As any industry in its infancy is bound to experience, the Canadian retail landscape of cannabis is constantly morphing and changing. Every month brings new mergers and acquisitions not just for licensed producers, but for retail chains and franchises as well.
On top of that, the competition in any given neighbourhood can cause cannibalization from store to store with retailers selling the same product mix, offering competitive pricing, and not leaning into any unique selling or service propositions. It’s never been more important to analyze your competition from a geographic and regional standpoint including location, product, and marketing mix.
Before analyzing your potential retail store, you should narrow in on a strategy. Are you opening a store with the idea of building and selling? Or is your store intention to grow and sustain a strong consumer base and sales? Again, considering how many mergers and acquisitions there are, it’s worth considering a short-term strategy that appeals to larger chains that are looking to grow and add to their network. If you want to own your store for years to come, then a longer-term strategy needs to be put in place; both require legwork and research.
Scope Out the Neighbourhood
Depending on where you live, this may mean you need to canvas just a few stores or several dozens. It’s not news that cannabis stores are concentrated in metropolitan areas and sparser in rural ones, however, this difference in stores per square kilometer radius doesn’t change the necessity of knowing your competition. Start a tally or scoreboard for what stores in the area are or are not doing, and how well they are doing it. For example, if you have 20 stores to investigate, you should review if they are chains, or franchise, delivery options offered, product mix, consumer loyalty programs, and promotional offerings. By building out a matrix of your competition, you can begin to see if there are any white space opportunities your store may be able to capitalize on, or areas that are over saturated to steer clear of. Maybe the stores around you are all heavily flower focused, and your store could cater to an edible consumer instead.
The importance of knowing what stores around you are franchise or chains, or mom and pop shops helps gain an understanding of how well stores in the area are doing. Has a store recently been flipped from X to Y? If your intention is to build to flip, this may not be a great area for it depending on the chain that’s taken over the store. Knowing the big players in the Canadian retail landscape, and how much they have grown is imperative, regardless of your strategy.
Dig in Deep
Beyond geographical context and an overall look at competition in the area, you absolutely need to drill down into more specific factors. What price points are they leaning into? Are they a value store or a more premium one? This will help you evaluate any opportunities and gaps that may exist. Are they selling the best-selling products at a higher price? Maybe you can offer them slightly less for a competitive edge. Without first gathering all this data, you can’t make educated and strategic decisions about your retail product mix.
Price may not be the best way to compete.
The same goes for the marketing mix. What are the stores around you offering? Can you do it better or in a more convenient way or can you offer something completely different? If you’re an independent store opening around several chains, price may not be the best way to compete, but promotions or consumer loyalty approaches certainly can be. You can also source unique craft products that are not offered by the chains.
Watch & Learn
When you’re scoping out stores, you should also be taking note of how many employees are on the store floor, and the consumer flow over X number of minutes. Check them out throughout the day, come on weekdays and weekends. The more data points and consumer insights you can glean, the better you can inform your own strategies and move forward. This kind of information can inform your staffing solutions and costs, as well as anticipate foot traffic, sales, and even the type of consumer demographics you may be serving.
While this level of digging may feel cumbersome, knowledge is power when it comes to building a solid foundational strategy. Dissecting your competition from every angle will only give you a better leg to stand on.
The Ultimate Consumer Experience
Lastly, consumer experiences are paramount to success and once you have done a thorough competitive audit and analysis to find where you fit in, you can begin to carve out how you want your consumers to feel when they shop in your store. Think about your favourite non-cannabis store experiences. What makes them stand out? What makes them a store you want to continuously go back to? Maybe it’s to support local/small business, perhaps they have unique product offerings, or maybe their store is laid out perfectly and your shopping experience flows from entry to point-of-sale seamlessly. Whatever it may be, use the same logic to apply to your cannabis store. Consider signage and how it can inform your customers’ purchases; from promotions or education or even how your store menu is displayed. All these pieces add up to the big picture experience.
Overall, the importance of a strong competitive analysis is not to be overlooked. Many cannabis store owners are new to the retail landscape and there is no shame in being overprepared to open a new store in any industry! Knowing what you are getting yourself into can only lead to a more promising outcome. Get out in the field, get your private investigator hat on, and collect all the insights and information you can.