The business of Cannabis from a retail perspective

by: Tania Moffat

Opening a new retail operation can be a gamble. The odds are primarily based on industry knowledge, meeting customer needs, building loyalty and a strong business plan. However, imagine that instead of having all this information to work with and base decisions on, there is nothing.

When it comes to cannabis, everyone – licensed producers, wholesalers, governments, and retailers are all still somewhat in the dark. The industry is a tabula rasa and we can only wonder what will happen post-Oct. 17th. Right now, so many questions remain: What should sales be? What will the typical client look like? What products will they buy? How many of them will buy online and how much? How many will switch from existing illegal sources? Will this be as profitable as people think it will be?

Business plans may not have all the answers, but at least they can provide educated guesses to these questions based on market research. However, new cannabis retailers are in a category of their own. This is a new industry for Canada, and business plans are based on the results of similar retail businesses, of which, there currently are none.

An uncertain market

Some information can be gathered from our American neighbours who currently have 10 states that legally allow the recreational sale of cannabis. Polls have been taken in our marketplace too, both nationally and provincially, so there is information to guide retailers. In fact, the amount of information out there on cannabis is staggering, but how reliable is it? It is difficult for a retailer trying to navigate through data as the projections vary wildly and there isn’t always a consensus. Opposing groups make excellent and sensible arguments for entirely different outcomes – even though they are in total conflict. There’s so much information out there that it’s almost too much, and none of it’s certain – the truth is that nobody really knows what is going to happen after Oct. 17’s legalization date. No country in the world has done what Canada is about to do this year.

In the words of one soon-to-be cannabis retailer, the road to legalization has already been a wild ride of unknowns. “It’s an experience unlike any other,” says the private retailer. “It is exciting to be a part of this brand-new industry, but it is also terrifying. You know nothing, and everyone, including government, is navigating this at the same time. We are all learning from each other, trying to get set up and ready for our customers in just a few short months.”

A new retail experience

To even get started in this business is not your usual retail experience. Cannabis retail is a heavily regulated industry and depending on where you live; it may not even be possible to open a private store. Each province and territory has its own rules. There are jurisdictions where the sale of cannabis is entirely government run, Nova Scotia, New Brunswick, and Quebec are three examples. Other jurisdictions, such as Alberta, have a hybrid public-private model where the Alberta Gaming and Liquor Commission acts as a wholesaler, operates some stores and online sales, while allowing private groups to have the opportunity to access one of the 250 retail licenses. Other provinces, like Saskatchewan, support a private retail, wholesale and online model with government overseeing licensing. While even now some provincial legislation is still under development; Ontario recently changed its model. Even in areas where private retailers are allowed, the number of retail licenses are limited, and for many, the application deadline has already passed.

Normally simple decisions are also much more difficult for cannabis retailers. There just hasn’t been enough time for vendors to prepare because cannabis is…well, cannabis. The most significant problem stems from the fact that the product isn’t even legal yet. Imagine trying to do simple things like banking, getting business insurance, or buying inventory. How can you open a bank account or get insurance or arrange delivery for a product that is currently an illegal substance? Sometimes what should be a quick question for your local rep becomes, “hang on; we’re working on it” or, “ask us again at the end of October,” not ideal situations for a business preparing to open by mid-October.

Obstacles

How does one even go about promoting a new, currently illegal business? Legal counsel is probably the safest course of action to help navigate you through marketing and promotions that comply with all the laws and guidelines that are/will be in place. As with anything new, retailers may accidentally make a misstep, unfortunately the resulting hefty fines and consequences can be a deterrent.

There are other considerations that haven’t even been touched on that are unique to cannabis – safety and security, stopping the sale to minors, and staff and customer education are all essential to success in this business.

There’s no doubt that the cannabis industry will be full of even more unique challenges in the days ahead. The landscape will constantly be changing, rules adjusted, and retailers will need to be able to adapt quickly and have the resources to do it. This is history in the making; there will never be an opportunity quite like this again in our lifetimes, to be a part of this brand-new industry. A monumental decision to shift what was previously illegal into something that will be picked up as casually as you can pick up a bottle of wine, or a vape pen, at your local store. It’s going to be an exciting ride for those lucky enough to participate.

In the months ahead, in our new column Cannabiz, we will bring you stories from the perspective of actual cannabis retail operators. Get their perspective as they navigate through this new, complex and exciting industry as Canada enters this brave new world of legalized cannabis.

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Tania Moffat is a freelance writer, editor, publisher and photographer. She has spent the last 15 years in the publishing industry writing for a wide variety of B2B and consumer publications both in print and online. She can be contacted via her blog www.chiccountrymom.com