Stop Over-Discounting in 2025: Here’s How It’s Hurting Your Store

1. Lower Profit Margins

One of the biggest pitfalls of frequent discounting is the impact on profit margins. The industry is already notorious for its high taxes, regulatory costs, and the expense of premium products. With these financial pressures, many cannabis retailers are already operating with tight margins as it is.

By offering deep discounts too often, you’re not just eating into profits—you’re setting a dangerous precedent. Over time, it becomes harder to raise prices back up without losing customers, and the cycle of discounting can quickly spiral out of control. This can lead to unsustainable pricing and potentially financial strain, making it harder for your business to stay afloat.

Consider Headset’s data from the post-holiday period: dispensaries that offered discounts during Green Wednesday and Thanksgiving season show varied results.

Source: Headset (2024) - LinkedIn Post

Stores that stayed in the “green” zone saw revenue and profit grow at similar rates, maintaining healthy margins. However, as the results shifted to the “red” zone, over-discounting became apparent—higher sales, but shrinking profit margins. The median store saw a 73.6% increase in revenue, but only a 52.5% increase in profit.

While that’s still solid sales growth, it shows how over-discounting can distort profitability. 

2. Damage to your Brand's Reputation

Frequent discounting can also harm your brand image.

If customers get used to buying your products at a lower price, they may start associating your brand with cheapness rather than quality. In the saturated market, customers are becoming more educated and discerning, so the quality perception matters more than ever.

And when consumers begin expecting discounts, it can be difficult to charge full price for premium products. High-end brands, whether in cannabis or other industries, maintain their exclusivity by offering limited-time offers or by tapping into other buying motivators like gamified loyalty, product bundling and not constantly slashing prices.

3. Attracting the Wrong Customers

Excessive discounting often attracts price-sensitive shoppers who are loyal to low prices but not to your brand. These customers will jump ship the moment a competitor offers a better deal! After all, market research shows that customers shop routinely shops between 2-3 dispensaries at any given time.

While discounts may draw in a crowd, they don’t build the kind of long-term customer loyalty you need for sustained success.

True brand loyalty is built on the quality of your products, exceptional customer service, and a strong brand experience—none of which are cultivated through constant price cuts. By relying on discounts, you're training your customers to focus solely on price, undermining the price integrity of your products.

4. Price Wars

When multiple dispensaries in the same market start slashing prices, it can lead to a “race to the bottom.” While large chains may have the financial resources to sustain lower margins, smaller retailers—especially independent shops—often can’t keep up. This can result in the closure of local businesses and the consolidation of the market under a few big players.

Price wars hurt the overall cannabis ecosystem, reducing market diversity and making it harder for smaller dispensaries to survive. But ultimately, this hurts the customer experience by reducing the variety of choices available and making the market less vibrant.

5. Employee Impact

The negative effects of discounting extend beyond just sales and marketing—they also trickle down to your own teams. 

Retailers that rely heavily on discounts may pressure staff to upsell additional products to compensate for the lost revenue. This can lead to employee burnout and dissatisfaction, particularly if staff feel they’re constantly pushing promotions instead of focusing on delivering an exceptional customer experience.

Moreover, frequent discounting can create operational headaches. Retailers may struggle with inventory management, overstocking slow-moving products, or rushing to meet discount deadlines. This creates unnecessary stress for your team and operational inefficiencies that can impact your business in other ways.

How to Drive More Customers with Less 

So how can retailers avoid this hurtful tactic? Here are some strategies that can help:

Focus on value, not price alone - Instead of constantly offering discounts, think about how you can add value for customers. This could include offering bundled deals, special access to limited-edition products, or getting them on your VIP mobile app so they’re always part of your exclusive community.

Loyalty Programs: Create incentives for repeat customers by offering exclusive coupons, early access to new products, or getting them on your digital punch card program. This encourages long-term relationships without the need for constant price slashing.

Customer Education: Focus on enriching the customer-budtender experience and product education. When customers understand the value of what they’re buying, they’re more likely to pay full price.

Targeted & Personalized offers: Rather than offering blanket discounts, focus on more tailored promotions that align with seasonal trends and your customers' specific preferences. This approach makes discounts feel like a special, personalized offer, rather than a routine sale available to anyone who walks through your door.

Think Twice 

While discounts can provide a quick sales boost, over-discounting can damage your business in the long run. From eroding profit margins to devaluing your brand, excessive price cuts can set you back more than you realize.

So, before you offer that next discount, ask yourself: Is this strategy benefiting our business long-term, or just a short-term fix? If it’s the latter, then consider reaching out to us or any of our award-winning partners.

Looking to build a more sustainable retail business in 2025? Get in touch with Digital Awesome to explore revenue-boosting, loyalty-building mobile apps that help you reduce reliance on frequent discounting—and much more. 

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