Will Dispensaries Take the Lead in 2019?

 
 

The 2018 MJBizCon show’s attendance numbers prove it; there has never been more interest in the cannabis market than there is at this moment. And with new states and markets coming online soon, in various permutations of legality, a cannabis-hostile U.S. Attorney General ousted, and increased favorable press coverage around all things CBD, it’s clear that consumers will be clamoring for cannabis in 2019.

How will they know what they should purchase?

We’ve long believed that given advertising and market restrictions, dispensaries can and should play the key guiding role for cannabis consumers. Whether with regular current users or those returning from a long hiatus, the budtender should be seen as the product and experience expert for that customer. But for many consumers, they aren’t.

In a recent online focus group we conducted on edibles, of the 6 participants, only 1 purchased their most recent edible at the advice of a dispensary associate. Recommendations from friends and websites comprised the majority of responses; the dispensary was left out of the decision-making process.

And when asked why they even choose a dispensary, our quantitative study (over 1,400 current cannabis users), cited variables that could be partly out of the dispensary’s control—location, price and selection of products.

All of this points to a threat to brick and mortar stores as cannabis delivery firms continue to gain traction in adult-use markets, thereby further disrupting the connection between dispensary and customer. Without providing a true customer-centric value, the dispensary becomes little more than a passive outlet of products.

A Greater Place for 2019

Those who are fighting this potential outcome are taking a customer-centric view of what a dispensary can be. Seattle’s Uncle Ike’s has made recent news with the introduction of its Ike’s OK program, wherein every month five random products are sent to labs for pesticide, heavy metal and microbial testing. Results are then published in pdf format on the dispensary website, with products that fail tests given the opportunity to respond. While the reporting is not super intuitive or user friendly, it marks a huge step in the right direction.

Certainly, talking about acceptable levels of carbaryl isn’t exactly the stuff of marketing lore, but the overall effect is similar to what we’ve seen work in general retail. Consider Whole Foods’ 5-Step Animal Welfare Rating system, which also partners with an outside third-party, Global Animal Partnership, to take a customer-friendly way to communicate quality and ethics in any easy to understand color-coded manner. In a similar manner, the Monterey Bay Aquarium’s Seafood Watch has become the go-to standard for seafood sustainability and is utilized across the food industry.

Such programs not only improve the customer experience by ensuring that customers have relevant information at their disposal but also elevate the role that the dispensary can play—from product provider to partner in quality. For manufacturers and cultivators that adhere to high standards, these independent third-party programs carry a positive halo that further promote quality products.

Consolidation Will Shape The Market

While dispensaries have the opportunity to create more customer-centricity in 2019, they also have the ability to shape upstream activities with manufacturers. Consider MedMen’s recent $682 acquisition of PharmaCann. Not only does the deal create the world’s largest cannabis company, but MedMen now has a defensible distribution position in key cannabis markets, including California, New York, Illinois and Ohio, among others.

Clearly not all dispensaries are going to have the market power of MedMen, but they all have a direct connection with the consumer. And with so few consumers having a brand preference within cannabis (45% of edibles users have no preferred brands, according to our Consumer and Edibles July 2018 report), dispensaries should be servicing customers while also representing their needs and wants to their manufacturer partners.

The recent opening of states is certainly bringing in more consumers to cannabis, but the limited number of licenses gives large and small dispensaries the power to shape what products come to the market for years to come.

Creating Partnerships, Not Monopolies

Limited distribution is not new in retail—check out the power Walmart and Amazon exert in general retail. And then check out how many unhappy vendors have been left in their wake. Cannabis dispensaries should recognize the enormous power they have in cannabis while also recognizing that for cannabis to be truly successful, all parties will need to work together, with the end-customer’s experience and reasons for usage always front and center.should have a go-to solution for that close at hand.

Questions? Comments? Contact me directly via eric@highyieldinsights.com

Photo by Riccardo Annandale on Unsplash

(This post originally appeared on Cannabis Business Executive.)

 
 
 
Eric Giandelone