then what? What am I making off delivery from a daily perspective? And does that go above an over under 15? If it's over 15 or close to $15, then you gotta factor in your other overhead.
Scott Prisco: Yeah, absolutely. Yeah. I mean, we we're trying to keep it cheap. Like you said, you made an important point, the economies of scale. So in the future, like my goal is to make that as cheap as possible and lower our cost to make that as cheap as possible. So for the [00:17:00] cons, for the, for our dispensary partners, almost like we look at it almost like a courier fee, right?
Like a. Like a FedEx fee. It's a flat fee when you go to the FedEx, right? So we're trying to get it there. And as we understand more about data market trends and see things and where things go and how cannabis levels out, I mean, we'll be able to make those adjustments and make it more affordable for our, our customers AK dispensary partners.
Um, it's only gonna come down from there. But yeah, I mean, I think you're right. I mean, when you look at it like that, you know that 15% you're giving to us is essentially. That was, that's what it would cost you in, in labor, let alone, you know, your let alone everything else involved in the transaction.
Tommy Truong: Yeah, that's, that's, it's, it, it, at the end of the day, it becomes a numbers game and I do agree with it. It really depends on the operator guys. If you're listening and you're thinking about delivery and you are. You are really, you feel as [00:18:00] though that you, there's a lot more to give and a lot more attention to give on the retail experience, then it may be a good a good partner to partner up with a solid delivery provider that can round out your services so you can focus on you know, your attention to where you need to in the business.
Scott Prisco: Yeah, I think that's a great point. I think it really all comes down to what's your end goal? What's your end goal? What, what are you trying to accomplish, right? Because that money could be used to go put down a down payment for a new location and get a loan and, and go, go buy or go buy a distressed asset, a distressed dispensary.
So I think it really depends on what, what your ultimate goal is. And it's not it not, it's not just about the numbers and how many deliveries am I gonna do, and is it is the mathematical math, does the mathematics make sense? But, uh, you know, what's my end goal as a, as an entrepreneur or a business owner?
Tommy Truong: So if a, if a business owner was offering delivery through their own platform, so they're in control of their e-commerce, [00:19:00] for example, right? It's not, you, you probably offer both. You probably offer dispensary owners, Hey, off your platform or off our platform. Why wouldn't they, right? Why wouldn't they go on your platform?
That's really a free lead gen, right? You only charging 5% more for that. But they still, you would still control. Your e-commerce side, which is important for a lot of people.
Scott Prisco: Yeah. They want to build their brand too, right? They want to build their brand too, which I say, yeah, that's great. You should do that. You should be building your brand. Right? But again, I think, I think I come from the e-commerce space before I was involved with Prescott. I've done e-comm for a while now, and I think that driving.
E-commerce sales, it's a different style of selling and business than a brick and mortar. So I think that, and that leads to a whole nother problem. I think that the cannabis industry is facing when it comes to just like how these, how things have played out when it comes to the different e-commerce companies.
Just these shitty eye frames and people just throwing them up and thinking it's gonna get [00:20:00] sales. Um, and then that's not the case. Running A DTC business and marketing in that fashion is and the user experience that you have to give is through that to retain customers is completely different than in store.
So it's really like two separate businesses. And if you don't understand that, a lot of these dispensary owners too are, are starting a business from the first time. And they're trying to wrap their head around their, their in-store retail, you know, starting delivery. Maybe, even if it doesn't make financial sense on paper, maybe it's not.
Starting delivery, using someone else. Even if it doesn't make financial sense on paper, maybe it's not the most optimal thing to go do it yourself.
Tommy Truong: Yeah, I've, I've always thought about this idea, and this is probably not the best idea because it takes a lot of resources and, and I, I do think that as a dispensary owner, you do have to. Really, really be hardcore on the Perato principle, the 80 20 rule, and just really, really focus on the activities that generate 80% of your.
Your revenue, your income. But [00:21:00] I, I feel like there's a market that's lost in our industry, and I talked about this a lot with other people where everybody knows about the recreational industry. Rec, the rec market. Everybody knows about the medical market. We are all fighting for the same users really, but not a lot of owners shops and brands really focus on the health and wellness. Industry and the health and wellness industry represents $70 billion, which is a lot more than the rec market today. So we're not talking about vitamins, but we're talking about gut health, right? Ccb, uh, C, B, G, we're talking about sleep. CBN, we're talking about focus and energy, THCV, you know, inflammation.
Everybody knows about that. CBD what are your thoughts on having. E-commerce brand and you know, regulation aside, you set up an e-commerce brand [00:22:00] that's just health focused and you target those users online.
Scott Prisco: I think there's an, I think there's definitely an avenue for it. I, you know, I was involved more on the minor cannabinoid, hemp derived side before I got involved in the recreational adult use cannabis. So it's kind of like my world. I always thought there was a market for it. I think, I think that, and I think as more research comes out with can cannabinoids as a whole.
I think people are seeing that the benefits and how they can be used more on an isolation basis if you isolate them. And I, I think that's where the market is ultimately going. Like issue targeted. Issue targeted. Uh, issue targeted products. Right. But I think right now they get lost. It just, it gets lost in the whole getting high thing.
Right. Like, just get, I wanna get high. So, it's, I think, I think there's gonna be a couple things that needed for that to happen. I think there's gonna be, need to be product I think there's gonna be, need to be a, what's the right term? I'm looking for a, um. Innovation in product. And I think the consumer buying [00:23:00] habits too, um, when you boil it down, like, why am I really consuming cannabis?
Is it to get, just get high or am I taking care of another issue? And can another product be better for this? That's more targeted towards that because someone makes one now. Yeah. So I think I think there's always been a play for that. I've always liked that play almost like a I'd call it like almost like a, like a virtual, like,
Tommy Truong: it's a gold
Scott Prisco: telemed
Tommy Truong: If you look
Scott Prisco: ghost kitchen, but tele, like tele telemed, like almost like towards people, like more InCorp, incorporating the whole person, their wellness. I, I think there definitely is an aspect for that. Yeah.
Tommy Truong: I wonder if I, regulations aside guys, in the restaurant industry, you have ghost kitchens, right? A company can set up a ghost kitchen and they can set up five different brands, load it up onto Uber Eats, and now you're eating Mexican food, you're eating X food, you're eating whatever food. Right? And it's all come from the same kitchen, you know, so they have the economies of scale and they're leveraging a platform like Uber [00:24:00] Eats, which, you know, we don't have in the cannabis industry.
And Scott, I know that you're working towards that, right? Where they can then have distribution. There's not a lot of marketing to a consumer like me, entrepreneur, young family. I care about productivity. I, I'm not a recreational user, but you know, I take mushroom supplements. I take a slew of supplements to increase my energy, increase my focus.
And I know that the cannabinoids that, that we're, uh, that we're starting to see. Can really help with that.
Scott Prisco: Yeah, absolutely. I think there just needs to be more research done and come out and, and I think the federal regulation will allow for that too. That's been a lot of, obviously a big hurdle and uh, I know it affects a lot of things, but, um, in the space. But, uh, yeah, I think that will more, more research and development will allow for that innovation.
But I [00:25:00] agree. I think there's a big market for that piece. I think that's where things are going. I think there's a couple brands doing it really well right now, I think, and have started doing it well, and I'd like to see where things go, uh, and progress.
Tommy Truong: Scott, thank you so much for for joining us today. You shed a lot of knowledge on deliveries when somebody should think about deliveries.
I've, uh, I, I agree with you. I think if you're first starting out, you probably wanna get things settled first, and when you're assessing deliveries, it becomes an economics game and it's definitely a lot cheaper to explore a third party provider that's, that has a good reputation.
Scott Prisco: Yeah. So yeah, ultimately. To sum it up, I think get your operation correct. If you're a dispo listening for this, get your operation correct. Get your bud tenders trained, make customers happy, drive revenue, build up a a customer base and then start to look at ways you can monetize. And then once you look at, you know, start to look at ways, other ways you can monetize.
Think about your end goal. What's my end goal? Like, where, where am I going [00:26:00] with this? Is my goal to build two to three dispensaries and sell it? Or, you know, so like, what, what am I trying to accomplish? And I, I think that if you, if you do that, you'll end up in the, in the right space.
Tommy Truong: Awesome. Well, we gotta have you back on, you gotta share with us the states that you've, oh, where are you live, by the way?
Scott Prisco: Uh, New York.
Tommy Truong: York, or you live in New Jersey too, right?
Scott Prisco: Oh, sorry. No, I thought you meant where am I right now? Yeah. We're live in Jersey. Jersey, yep.
Tommy Truong: Or do you deliver in New York too, or just
Scott Prisco: Not yet. We're not yet Jersey. I mean, not in New York yet. We fo we are focusing on Jersey right now. But New York should be coming maybe in the next 30 days. So we're working on some cool stuff.
So, you know, next time I'll be on, I will, I'll have an update on that, but yeah, I think that's pretty, pretty soon. It's, it's in the works.
Tommy Truong: can our listeners find you?
Scott Prisco: Find, uh, add me on LinkedIn, Instagram Scott Prisco, and then, you know, add me on LinkedIn. You can check out Priscotty HQ, Twitter, uh, Instagram, you know, we, we post some great content.
So yeah, you any of those would work. And just shoot us a message if you wanna [00:27:00] chat and, you know, we can go from there or you can go on priscotty.com for sure too. That's, that's obviously the website's obviously a, a good starting point.
Tommy Truong: Awesome. Scott, thank you so much for joining us.
Scott Prisco: Yeah, no problem.
Tommy Truong: Thank you so much for listening to this episode. I know what you're thinking. Did any of my budtenders win this week? Let's find out.
This week's budtender spotlight goes to Howard Thompson III, who was nominated for being a hardworking person, always in a good mood and constantly looking for projects to improve the business. Great job, Howard. If you'd like to nominate a Budtender, please check out KayaPush's Budtender Spotlight campaign. I'll see you guys next week.
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