The Convergence of CBD Consumers and Omnichannel Strategies

omnichannel cbd

(For information on The CBD Consumer Experience report referenced below, sign up here.)

As the pages of the CBE Week and CBE Policy & Legal e-newsletters have made clear in recent weeks, there is a rush to enter and expand into the CBD market and reach its existing and potential consumers. Cannabis companies cultivating and manufacturing products with THC and CBD, dispensaries and others are all eyeing CBD as the newest new growth market. At High Yield Insights, we’ve previously written about why we believe having a CBD only product line makes sense, so we won’t rehash those point here.

Instead, new research we’ve conducted on CBD consumers nationwide gives us an insight into this consumer’s mindset, there attitudes and behaviors and the product and channel ramifications for the larger cannabis industry. CBD may represent a new opportunity, but as we note in our forthcoming The CBD Consumer Experience (due out in February) competition for this customer will represent a shift for cannabis.

A Wide Open Marketplace

or the most part, any cannabis product with THC can only be acquired via one of two methods: through a licensed operator or illegally. CBD is unencumbered by such restrictive (or illegal) channels. In fact, CBD’s legality has allowed consumers to purchase this product in many of the same ways they would purchase other consumer packaged goods for some time.

Among current CBD users, we found that the dispensary still rises to the top as the number one channel for purchase (favored by 31% of CBD users), but it’s followed closely by CBD company websites, general online retailers (like Amazon) and health foods stores. These omnichannel purchase options range from having no intermediaries between manufacturers and buyer to having multiple third parties involved, with varying degrees of expertise and trustworthiness.

For CBD manufacturers with a robust e-commerce site, the benefit of direct-to-consumer sales is more than greater profitability. From that initial order, the manufacturer now has the opportunity to directly engage with the customer via email, text or whatever medium is most customer centric. This is invaluable for those companies that also produce THC products and who are limited in their ability to reach consumers via social media and other marketing channels.

But the larger shift that we anticipate seeing in the future is customer engagement with dispensaries While it’s true that dispensaries are the still the top choice for product purchase overall, those consumers who do not live in adult-use states are buying online—either direct from the manufacturer or general online retailer. While the products that are currently on Amazon right now may not reflect true CBD products, we should anticipate that that will change and the share of consumers ordering from Amazon will only grow as consumer usage and familiarity increases.

The ramifications of this for the future are clear—These consumers are developing purchasing habits for CBD that will be hard to change if and when adult-use cannabis legality comes to their states. In essence, dispensaries may find themselves as a forgotten outlet for CBD in these markets, which may challenge their revenue expectations in a more competitive buyers’ market.

CBD Channels Create Opportunity But Also Risks

We see consumer acceptance of CBD in new channels as a net positive for CBD and cannabis companies, but it’s not without risks. Beyond more competition, it’s also likely that the boom in CBD popularity will spawn many CBD companies overnight, with no quality control checks and an abundance of benefit overpromising. The proliferation of multi-level marketing CBD companies may only add to consumer skepticism in the future, while the FDA’s involvement with CBD products may also add some near-term murkiness on what is legal and not legal and what is approved and what is not..

All of this is to say that with CBD, we are finally able to watch how a cannabis product performs in an open “mainstream” marketplace. All industry players should be using this time to hone their messaging, engage with new channels and build a direct-to-consumer marketplace, not only for application for their CBD products today but also for their THC products tomorrow. If we anticipate that adult-use legalization will continue to expand state-by-state—and one day federally—then we should also anticipate that channel access to all cannabis products will also grow. This growth will assuredly benefit consumers, but will only benefit those manufacturers, dispensaries and retailers who learned and optimized from CBD.

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Photo by Artem Oleshko on Unsplash

(This post originally appeared on Cannabis Business Executive.)

Eric Giandelone