SIX THINGS YOU NEED TO KNOW ABOUT CANNABIS RETAIL
If you are considering purchasing or opening a cannabis retail store in British Columbia here are six things that you need to know, written by our in house cannabis retailer and commercial real estate agent Matthew R. Greenwood.
1. Municipal approval is the golden ticket to opening a cannabis store (once you pass a pre-licensing inspection)
In municipalities where land-use zoning policies have been decided for cannabis retailers, the only way you can expect to get a store is by purchasing a retailer that has existing municipal approval and which has been operating or is going through the approval process.
Without municipal approval you enter the queue of hundreds of applications slowly moving their way through the system, and you will hit what can best be described as the approval bottleneck, which has no timeline and, in many cases, no real possibility of success.
2. You cannot crack the code of municipal land-use policies.
Many clients are pursuing locations in cities where cannabis land-use zoning has already been decided. For example, in Vancouver many groups have spoken with us about possible locations they have under contract or are paying monthly rent on, with the hope to eventually open a cannabis store. Unfortunately, land-use policies for cannabis retail have been available since 2016. Meaning, four years ago this became a market – an illegal one – but a market nevertheless. Therefore, desirable locations are spoken for, and the only other possibilities require a board of variance hearing.
My calculation on this best-case scenario process is roughly a year before you find out whether your proposal is a winner or not, whereas buying a development permit for an existing, approved cannabis business would have you licenced and operational within that same timeline.
3. The government, not other retailers, is your biggest competition and threat.
The provincial government is currently the biggest competitor for private cannabis retailers. It decides what is on your shelves and how much you can charge your customers. Understanding what private liquor operators face is the best way to prepare for the experiences you will endure as a cannabis retailer.
4. The black market thrives... for now
Currently, the black market is the only cannabis industry participant that has benefited from legalization. Prices and quality of the black market continue to crush those in the legal stream; this is an undeniable fact and is what drives customers to the underground economy.
With that in mind, one cannot help but wonder how long cannabis users/customers will continue to meet in alleyways, parking lots and random apartments to pick up their products once the legal market can compete on a level competitive field. As we move into the second year of a legal cannabis market, prices are coming down and quality is going up. It is reasonable to expect regulated provincial sales can do nothing but go up. This industry is still young: the time to get in is now. You must keep an eye on the future and have the patience to deal with frustrating factors that are out of your control.
5. Spending massive money on your build-out will not increase sales
There has been a trend in the first year of legalization to build the most beautiful stores, spending an unbelievable amount of money on designs and materials with no guarantee of a solid financial return.
If you are currently considering purchasing a shop, do not let any consultant, employee, friend or acquaintance convince you of the need to build the Shangri-La of pot stores. Remember, your customers are buying products that have a negative stigma around them. They don't want to be seen by peers/co-workers purchasing these products and will be in your store for the minimal amount of time.
There will be the occasional customer who requires some education, however, they don't need a $10,000 couch to sit on while an employee educates them on a strain, nor do they need to put on a virtual reality headset to walk through a grow room.
The goal of a cannabis retailer is to get people in and out as soon as possible, with questions answered and a smooth retail experience. Your focus should be on providing helpful staff and enough point of sale terminals. Oh, and don't forget a great display cabinet full of accessories that a customer may require to maximize their cannabis experience.
6. Your first/best employee is one with real cannabis experience
If you have never grown or worked with cannabis, the most critical employee on your team will be the one with real-world experience. Hire someone who grew cannabis at some point and understands how to spot a well-grown, healthy plant and an excellent bud. If you do not have this knowledge or are uncomfortable hiring someone who used to work in the black market, your next best option is someone who used to work in a cannabis dispensary before legalization.
In many instances, those who worked in black market dispensaries received much training, whether they were put through the CannaReps program or just worked for passionate people. They possess real-world, actionable knowledge of cannabis, the industry and grow teams. You want to order your initial inventory with this person on your side because product that doesn’t sell can’t be returned. From the first order onward, having someone on your team who has industry experience can make the difference between a business that sinks or swims.
While a slew of data and metrics for this budding – excuse the pun – industry are still being compiled, the data collector that every British Columbian already possess is their nose, and as a life-long BC resident, I know many citizens of our great province are cannabis users. Now they can visit retail outlets and legally purchase and possess products they have been using for years. Use these six points to build a business that customers will want to return to again and again for a regulated, enjoyable cannabis experience.
Matthew is the Associate Vice President of RE/MAX Commercial Advantage, Co-Owner at 258 West Broadway, and an Associate of Rising Tide Consultants Ltd. Matthew can be contacted via email at mgreenwood@remax.net .