Loyalty, Not Discounts, Drives Cannabis Retail Revenue, New Sweed Data Suggests

As cannabis retailers continue battling price compression and shrinking margins, many have responded with increasingly aggressive promotions designed to bring customers back through the door.

But new data from retail technology provider Sweed suggests operators may be solving the wrong problem.

According to the company’s Q1 2026 Customer Loyalty Benchmark Report, loyalty program members account for 89% of dispensary revenue while purchasing at more than twice the rate of non-members. Yet despite strong enrollment growth, most customers never engage with the very rewards designed to keep them coming back.

The findings point to what may be a larger challenge for cannabis retailers: customer engagement rather than pricing.

Enrollment Isn’t the Problem

The benchmark analyzed 2.1 million cannabis shoppers and $452.5 million in retail revenue across dispensaries using Sweed’s loyalty platform.

While loyalty programs appear to be widely adopted—members represent 81.7% of active customers—the data reveals a significant gap between enrollment and meaningful participation.

According to Sweed, fewer than one in four newly enrolled members earn their first loyalty point, and only 6.6% ever redeem their first reward.

In other words, retailers are successfully convincing customers to sign up but struggling to give them a reason to stay engaged.

Retention has become one of the industry’s biggest challenges as dispensaries compete in increasingly saturated markets where consumers can often choose between multiple retailers offering similar products and pricing.

Discounts Alone Don’t Create Loyalty

The report challenges one of the industry’s most common assumptions—that deeper discounts are the primary path to customer retention.

“Many operators are spending margin to solve the wrong problem,” said Rocco Del Priore, Co-Founder and President of Sweed.

“Discounts can drive transactions, but they don’t necessarily create loyalty. The biggest opportunity isn’t getting more people to join a program—it’s getting more members to engage with it.”

The findings align with a broader trend emerging across cannabis retail.

During multiple panels at IgniteIt’s Cannabis Capital Conference in Chicago earlier this month, retailers repeatedly emphasized that long-term growth depends less on price competition and more on understanding customers, building communities, and creating differentiated shopping experiences.

As legal markets mature, operators increasingly appear to be shifting from customer acquisition strategies toward customer lifetime value.

Engagement Becomes a Margin Strategy

Rather than treating loyalty programs as digital punch cards, Sweed argues retailers should use them as engagement platforms capable of influencing purchasing behavior over time.

Its updated Loyalty and Marketing Suite incorporates tiered memberships, personalized offers, gamified challenges, referral programs, exclusive product access, and real-time rewards synchronized across in-store and online purchases.

The objective is straightforward: increase visit frequency without relying exclusively on broad discounting.

For retailers, that matters because every unnecessary discount directly compresses already-thin gross margins.

Operators have spent much of the past two years searching for ways to improve profitability while competing against neighboring dispensaries offering nearly identical products.

Data-driven personalization may offer an alternative.

Instead of discounting every customer equally, retailers can reward high-value behaviors, encourage repeat visits, and tailor promotions based on shopping history.

Data Is Becoming a Competitive Advantage

The report also reinforces a broader shift occurring throughout cannabis retail.

Increasingly, competitive advantage comes not only from product assortment or pricing but from how effectively operators use customer data.

Integrated retail platforms now allow dispensaries to analyze purchasing patterns, campaign performance, visit frequency, product preferences, and customer lifetime value in real time.

Those insights help operators make better merchandising decisions, improve inventory planning, and allocate marketing budgets more efficiently.

For multi-state operators and independent retailers alike, customer intelligence is becoming as valuable as shelf space.

Do Not Forget About The Community Advantage

If nearly nine out of every ten dollars already comes from loyalty members, the opportunity lies in helping existing members reach the moments that keep them coming back.

As competition intensifies and margins remain under pressure, retailers may find their next competitive advantage through stronger customer engagement.

The findings echo a broader shift taking place across the cannabis retail sector.

For years, many dispensaries have competed primarily on price, convenience, and product selection, often creating fast, transactional experiences where customers move from an iPad to the checkout counter with little reason to return beyond the next discount.

But operators are beginning to rethink that model. The challenge is creating a place where customers feel recognized, understood, and connected to the brand. Like the neighborhood deli where regulars are greeted by name, successful dispensaries are increasingly using data, personalization, loyalty programs, events, and community engagement to make every visit feel familiar rather than overwhelming.

In an industry crowded with products and constant promotions, that sense of belonging may prove to be one of the few competitive advantages that discounts alone cannot replicate, and one of the strongest defenses against the race to the bottom.