2025 saw most businesses scrutinizing their operations to trim margins and survive the tumultuous market. 2026 is about digging deeper to uncover hidden costs that will further improve their bottom line.  

Tom Zuber, partner at Zuber Lawler, led a panel discussion at the recent IgniteNJ event, where experts offered advice on margin discipline and where to cut costs.

What to Consider When Entering A New Market

Trent Woloveck, Chief Strategy Officer at Jushi Holdings, says retailers entering a new market must evaluate three core cost centers: labor, compliance, and real estate.

Operators should closely analyze traffic patterns, peak hours, and staffing models to understand true operating costs and potential revenue. Retail, he notes, is a people-centric business where customer experience cannot be sacrificed, even in a margin-compressed environment.

Engaging with local authorities and community leaders is essential for educating lawmakers and shaping favorable, reasonable legislation. Woloveck emphasizes the importance of being a responsible operator so that regulators do not feel as though the sky is falling simply because they legalized medical and/or adult-use cannabis.

When it comes to real estate, Woloveck stresses the importance of a “main on main” location with high traffic counts, adequate parking, and strong signage, while keeping rent between 3% and 5% of total projected revenue as a benchmark for profitability. He acknowledges that securing prime locations remains one of the harder costs to control, largely because many landlords near malls or carrying mortgages on their properties are still unwilling to lease to cannabis operators. Woloveck is optimistic that federal rescheduling will expand that pool of willing landlords, increasing supply and putting downward pressure on rents. He draws a parallel to COVID-era lease concessions that proved beneficial for operators in markets like Virginia.

Battling Price Compression

While retailers are combating price compression that is driving down basket size, Travis Scadron, EVP at Surfside, suggests other ways to increase margins by passing merchandising costs onto brands and monetizing the real estate on your website. He cites Amazon as an example, noting that 68% of the profit on Amazon’s e-commerce platform comes from advertising sales. He stressed the importance of pushing the right products at the right time and with the right pricing.

Trip McDermott, COO of Verano, a vertically integrated operator, says the company is seeing margin erosion across all areas of the supply chain. He specifically pointed to cultivation, noting that labor prices are rising, as are input costs such as salts, nutrients, and coco. On the retail side, he said labor costs are also increasing, compounded by mounting pressure to discount.

“So, there’s erosion happening everywhere, but it’s where you can control part of that erosion, which is going to be around reducing turnover of your employees, trying to get more out of them, continuous training so you’re not having to rehire, improving efficiencies so that you’re getting more units per head out of all those employees,” he advised. “Automate where you can without sacrificing quality, and really look into the data to understand where there’s opportunity for improvement,” he added.

McDermott highlighted extraction processes as an area where costs are easily overlooked. Operators who are not capturing data on their extraction yields may be quietly eroding their margins without realizing it. Key questions to ask include: What are your inputs? Is it trim or flower? What are the yields on the other end of the extraction process? “I would say that’s an area for improvement, a lot of operators should really focus on,” said McDermott. “Capturing that data is not only important for fully understanding your cost of goods, but it also adds up to a lot of money at the end of the day.”

Customers First

Krista Raymer, Chief Strategy Officer at C3 Industries, cautions operators against cutting costs in areas that directly impact the customer experience. In a market where a core group of loyal customers drives the bulk of transactions, she argues that retaining existing customers is just as important as acquiring new ones. Labor reductions, shifts in inventory assortment, and changes to the marketing mix can all have unintended consequences for the in-store experience if not carefully considered in advance.

The Hidden Risks of Inventory

On the inventory side, Raymer warns that carrying costs can quietly balloon as operators chase newness and freshness to satisfy customer demand, which does not always align with how quickly the product actually moves. Maintaining analytical control over inventory is critical to avoiding dollars tied up in slow-moving product. Tom Zuber echoed the point, noting that buyers need to stock what actually sells and not be influenced by vendor friendships. If a brand does not meet customer expectations, it will sit on the shelf as dead weight, becoming a direct drag on the store’s bottom line.

Verano’s McDermott adds another dimension to the inventory conversation, pointing to product costing at the facility level as one of the most under-invested areas in the industry. He argues that implementing an ERP system to accurately understand the true cost of producing each product is foundational to becoming a fully dialed-in operator. The process is not easy, but McDermott says it will identify weaknesses and pinpoint where products are underperforming, providing direction for SKU rationalization. Without that level of product cost of goods, he warns, operators are likely working from their gut, which is further off than they realize.

Flexibility and Market Pivots are Key

Woloveck notes that rather than spreading thin across many markets, Jushi has shifted its strategy toward going wider and deeper in select states, pulling back on store expansion after a 40% increase in store count and redirecting dollars toward cultivation buildouts in high-opportunity markets like Virginia and Pennsylvania. He noted that this “concentrate and win” approach has become a common strategy across both public and private MSOs.

On vertical integration, the panelists offered contrasting views. Verano’s McDermott says that being vertically integrated in New Jersey has been an advantage, allowing the company to capture margins at every stage and bring new products to market where it can be more price-competitive in the wholesale space, particularly as newer brands use price as a competitive weapon.

Raymer says the company assesses each operation state by state and that vertical integration is not a one-size-fits-all strategy. In New Jersey, C3 operates without vertical integration, and Raymer says that works because it allows them to experiment with the market without operational pressure. In Missouri, by contrast, the company is fully vertical, targeting a set percentage of its own product through retail. As wholesale costs evolve and markets mature, she suggests the evaluation around vertical integration will continue to shift. “It just depends on where the state is, both from a cost to produce, as well as what the wholesale costs look like within that market,” she said.

Looking at Product Margins From Different Angles

Raymer says C3 Industries looks at inventory and assortments within a state and then by store to identify where there is room to push on margin or negotiate costs based on factors like sales velocity. The company uses markup strategies based on how quickly a product moves through the environment, focusing on total margin dollars rather than margin as a percentage.

Woloveck has observed a notable consumer shift toward larger units, with customers trading up from eighths to quarters or ounces on flower, and vape formats growing from 0.3 grams to 2 grams. Larger pack sizes lower the cost per unit and improve overall margin dollars, even if total unit count decreases. He stressed that every state, and even a city or jurisdiction within a state, requires its own distinct strategy.

The post The Cannabis Retailer’s Survival Guide to 2026 appeared first on Cannabis Industry Journal.