Operating a cannabis retail store in Canada can be challenging. It’s often thought that obtaining a retail licence itself is the biggest hurdle to cross, but that’s just the first step. Setting up and maintaining a compliant and profitable cannabis retail business also brings a different set of challenges.
The Canadian cannabis retail market has been around for a few years now. While some are noticing a market saturation, there are still many opportunities for retail stores, particularly in areas that are underserved and new to the world of cannabis. Here are some things you should consider if you’re looking to open a cannabis retail store in Canada:
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Number of Cannabis Retail Stores per Square Kilometre
The retail cannabis market has grown considerably, with retailers of legal cannabis establishing hundreds of brick-and-mortar stores and registering millions in sales. While online cannabis retail ensures access to all Canadians regardless of proximity to a physical store, accessibility continues to improve as more stores open across the country. It’s therefore important to consider the number of cannabis retail stores per square kilometre when deciding on a location for your business. Areas that are saturated in the number of stores should be avoided, and areas that are underserved should be prioritized. Overcrowded communities will mean higher marketing and advertising costs for you, and pricier products for the consumer due to all the competition.
Proximity to Areas of Interest/High-Traffic Areas
Choose a retail store location that has high-traffic flow for leisure and shopping (e.g. LCBO, restaurants, etc.). While cannabis retail stores cannot be included as part of shared spaces (e.g. within an existing café), there’s no problem with opening an enclosed cannabis retail store in a mall or shopping centre where there are constantly people going in and out. This increases the chances of having new customers enter your store.
It’s important to take advantage of tools like MLS and realtor websites that offer free information on demographics. Knowing your typical customer is the key to stocking your store with the right products. For example, if you’re located in an area with a high density of young adults, you may want to consider dried flower products, including pre-rolls, with high THC percentages. On the other hand, if you’re in a community that consists of older adults who may not be familiar with cannabis, you may want to stock products that can introduce them to the cannabis industry. Some examples of these products include edibles or capsules that are low in THC percentage and high/equal in CBD percentage.
Store Design and Offerings
Your store should be designed in a manner that is appealing and inviting. Remember, your store will have its own personality, so the design and customer service should reflect that. Customers should leave your store with a memorable experience, and this alone can drive returns and new customers.
FARMGATE CANNABIS RETAIL
Farmgate cannabis retail has also made a breakthrough in Canada as the number of farmgate stores is slowly increasing across the country. Ontario was the first province in Canada to allow farmgate cannabis sales however, British Columbia and New Brunswick are also entering the game as well.
With the introduction of farmgate cannabis retail, licensed producers are given the opportunity to set up a cannabis store that is very similar to a vineyard. In the farmgate setup, a licensed producer of cannabis will have a production site that also includes a cannabis store to allow customers to purchase cannabis products directly from the producer. Going back to the earlier reference, this would be equivalent to purchasing wine directly from the source after touring a vineyard.
The farmgate model has introduced a new and exciting opportunity for licensed producers to enter the retail space and open a cannabis store in their community. These stores will be used to create jobs, increase revenues and educate customers on how cannabis is produced in a legal and quality-controlled environment, which in turn produces a stellar product for the end-user.
Farmgate cannabis retail also presents a great opportunity for both small and large cannabis operations. In the past, larger cannabis facilities were usually favoured with smaller start-ups being left in the dust. However, the way the regulations are currently set up in Ontario, they do not constrain micro-cultivators and microprocessors. These are typically smaller-scale businesses that aren’t eligible for the same opportunities for retail for their own brand of cannabis products. Farmgate cannabis sales are particularly special for businesses based in rural areas where the closest cannabis retail store can be located very far away. Farmgate sales allow those smaller, craft businesses in rural areas to promote locally grown and processed cannabis products available at their site as well.
While the farmgate program is relatively established in Ontario with both retailers and licensed producers being happy with the outcome, the story is a little bit different when it comes to farmgate cannabis retail in British Columbia (BC). The farmgate program in BC will be eligible for standard cultivators, micro-cultivators and nursery licence holders only. Licensees who hold a processing licence in combination with a cultivation licence will still be eligible, however stand-alone processors (with no cultivation license) will not be eligible for a farmgate cannabis retail store. This has raised some concern among both craft and large-scale processors in BC. These processors feel they should have an equal opportunity to sell products directly on-site to establish brand recognition and achieve direct consumer connection.
SUCCEEDING IN THE CANNABIS RETAIL SPACE
It is crucial that you stay up to date on applicable cannabis regulations, whether at the provincial or federal level, as the industry is constantly evolving and maturing. Reading the regulations once is not enough. You should periodically check for news and updates so that you are aware of any changes to the rules and regulations governing cannabis retail stores.
It’s also important for your business to be able to pivot and adapt to the growing cannabis retail space. There are bound to be slow months where inventory is abundant, and sales aren’t skyrocketing. Successful retailers analyze these situations as opportunities to learn from versus dwelling on what has occurred. As more new and innovative products are launched in cannabis retail, understanding when to pivot inventory and product portfolios versus maintaining existing products isn’t an easy decision. When faced with this situation, it’s the best way to lean on data, including customer and cannabis retail store data that is available for free, often through the province’s regulatory body.
Finally, working with the right consultant can help make the process of opening a cannabis retail store easier and quicker. Your consultant will help streamline the process and help remove the guesswork so that you can focus on setting up the business and managing other priorities.
There are still many opportunities available in the Canadian cannabis retail space, it’s just a matter of doing your research and then taking action!
Kalpna Mistry is Regulatory Project Specialist at Cannabis License Experts.