As legalization of the cannabis market expands throughout the U.S., so does the size of the market. In 2022, the U.S. cannabis market was valued at $13.2 billion and is expected to grow at a CAGR of 14.2% during the next seven years. MJBizCon research indicates that the market could be nearly $60 billion by 2028. A total addressable market of that size has attracted – and will continue to attract – interest from those looking to capitalize on the opportunity.
Growing interest means growing competition. It’s no secret that competition in the cannabis sector has escalated greatly in the last several years, and dispensaries are among the first to observe the changing consumer trends that have helped fuel some of that competition. In many ways, today’s cannabis dispensaries are similar to other retailers, and must make well thought out decisions for their business’s branding, the store’s layout, and its staffing needs. But most retailers aren’t involved in the sale of a heavily regulated, controlled substance, which means that dispensaries must consider numerous other factors as well. Here are a few of the most important factors we’ve seen firsthand that dispensaries need to get right in order to thrive in a white hot cannabis market.
1. Location, location, location.
Choosing a location is one of the most make-or-break decisions for cannabis retailers. Unlike most other retailers, dispensaries have specific limitations on where they can be located. Even if state law permits recreational cannabis sales, not all towns will allow dispensaries to operate. Most retail dispensaries have to navigate strict regulations governing where they can be located – away from schools, daycare centers, and other facilities. States such as California also require a set amount of space between dispensaries. These limiting factors make it hard to secure an ideal location without help from an owner’s rep.
Location also matters in terms of competitiveness. This is especially risky in a newly opened cannabis market. Too often, we see dispensaries rush into securing a prime location in a high-rent district. As other dispensaries enter the marketplace, the influx of supply depresses the price of cannabis products, thinning out margins for the entire cohort. For those retailers locked into high-cost rentals, this profitability squeeze can be ultimately catastrophic to the business. While some dispensaries move quickly and get lucky – successfully cornering the market in a way that other entrants will struggle to to break into – many others end up being cautionary case studies of things gone wrong. Sticking your neck out doesn’t always pay off.
2. A new building or a retrofit.
Location aside, dispensaries also need to consider whether to seek out an existing space or build a new one. Both options come with their pros and cons.
There are numerous examples of dispensaries taking advantage of existing spaces. In Georgia, for example, where retailers are preparing to start operations when cannabis is soon legalized, J2H has helped clients convert everything from banks to funeral homes into ideal retail locations.
3. Tastes and trends. Be lean, nimble, and ready to adapt.
For today’s younger generation, the legality of cannabis is less of a novelty than it is for older generations. As such, the notion of mainstream “cannabis connoisseurship” is likely to emerge as a trend, and today’s cannabis consumers are quickly evolving, expecting a more high-end product and experience. Dispensaries need to be ready for anything that comes in the future. This future might include cannabis-infused drinks, and other more gourmet product experiences, particularly as markets mature and consumers look to new, more novel, more sophisticated ways to enjoy the product. Staying lean and being able to recognize when these new consumer trends emerge is vital – not just for the retailers, but for the manufacturers and cultivators that create the product. It’s up to the dispensaries to keep an eye on the trend horizon.
4. Security. It must go well beyond what’s standard for most retailers.
Once the facility is established, retailers need to consider the next critical component: security. Given the regulations around and the value of their products, the level of security required for dispensaries is decidedly higher than most other retail storefronts. In this sense, dispensaries operate more like high-end jewelry stores. Unlike a jewelry store, however, the limited banking options for cannabis businesses mean that most of them operate on a disproportionate number of cash transactions, making them known targets for break-ins and theft.
For all of these reasons, any cannabis dispensary's security portfolio needs to include consideration around well-trained guards, access control and theft-mitigating displays, adequate locks, thorough surveillance equipment, and other access control measures to keep property, products, and people safe.
With so many decisions to be made, an owner’s rep can be an invaluable guide in this process, helping you secure everyone and everything from architects and contractors to security and staff. An industry this new means a smaller supply of experienced partners with enough projects under their belts to be able to advise from start to finish. But finding the right owner’s rep pays dividends, expediting the process of getting fully operational and saving money along the way. We’d love to discuss your next cannabis project with you – contact us to get started, or read more about our insights and learnings in our newly published white paper.
