We sit down to talk about tech in the retail cannabis space and where he see’s the industry going
In the cannabis industry, technology is quickly reigning supreme over the sloppy handwritten retail solutions of the past. With commercial industry entrepreneurs becoming more and more concerned with streamlining their operations in order to scale, several forward-thinking companies have emerged to create systems to help these businesses grow smarter, not just larger. We sat down with John Yang CEO and Co-Founder of Treez.io, an enterprise software solution company for retailers, about tech in the retail cannabis space and where he see’s the industry going.
Marijuana Retail Report: Could you tell us a little bit about yourself and how you decided to get into the cannabis industry?
John Yang: Yeah. I’m very much a small business person. I immigrated to the states when I was seven. I had the luxury of growing up inside my father’s computer store. He had a computer store back in the mid-early 90s. It was a computer shop, no different than a geek squad within Best Buy; servicing, selling computers, servicing computers software for small businesses like law offices, simple retail shops, dentists offices. Ever since I was 12, I had the mentality of just helping businesses. I was using technologies, I was using software, using hardware, whatever it took to streamline their business. That’s what I was about growing up. That made me look forward to my first job out of college, which was with Accenture, a very big IT consulting firm. There I was doing ERP and business intelligence implementations. The same thing, I would be put into clients, I would take in and absorb all their pain points and I would come up with some solutions through software customizations and developments and provide solutions that work. So Accenture did great with the likes of Healthcare.gov, with the Southwest Airlines kiosks, anything you’ve seen from a technology and software standpoint, Accenture probably took a part in it. I did that for the first eight years of my working life, really wanted to do something on my own, had a point of sale solution at the time. At that time, I was lucky enough to have met my co-founder Sharif who was in the cannabis industry, had been in the cannabis industry for a decade, operating all sorts of businesses, one particularly busy dispensary in Hayward, California. So that’s how this venture, Treez began. This happened a little over three years ago now. Our story is really about cannabis finding tech. Shareef being the cannabis, me being tech. When I met him it was just kind of the same thing I was used to, the same thing I was good at, which was – got a lot of pain points, got a lot of issues, need a solution. Need a solution from the tech perspective. Right? They were doing about four, five hundred tickets a day within the confines of a 900 square foot retail operation. I was really amused because here I am, I’m used to going into a big firm like Toyota and the project always literally begins with “I got a lot of pain points, but I got a lot of different systems.” Legacy systems you have to use to source your data from and those pain points came from there. So there’s not a lot you can do. Right? Here, Shareef came to me and said, “I got a lot of pain points, but here’s an opportunity to build something from scratch, build something that’s purposefully built for a cannabis space.” That’s really how we began a little over three years ago.
Marijuana Retail Report: Being a tech company in a non-traditional tech space, how do you see seed to sale systems, inventory management, real-time delivery tracking, and other systems come together in the future for the industry?
John Yang: Yeah, I think there’s a lot of consolidation that’s going to be in play. Point of sale systems in general, which is the sale side of seed to sale, is fragmented. In any other vertical, you look at retail, you look at restaurants; there are thousands if not tens of thousands just in the states alone, software providers. I think a lot of them operate the same way, even in cannabis. We’re in a particular market, in a very special small niche and we grow out of that market. Luckily for us, we’re in a California market, so it’s going to be projected to be about 50% of the US, in terms of revenue generated. The marriage of technology is going to come from all sorts and avenues. Right? It’s not just gonna be the point of sale. It’s not just going to be the cultivation tracking software or the manufacturing tracking software. Let’s just put into perspective of a dispensary owner. What they need to worry about day to day, is a lot. The point of sale isn’t going to solve it all. They’ll need the point of sale, they’ll need maybe some loyalty management software, they’ll need some route tracking if they do delivery. If they do delivery, they’ll need some kind of online presence. So a lot of components will have to come together to provide a solution for an operator. Whether that operator is a dispensary or a cultivator, or whatever in the cannabis space. I think a lot of software companies will appear and will come out of the woods, and the good ones that survive, they will either consolidate into a company, or they’ll consolidate into integrations that work very well with each other.
Marijuana Retail Report: Do you sort of feel that there’s still a lot lacking right now in the industry as far as a lot of these tracking and technologies go? If so, how are you working to placate those issues?
John Yang: Yeah, that’s a great question. That’s why we started. We felt there was something lacking. Right? The tech space in cannabis is largely complacent and it’s complacent for good reason. There’s not a lot of investments in the space. Even today, it’s hard to raise money. When it’s hard to raise money, you don’t get a lot of innovative ideas, you don’t get a lot of innovative people that are daring enough to come into the space and can be capitalized for success. Therefore, when we started we had the fortunes of being somewhat of a consulting company to a lot of these businesses early on, where Shareef contracted me as a one on one project to get things started. So we had capital. It was funded by a dispensary. We got off the ground well. We, at the time, aimed to solve the problem of, “Look, the early incumbents in the seed to sale space, did a great job seven or eight years ago. They pioneered the space. They gave the Mom and Pop shops something to work with, to be compliant, to be legitimate, to actually just be able to track things. Going from pen and paper to something digitized allows them to track things accurately.” The problem was exactly what I just said. That software early on was built for mom and pop operators with a much smaller volume. If you imagine the average ticket for a dispensary seven to eight years ago, it was probably in double digits. Right? Now it’s commonplace to be in triple digits for a dispensary in the terms of the number of tickets. When you grow with a software that didn’t adapt to that growth, then you’re really growing linearly. Meaning if I grow from 100 patients or tickets in a day to two, to three hundred in a single day, I might have to anticipate throwing a lot more labor at a problem. I mean if I threw a lot more point of sale terminals at the problem then I could meet that demand. But that’s not growing smartly. Right? We saw the opportunity and really the void of a software that could help operators grow exponentially. That’s what we set out to do three years ago and there’s a lot left to be done in the sense that there’s a lot of workflow issues that can be solved. Some of it, like I mentioned earlier, can be solved from the seed to sale provider. Some of it can’t, we simply can’t fix every problem and do everything ourselves. Therefore some of it, those voids could be solved by a value-add software provider that we integrate with.
Marijuana Retail Report: Do you feel that the current federal administration is creating fear in some of these innovative companies? Meaning as a canna-business owner or one that supports the industry through a value-add business, would you see that as a true worry for your business or a temporary situation?
John Yang: It’s definitely not a fear. No, complaints of any sort is an opportunity. Right? We teach our employees never to complain. Right? Always find opportunities. I feel like what’s happening at the federal level, although unfortunate, in some cases is fortunate for the companies that are persistent, the scrappy startups like ourselves. It’s an opportunity to build into a space where if it was federally legal now, or five years ago, ten years ago, then you’ve got the likes of Oracle, MICROS, and all those other software companies that’s already going to be in the space and that’s going to thrive well with pain solutions. But because of where we are in the landscape, investment capital is hard to come by, but if you persist enough, you can prove with the little money that you could raise, that you could do very well with it and execute well with it, then we’re setting ourselves up for success. Because of the void of the larger investors, then the larger players aren’t in the space yet. That allows us the breathing room and the opportunity to execute. By the time federal legalization comes around, then our company will be big enough and poised for an acquisition or for an exit when the larger players with the money come in.
Marijuana Retail Report: You spoke a little bit about legalization. Do you see that as a being positive progress for your business as the expansion of medical marijuana to recreational?
John Yang: When recreational rolled out in certain states, we saw our clients growth from that was about a three to four x-growth in certain locations that they had. That’s why they need great software that can grow exponentially with them because even if they had a three thousand square foot space, there still wasn’t enough labor or terminals they could throw at that equation to make it work. As I stated earlier, going from two hundred tickets a day to six, seven hundred tickets a day, they needed something much better, much more streamlined. We definitely see the legalization of recreational use as a huge boom for what we provide and for the industry as a whole.
Marijuana Retail Report: Do you see the whole banking industry as a problem that can be solved by the tech industry? For example, do you see blockchain technology as stepping in to take care of the whole cash system, which has been kind of the industry’s bread and butter for a long time?
John Yang: Yeah, I believe in blockchain. I don’t think that necessarily Bitcoin and whatnot, the currency, in general, will marry well with the cannabis base in the short term. That’s just because you’re putting essentially two very largely scrutinized industries in one and that’s gonna be a prime target for the government if they want to crack down on it. So, I don’t see that as some means of immediately being able to solve the payments issue. Payment solution’s out there. We heard from the next best PBM solution coming to us, wanted to integrate, but about six months later, a year later, they fizzled out. Because until the interchange, the VISA, MASTERCARD, and whatnot, allows and recognizes cannabis as a legitimate business, it’s just not going to be allowed, that’s the bottom line. However, that does not forbid tech companies from being creative or financial companies from being creative. There’s going to be and there are, we’ve already seen, companies in the works that’s going to operate in a legitimate way that’s going to allow for payments and payments can come in different forms. Right? It could be ACH payments, it could be some kind of form of payment that’s recognized and powered by some kind of blockchain technology. But true payments in terms of being able to literally process a VISA card or a MASTERCARD, it’s gonna be still a ways away and that’s not something that tech creatively could come up with a solution for, not in the short term.
Marijuana Retail Report: What are some best practices that you could offer to some of these dispensary owners who maybe are just getting started, maybe are trying to figure out how better to situate their business for the retail space?
John Yang: Yeah, have an open mind. We talk about this every single week with our customer success team. About 40% of our company is made up of customer success or customer service personnel, largely because changing a system usually equates to changing some processes. These processes, if we do our job correctly, will be considered best practice if they adapted to it. But change is very difficult. Right? It requires some hand holding. I would just recommend these cannaprenuers to have an open mind. When you believe in the dream of operating like a big player, like a Harborside, like a Med Men, like a whomever that they look up to; that has to be a top-down decision so that not only you as the owner, as the decision maker buying into it, but all of your staff, your middle managers and down to the person that’s maybe the security guard opening the door has to buy into the change. I think what’s largely devoid and I’ve mentioned to you on occasions in this industry, is some best practices content out that teaches people, “How do you intake patients in a medical space, let’s say up to four, five hundred patients a day with just one intake person and one security position.” Did you even know that was possible? We want to do a better job as us, as part of a scrappy startup growing up and being more mature, we want to offer some of those insights back to the industry. We want to start posting some content and series of articles that helps tell people what are the best practices in our space. I’ll give you an example here of best practice. One of the best practices that we harp on, that we actually developed a module specifically to handle this is, that’s the thing about discounting. I was part of a lot of deployments in our dispensaries and I literally witnessed one transaction from start to finish, and I timed it, that lasted one hour. Right? That’s not a joke. This dispensary did well because they literally had a binder full of discounts. They had discounts for weekends, they had discounts for happy hour, they had discounts for being a veteran. They had literally a binder showing the various discounts and now if you are a buyer that happened to be picky, that happened to like to be conversational and that happened to want to take advantage of every little nook and cranny discount that you can come up with, you can imagine how that conversation starts to trend. By the half-hour mark, you’d think as a budtender that you’ve finally arrived at a total, only to throw that completely out the window because they wanted to add one more item. That one more item could have added a minimum that allows for another discount to apply that then would have been stackable with some other discount, and it was solutions we had today, even ourselves included as a learning process, even us, we couldn’t handle. Literally, pull out a calculator, pull out a pen and paper, pull out something to help you figure out all the discounts and at the end make sure the customer has agreed to it and then so, by the 50-minute mark, once that was agreed upon, the receipt printed. The customer then took a look at it and took their time using a pen and a calculator to figure out if they got the right discounts. Right? Best practice here in our is system is, “All right, you know what, we need a very robust discount engine.” That discount engine has to be something that’s built for the cannabis, that speaks cannabis lingo, that literally the next time at the point of sale, you’re going to scan items and it’s either going to be applicable for a discount or not. It’s going to do all this magic that you had to do manually via pen and paper or calculator by itself. So there’s no guessing and there’s definitely no manual discounting at the point of sale. Let’s speed up the transaction, let’s get all the math handled and the best practice here is if you have this binder full of discounts, do it in January first, do it for the rest of the year, and just really set it and forget it. The only discount that ever happens at the point of sale is something like maybe a compensatory. Right? Maybe there’s an upset customer, you give the GM the only person with the right to manually discount, otherwise, have it all self-calculating, have it all fixed. If you could do it to that extent through software and through a buy-in across all of your staff members, then you’re going to be able to speed up those transactions. You’re not gonna lose money at the end of the day.
Marijuana Retail Report: When picking out technologies for a dispensary, what are some things they should want to look for and what are something red flags to avoid?
John Yang: Yeah, this is a great question. When you’re looking for a point of sale, if I place myself in the position of a dispensary owner, what I want to think about are what are my top three, four, five pain points. I need to ask those questions across the board. I need to ask that of my inventory staff, I need to ask that of my security staff, I need to ask that of my budtenders. So across the board, I need to understand what are my pain points. Cause I can only turn pain points into something that’s quantifiable in terms of ROI. If a software system can prove to me that I’m saving labor, literally reducing headcount through their software, then that’s a quantifiable ROI. If there’s a system that can help me curb theft and diversion that’s happening perhaps in inventory, then that’s something I can turn my attention towards. If I lose ten fewer items or a few pounds less a month, then that means, in my pocket, I would have five, six, seven thousand dollars more, then that’s something that for me it’s easily justifiable. But everyone’s pain point is different depending on the market. NorCal and SoCal have very different cultures, very different mentalities and so, therefore, their pain points are different. So there’s a golden answer, and it’s definitely not a decision based purely on price. It’s going to be a top-down decision but with feedback from everyone, that’s going to be using the system.
Marijuana Retail Report: Do you see vending machines as a viable option in the future?
John Yang: Yeah, we love vending machines. Where legality would allow for it, it is definitely a solution that can marry well with the point of sale system. Grasshopper comes to mind as they’re an integration partner that we’re targeting. We met them on several occasions throughout the different conferences. They’re very robust looking vending machines with some Amazon, pick up locker type of hardware. We would love to marry a good inventory management system with that. Now you’re reducing labor. Right? You’re reducing counting and the discrepancies within their inventory. With a machine that can operate, that can also help with some volume issues that you may be facing. If a customer goes in and they know what they want, then skip the line, that reduces the turnaround time per person. You can just walk in and pick it up from the Amazon style locker or you could pick it up from the vending machine that has the exact product you’re looking for.
Marijuana Retail Report: What do you see for the future of the industry?
John Yang: Yeah, we want to, through our platform, we want to help legitimize this industry and if we want to put it into that scope of mind, it’s going to mean ordering cannabis is no different than ordering food. Shopping all around for cannabis is no different than the traditional retail experience. We want to bring it to par first of all with the other verticals. The other verticals have an advantage, they have payments. But we can get creative. We can get creative and we have our own workflow issues to solve for and once we’ve solved for those, we can be at par with the other vertical retailers or the other retail verticals across the industry.
Marijuana Retail Report: What do you see as next for you and for Treez?
John Yang: Yeah, next we want to think about expansion. So today we’re in California predominantly, but we have clients out in Florida and in Arizona and Nevada. We want to enter a lot more states. We feel like in California we’re doing very well and we have a lot of name recognition and a lot of operators on our platform. We want to bring out that expertise and package it into software that is now deployable to, let’s say Colorado, let’s say Michigan. Right? So we want to think about expansion. We want to think about some other component within the operators, within let’s say the cultivators, the manufactures, and the retailers. How do we create synergist modules that can tie each of those together? Let’s give a simple example for this. At Costco at the end of the night, nobody working there worries about, “I need to resupply my peanut butter. I need to resupply my X, Y or Z products.” The supply chain comes in to do that every single night and that’s the same for grocery stores. Right? We want to use software to help power some of those automations to the point where if a dispensary has 20 or 30 so vendors, the vendors are notified when they’re running low on items and those vendors can come in just like any other space and be able to restock the items that the dispensary needs. So, short of extension, we want to be better at our own software and every year there’s going to be a good slew of new technology that we’re gonna be able to bring and deploy to the industry that helps everyone streamline their operations.