5 Reasons Why Selling Marijuana Is Just Like Selling Shoes

On January 1, 2018, California became the ninth state to legalize the sale of marijuana for recreational as well as therapeutic use. California will net an estimated additional $1billion in tax revenue per year adding to the state’s budget surplus through this move.

Twenty-nine states already provide for the sale of marijuana for medical use. Total annual retail sales in the United States are projected to reach $21 billion by 2021.

“Oh Canada.” Recreational marijuana becomes legal coast to coast in Canada on July 1, 2018. Canadian stocks of marijuana companies have seen triple-digit increases in 2017.

Clearly this is not a small, shady business run by guys with grey ponytails and tie-dyed T-shirts. This is a serious retail business sector. And achieving success for this business will involve all that serious retail businesses of any kind do. These include:

• store design
• packaging
• assortment planning
• pricing strategies
• presentation
• inventory control
• marketing
• tax attorneys
• operations officers
• T. systems
• human resources
• real estate brokers

And of course they will need business consultants—not just because that’s what I do, but a retail consultant can help them pull all the pieces together and position the business for success.

Success Means Having More than a Corner Store

In today’s retail environment, success often hinges on the appropriate implementation of an omnichannel strategy, which means the mix of brick-and-mortar, online, mobile, and catalogue distribution channels. Of course Amazon is on to it. Check it out online for yourself. How long before Starbucks includes the herb on its menu?

Not all marijuana retail sellers will be successful just because it is a product that is in demand and in somewhat limited supply. Some will be poorly run and will fail. Others will grow, increase market share, and be very successful.

Applying The Five Laws of Retail

One question to consider then is, “What are the factors that will make some succeed while others fail?”

Fortunately, the answer to that that has already been discovered and explained in The Five Laws of Retail:

First: People First

Second: Turn Is Magic

Third: The Power of the Product

Fourth: It’s the Retail Cost

Fifth: Protect Your Downside

What will make a marijuana retailer successful or not is exactly what makes a shoe store, a bookstore, or a department store work or not work.

Let’s just briefly consider The Second Law of Retail, Turn Is Magic. Marijuana is perishable. A retailer cannot have too much old inventory or, just like with dresses that go out of style, every day that passes the product loses value. In addition, there are dozens of different varieties from dozens of different sources, and the product is available in different forms and sizes. It’s not a simple or easy assortment to plan. Not everything sells equally.

I suspect that some variation of the 80/20 rule applies to marijuana sales patterns and trends just as it does to shirts and shoes. That is; roughly 80 percent of the sales are generated by 20 percent of the inventory.

So what are the best sellers? How does a marijuana retailer identify slow sellers and liquidate distressed inventory? Do they analyze performance in units or dollars? What is an appropriate turn? 4x/year, 6x/year or more? What are the emerging “fashion” trends?

In the next few weeks, I’ll be looking at these and other questions in order to better understand this interesting growth segment of the retail industry. Next I will conduct a walkthrough of some of the higher-end retail cannabis stores in San Francisco; San Francisco Apothecarium on Market Street, Harvest on Geary, and Barbary Coast on Mission. I think you may be surprised by what I find and share with you.