How Higher Level Increased Repeat Customers and Were Successfully Acquired with Treez
Meet Higher Level
Location: Seaside, Hollister, Greenfield, CA
Mission: Providing second to none medicine and customer service to Monterey County
Higher Level was held back by their previous POS and unable to pull reliable reports. Their payments weren’t integrated with their point of sale system, leaving too many opportunities for human error, which hurt their expanding business.
By upgrading their point of sale system to Treez and adding debit and ACH payments, Higher Level has reduced staff error, abated customer fatigue, and streamlined unnecessary steps. At the same time, the dispensary has increased its Average Order Value, for debit by 20% and for ACH transactions by more than 30%. Getting budtenders on board to educate end-consumers has been simple too. Budtenders have seen an increase in tips which has boosted morale, and adherence to store upselling procedures. The dispensary leveraged Treez Retail Analytics’ reporting to satisfy due diligence inquiries and close on an acquisition by vertically-integrated cannabis brand Gold Flora.
A Place in the Community
Higher Level boasts a total of 4 locations, all in the Monterey Bay area of Central California. Its Seaside and Hollister locations have both been acquired by vertically-integrated cannabis company Gold Flora. Its Greenfield location continues to operate as an independent venture. The Carmel location goes by another name, Joint Venture. It is a literal joint venture between Salvatore Palma, founder of Higher Level, and founders of Big Sur Canna+Botanicals Aram Stoney and John Defloria. A Fresno location of Higher Level is scheduled to open in early 2024.
“We are so proud to be a part of a county like Monterey, and we do our best to get as many local quality products on our shelves as possible,” Higher Level shares on their website. They encourage their patients and customers to support the local cannabis community by shopping for local products from Monterey and Santa Cruz.
Higher Level began as a medical cannabis dispensary in San Diego in 2010. In early 2015, the founders saw a need for safe access for medical marijuana patients in their local community of Monterey County and refocused their efforts there. Higher Level Collective opened its doors in June 2015.
In 2020, it became apparent that Higher Level needed to graduate to one unified point of sale at all their locations. With one store on Greenbits, another on IndicaOnline, and several cannabis point of sale systems to investigate, Licata took on the project of finding the next step for Higher Level’s POS.
“I was responsible for locating a better system that was cohesive, and fit for the rapid expansion we were experiencing. Through industry discussion and just talking to different people, I found Treez to be the Rolls-Royce of POS systems,” Licata said. “It was one of the few that split inventory management and product management up. It had a lot more advanced features when it came to discount scheduling. The reporting was much more robust. Ultimately it just made perfect sense to take a leap of faith and try something new.”
And how has the switch been treating the Monterey County establishment?
“Since we've jumped on Treez, it has saved us a lot of time. We were able to align our operations,” Licata said.
“When Gold Flora started to look at us and go, 'Hey, you know, maybe we're interested in purchasing some of your companies,' they requested quite a bit of due diligence, and without Treez, that process would have been an absolute nightmare,“ said Tyler Licata, Director of Operations at Higher Level Dispensaries, who has been with the dispensary since 2020, and the cannabis industry since 2016. “Just the fact that Treez was going towards the SOC compliance standards was pretty much the sole reason we were able to get through it.
What did the acquisition process entail?
“There were a lot of rollbacks – so they wanted to take our inventory at a point in time and roll it back and see if it matched the actual activity between those periods. That was quite literally impossible before, but using activity reports, we were able to do exactly that,” Licata said. “[Robust reporting and rollback capabilities] makes it much more attainable for a small fish in a huge pond to be chosen and to go through that gauntlet all the way.”
Meanwhile, the pressure to add cashless payments mounted as neighboring dispensary competitors started to accept cards. It wasn’t enough to have an ATM machine off to the side of the counters.
“We started to receive more and more questions from customers going, ‘Hey, when are you guys going to accept card payments?’ ‘You know I only have so much cash on me’ ‘I’m getting tired of waiting in line at the ATM.’”
When it was operating on Greenbits, Higher Level ultimately chose not to add cashless payments. Those options were not integrated, which would have spelled extra legwork and compliance concerns it couldn’t risk.
“Once we were introduced to TreezPay and the fact that it was completely integrated with Treez, the options opened up,” said Licata.
Integrated cashless payments let Higher Level staff offer customers the convenience of checking out with a card without a second step required. Because Higher Level implemented SellTreez a year prior, all staff knew how to complete a transaction in Treez with cash, and after TreezPay debit was added, the only change was charging a card instead of collecting cash at the transaction’s end.
Budtenders’ Best Friend
Budtenders also have embraced the new payment options, which have led to bigger purchases with heftier tips. Higher Level nearly doubled their average tip out after adding ACH. Budtenders know, customers aren’t very likely to hand back the change they’ve just received or dip into their pockets to fill a tip jar. They are, however, more prone to tap and add a tip onto their cashless transaction. More tips have obviously boosted morale. Cashless payments have also increased budtenders’ adherence to upselling processes and practices, likely in part due to the chance at increasing their tip. They also feel empowered to promote an add-on since they know their customer won’t be inconvenienced with another trip to the ATM if their cart gets too full.
In the months after implementing ACH, Higher Level has seen a notably higher customer repeat rate in comparison to other payment methods. The sample size of customers using ACH is smaller than cash or card customers, but the loyalty of this customer subset is unmatched. In October 2023, Higher Level saw a repeat rate of 100% of customers who used ACH in the previous month. This makes sense when you consider the slightly higher barrier to entry when it comes to ACH payments, entering details and connecting a bank account. But once an account has been created and connected, ACH customers can complete a transaction faster than many customers can locate a card in their wallet.
Know Your Customer
Prior to adding cashless payments, Higher Level customers were most likely to be a “daily smoker” type. They had a set amount of cash they were willing to spend on cannabis and came in to purchase just that amount, three times a week or so. Licata also identified a segment of consumers who came in early in the morning or late at night, and could be described as being embarrassed of their consumption. They felt uncomfortable engaging in “abnormal commerce”, pulling cash out of an ATM.
After adding cashless payment options, Higher Level noticed a diversification of their customer types, including the hours they kept. More people were dropping by in the middle of the day, after their run on the beach, with just their ID, their phone and a card on them. These customers took advantage of the convenience of card payments. Others were tacking on a dispensary run to their other evening errands like the grocery store and pharmacy, choosing to preorder and prepay with ACH.
“It was almost like the thing that was keeping us as this separate entity, even though we are just another retail location,” said Licata. “We're selling products just like Vitamin Shoppe, it just happens to be cannabis. [Adding cashless options] took the discomfort of buying cannabis away from the customer. It normalized it and made the experience more comfortable for the customer overall.”
Another customer subset that increased after cashless payments went online at Higher Level were the “get in, get out” big spenders. This demographic tends to already know what they’re looking to purchase, and they do so in large amounts. They prefer the convenience, focus, and solitude of an online-ordering experience. Higher Level sees the impact of that buying style clearly within Retail Analytics. Customers who preorder and use ACH tend to spend more than $30 per order on top of what a cash-only consumer would.
When they added cashless payments, Higher Level set up a shopping experience much more like the wider retail shopping experience. Any and all customers are welcome to shop and pay the way that works best for them. If a customer is interested in a consultation, they have that option available to them but if they’re more like a “daily smoker” type, the quick in and quick out shopping that ACH and cashless payments allow works better for their easy-going re-up style.
Cannabis may be one of the last industries where a customer is asked to carry such a significant mental load during a transaction. Shopping for cannabis already is an experience filled with percentages and metric conversions. Without cashless payments, Higher Level's customers were stuck holding more than just their purchases. They were budgeting with cash when the price tag doesn’t fit neatly into $20 denominations, ATM fees and networks, hitting their withdrawal limit on an ATM and having to return an exciting new product or strain. Before cashless payments were added, Higher Level even experienced frustrated customers walking out.
“Customer fatigue started to reduce the minute we put TreezPay into play. When we added ACH it started to go down, but when we added [the ability to accept cards], the customer process became a more natural flow, something more akin to what we experience in any other retail store,” said Licata.
How Higher Level Increased ACH Usage
Despite its high earning potential and its security and stability, ACH does have a higher barrier to entry than card or cash payments. Even though subsequent purchases are some of the most seamless, a first purchase on ACH does require a bit of preparation, in entering bank and identity details.
Until customer education has reached a saturation point, however, Higher Level will reserve ACH as an online-only payment method.
“Right now we only offer it as an integration on our online menu. So you can pay with ACH online, but we do not offer an in-store product.” What’s the retailer’s reasoning for this half-rollout of the product first? “[Customers’ bank details] are likely on their desktop, they're ordering on their desktop from home. It seems like there's less stress behind the setup process.”
Higher Level has headed off some of that initial stalling and encouraged customers to utilize the newest and most secure payment offering through customer education.
They have in-store signage and assets, plus an educational page on their website explaining the basics of cashless payments. The dispensary is also running incentives or “deferred discount promotions'' to increase uptake of ACH. If customers spend $100 on the first purchase with ACH, Higher Level rewards them with $10 cash back on their next purchase. This incentive is absolutely creating stickiness, with more than $6,000 in revenue directly attributable to the campaign.
“These were customers previously paying with cash. Now that we have them on ACH, it's easy to get them to come back,” said Licata.
Weathering a Stormy Time in Cannabis With Cashless Payments
As any owner or operator in the cannabis industry can tell you, the past few years have been especially trying. Sales have dipped after the 2020 boom. Higher Level is no stranger to lighter sales overall, as customers are staying home less, have tighter wallets themselves, and are making fewer big ticket purchases. As data-driven operators, Higher Level has kept an eye on the industry and forecasted their 2021 and 2022 years to be lighter as a result. But adding TreezPay has actually helped them defy those forecasted numbers.
“We are anticipating lower numbers, but the increased AOV on TreezPay cushioned that impact,” said Licata. Higher Level’s sales numbers have come in 8% above what the year end was predicted to be.
“[Adding TreezPay cashless payments] reduced the amount of loss that we had [year over year] from 2021-2023,” he said.
TreezPay is the Future
As Higher Level sets sights on the future, plans are already in motion to bring the convenience of TreezPay to their Greenfield,Carmel and upcoming Fresno locations. Carmel’s clientbase heavily tends towards commuters.
"If there is any inconvenience at all, they are not going to show up," said Licata. "With the addition of credit and ACH, the hope is to reduce frustration and increase sales overall."
Ultimately, the plan is to diversify cashless payment products across all four stores, molding the customer experience into something as straightforward and comfortable as shopping at any other retail outlet.
Speed and Efficiency with TreezPay One App
What's driving this expansion? It's the TreezPay One App, a common application that lets retailers apply, and get expedited approvals for, all of TreezPay cashless payment options. One application submission unlocks potential approval for every TreezPay product including ACH and card payments. By gaining approval for multiple products, retailers can nimbly navigate the dynamic cashless payments space. The app's quick application process serves as an accelerant, keeping the Higher Level team from losing steam.
"If I can put it through an application like this, get it rolled out, start testing, I am more than willing to move forward with it. So just kind of the fatigue of the whole process is totally eliminated by this new process," Licata said.
Licata has spent almost 8 years in the cannabis industry and finds himself genuinely impressed by the application.
"I never thought I'd find myself impressed by a merchant processor application, yet somehow TreezPay One has done it. Getting signed up takes less than a minute, and the application itself is a breeze compared to any other process I've personally encountered," he said.
The TreezPay One App is a game-changer, slashing through the red tape and streamlining the entire payment process. With Treez on its side, Higher Level is setting the standard for convenience and customer experience in the cannabis industry.
Higher Level's strategic adoption of Treez's point of sale system and integration of cashless payment options, including ACH, significantly enhanced their operational efficiency and customer experience.
Not only did they streamline their inventory and product management but they also improved reporting reliability. This turned out to be a critical factor for business growth and ultimately acquisition readiness.
The dispensary chose to educate both staff and customers on the benefits of these new payment methods, which led to a substantial increase in AOV and repeat customer rates, notably for ACH transactions. This customer-centric approach, plus the ease of TreezPay, has not only boosted staff morale through increased tips and diversified their customer base.
Higher Level's success story underscores the transformative impact of innovative payment solutions and data-driven insights in the competitive cannabis retail industry, setting a new standard for customer convenience and operational excellence. Their journey from facing challenges with their previous systems to achieving increased profitability and customer stickiness should serve as an inspiring example for others in the industry.