By Oliver Summers
In the cannabis industry, knowledge is hard-won. Too often, the conversations I hear in boardrooms among big business executives seek to compare the cannabis industry to others they are familiar with, from alcohol to healthcare. The mistake these executives make is thinking such juxtapositions provide any useful insight into the cannabis space at all. Cannabis culture, legacy operations, and history all have a direct impact on consumer preference and decision-making in ways that are not akin to any other market. Without authentic, intimate knowledge of these spaces, companies simply cannot succeed and instead disrupt the market in disastrous ways for independent operators.
Based on my nearly three decades of cannabis business experience, here are four lessons from the legacy market every cannabis company should consider to dodge unhelpful big business disruptors and ensure successful market staying power.
1. Big Tech “Partners” Are Only Looking Out for Themselves
Some partnerships pay for themselves in replication, while others will cost you more than you bargained for. It is worthwhile to partner with consultants who have specialized expertise outside of your own knowledge base, such as by working with brand designers, search engine optimization (SEO) professionals, and strategic marketing firms. Invest in outside skill sets that affirm and build out your brand.
Avoid like the plague platforms and “partners” that seek to own your customer relationships, like Amazon, Grubhub, or Dutchie. As I’ll discuss further in-depth in the next section, whether it is advantageous to engage third-party sellers at all in the modern cannabis economy is ultimately questionable, and these platforms exist to take advantage of retailers that don’t know better. Companies, like Dutchie and others, place all the financial risk on dispensaries by putting the dispensary’s name, license number, and brand image on the line and providing very little in return. The dispensaries take on the costs, legal fees, and sketchy processing costs and lose the important customer relationship they once owned.
It’s imperative to keep in mind your brand’s value is directly tied to the unique consumer data you garner and are able to properly capitalize on. When dispensaries allow an aggregating platform to step in front of customer interactions, they lose access to both that data and the ability to represent their brand according to developed standards. It is better for overall brand value to follow the lead of the legacy market and keep operations tight.
2. Manage Services In-House Whenever Possible
In the pre-legalization market, having oversight of business partners was literally life or death at times. Though the stakes aren’t as high and prison time is not as likely in legal markets, keeping your operation under close control and outsourcing as little as possible is still good business practice.
Take delivery as an example: In the legacy market, delivery was a vital part of the illicit cannabis economy, as many consumers preferred having the plant delivered to them rather than risk traveling with it. The element of consumers committing a crime in transit has been absolved in legal markets, and accordingly, we see a consumer preference for shopping in-store. Run the numbers yourself to assess the break-even point of delivery as a viable income stream and do not take the word of big business or tech platforms concerning margins. If you determine delivery is worthwhile — which I doubt — keep the services under the umbrella of your dispensary so you continue to own your consumer’s data instead of literally paying to give it to a disruptive third-party service like California operator Eaze.
Keeping everything at one location from cultivation to sale also decreases overhead costs, and contributes to brand value by providing opportunities for unique on-site branding and events to build consumer interaction and loyalty. We’ll dive into this subject more in the section below on experiential purchasing.
3. Proprietary Strains Still Sell
Remember the days when you’d drive for hours to see a grower and get a specific, awesome strain you could only secure from them? The future, like the past, is in the specialization of cultivars. Legacy growers participate in a process called pheno-hunting — or the isolating of specific favorable traits in one cannabis plant — and then work to stabilize the strain and make the cultivar’s effects relatively consistent from seed to seed. This process can take any number of cannabis plant life cycles to complete and accordingly the finished product is singularly valuable. This is the process that has created every favorite cultivar you’ve ever consumed, from Larry OG to Sour Diesel, and everything in between.
Doubtless, cannabis consumers have noticed every major retailer seems to have Girl Scout Cookies and Gelato on their shelves, but few have proprietary options to drive consumers to seek out their specific, physical location. Specialization of cultivars could even lead to strain patenting in the coming years, and I predict those cultivators who stay true to the classic process of pheno-hunting, strain stabilization, and niche offerings will see better results than those without focus. Dodge generalization, pursue strain specialization.
4. Consumers Want Experiential Purchasing
Testing out the merchandise by having a complimentary sample was an integral part of the dealer-consumer experience in the pre-legalization era. Cannabis sales are about more than a product, they’re also about the experiential elements that accompany consumption. Data shows experiential-based purchasing can up consumer happiness, so incorporate interaction into your sales model, and consider tangential activities that can boost interaction. Open a smoking lounge if your state permits it, or allot a tasting area for special events like a cannabis and chocolate pairing. Consider partnering with another local business like a next-door sandwich shop to encourage growth in the local economy and cross-business pollination.
If you’ve created proprietary products and kept operations centralized as previously outlined, people will feel encouraged to travel for specialized brand products and experiences. Having activities on-site will be a boon for travelers, who will in turn help spread the word of the ways you made it worth their time and effort to make the trek. Dodge those third-party services that eliminate potential sales and branding opportunities by stepping in front of your consumer interaction.
Throw Out the Big Business Playbook and Keep it Simple
“Revolutionizing retail,” or “disrupting the market” have become standard phrases in the big business pitching playbook, but they don’t necessarily belong in the world of cannabis.
Big businesses think high THC content equates to better sales. They don’t have an interest in understanding the culture and often look down on and are dismissive of cannabis consumers. For this reason and so many more, big businesses don’t get cannabis.
Luckily, you have an opportunity to dodge the entire “trailblazing” mindset. Look back to the simple things that worked well in the legacy market and amplify or modify accordingly to find success in the legal market today. Remember foremost to always protect and prioritize your relationship with your customer base: it will differentiate your brand from those disruptive big businesses that will failingly never understand stoner culture.
