Trends in Cannabis Retailing
Marketing professionals in the cannabis industry are finding creative ways to attract customers and remove the stigma associated with previous pot shops.
Cannabis Retailer interviewed some industry experts who will be participating in a panel at Dx3, Canada’s largest retail, marketing and tech conference, which is taking place at the Toronto Metro Convention Centre on March 6-7.
What Trends do you See in Cannabis Retail Right Now?
Ray Gracewood, Chief Commercial Officer, Organigram
Retailers are starting to formalize marketing programs and merchandising opportunities for producers to invest in the retail environment. Due to the nature of the environment being strictly legal age, retailers are starting to understand how important their environment is within the marketing mix. Strong retailers are finding creative ways to leverage their position, such as developing a regular print publication for customers, providing same-day delivery, or allowing producers to enhance the retail environment with interactive displays.
Consumers need to touch, smell and see the product.
The legal market will defeat the illicit market with success in the four following areas: quality, price, convenience and consumer experience. Most public retailers have done a great job in creating a positive experience, and private retailers have really started to separate themselves based on consumer experience. The capacity and inventory challenges have allowed prices to remain reasonable, but we’re already seeing price compression and price promotion activity. Smart retailers will do more to make price less of a determining factor.
Markets that have invested in a high number of retail locations are early winners; recently released consumption numbers have put Atlantic provinces near the top, and laggards in retail locations have been near the bottom. In a new market that requires consumer confidence, it’s become clear that consumers need to touch, smell and see the product. Online sales have not provided the results we expected, but have seen signs of growth.
Jeremy Potvin, Co-founder, Weedbox
Anything that is moving us away from the old stigmas is working! Still to this day, when the majority of people hear “cannabis shop” they think of every stoner cliche they have ever been exposed to. So, any efforts to move away from that is a step in the right direction.
There is also a trend towards open-concept cannabis retail locations that have thoughtful interior design.
Unfortunately, we now see people entering the space who, while they understand that, aren’t retailers. We are seeing too many of the same generic “next gen” cannabis stores. This could be considered a much better version than what consumers are used to, but they haven’t really addressed the basics to build a unique, tailored experience for a specific market segment. Just building a nice clean “cannabis for everyone” store doesn’t help consumers in the long run.
There are a few shops doing it right. Serra in Portland has set up a fantastic experience. Unique, thoughtful, and the creators were patient enough to design to their surroundings.
Monica Chadha, Canada Cannabis Leader, Ernst & Young
Cannabis is a relatively new product category. Consumers have different purchasing behaviours compared to a product like alcohol. Purchasing cannabis is experiential in nature—consumers want the ability to touch, smell and see the product prior to purchasing. That’s why some retailers, for example, have clear containers with magnifying glasses and slots so that consumers can see and smell the dried flower prior to purchasing.
There is also a trend towards open-concept cannabis retail locations that have thoughtful interior design, right down to the ambiance, atmospherics, décor, and fixtures. This helps make the customer feel more welcome and inclined to have an enjoyable purchasing experience. It can also provide a safe, non-judgemental environment for new customers who don’t have experience with consuming cannabis.
Successful cannabis retailers need to be experts in branding, consumer engagement, technology, e-commerce, design, product curation, and product creation.
Retail staff often plays an important role in influencing a customer’s in-store experience. Training and educating retail staff on the various products and brands is essential to enable them to provide a positive, guided customer experience. Given there are legal limitations on how retailers can communicate to consumers [to explain] how a product is supposed to make them feel, the ability to simplify the purchasing journey can make cannabis feel more accessible. Cannabis companies can do this by:
- Colour-coding high-THC, high-CBD or balanced products;
- Highlighting dominant aromatic components within each cultivar using scent—e.g. sample terpene scents that consumers can smell; and
- Highlighting visuals—e.g. listing terpenes and the plant in which the specific terpene is dominant, such as linalool (lavender) or limonene (citrus).
Further, retailers are starting to accumulate sales data from their point-of-sale systems. The ability to analyze that data to determine what products are popular will help them to ensure those products are always in stock. It can also help to provide consumer recommendations on which products seem to resonate with different demographics.
What do you Predict in Retail Cannabis in 5 years?
Five years from now, we’ll start to see the separation from full-service to specialized retail within the cannabis space. Due to oversaturation once licensing becomes more liberal, retailers will be forced to be either very broad, or very niche. Think grocery—you’re either Loblaws or Whole Foods, there is no middle. Retailers need to be thinking now about product and brand offerings, and how they curate those offerings from a category management perspective to specialize in niche products that require a highly trained and specialized staff.
Successful cannabis retailers who will be around for the next 5-20 years need to be experts in branding, consumer engagement, technology, e-commerce, design, product curation, and product creation—basically, entirely vertical with the exception of cultivation.
Would-be cannabis retailers need to understand that we could still be years away from being able to market your company in a traditional way. So, smart retailers will have already spent the last two years building communities through engaging content and physical engagement strategies.
If you want to know who is going to be around in the next 5-10 years look around right now and see who has been doing a great job of building a brand through creative, technology-leveraged consumer engagement. Brands and retailers that have successfully either leveraged technology or ideally, built their own tech stack to achieve efficient consumer growth are the ones who will have a great chance of being around in the future. Consumer trust is everything, and it really is the first thing any brand should address on day one of their existence.
Of course, great design and retail experience are paramount, [but those] alone won’t do the job. Just because this is a high growth industry in the early days doesn’t mean that simply being first will translate into long-term success. Retail is very, very tough. Experience, attention to every moving part, tight margin control, and a continuous evolving knowledge of what your target consumer will want is essential for future success.
In the immediate future, one of the biggest strategic focuses for Canadian cannabis companies will be the preparation for legalization, production, and sale of additional product formats such as edible cannabis, cannabis extracts, and cannabis topicals later this year. Greater exploration with cross-sector integration and other consumer products such as beverages, cannabis-infused products, and non-combustible delivery methods are expected to grow the cannabis industry further.
Looking to the next five years, increased competition will commoditize dried flower, putting even more pressure on producers to maximize output in the most cost-effective and efficient manner. Strategic joint ventures and partnerships in new markets will be critical to success, resulting in heightened research and development of new innovative, cannabis-infused products.
Main image courtesy of LDB. Photo by Joe Borelli.