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Legalization Is Coming To Your State. Are You Ready?

Four critical lessons for retailers looking to get into the recreational market.

Opinions expressed by Entrepreneur contributors are their own.

If you’re a retailer of medical cannabis, chances are recreational cannabis is coming to your state soon. In every adult-use state so far, the state legalized medical cannabis first and then legalized recreational years later. States with medical dispensaries would then add recreational retail to their existing plans. 

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And the sales have been impressive. In 2019, Massachusetts harvested a robust $420 million in its first full year of adult-use sales. Illinois sales totaled $40 million in its first month. Sounds simple enough—but it isn't. Both states can serve as templates for the states that are next in line, like Michigan and Vermont that have legalized recreational cannabis but haven’t implemented adult-use sales yet. States like New York and New Jersey, with medical plans, are also considering legalization.

What lessons did we learn from the states that went before, about how to keep products in stock, how to keep the line of customers moving, and how to keep prices competitive?

1. No empty shelves

Don’t run out of stock! Stocking enough cannabis to meet demand is critical since you can’t sell product you don’t have. But running out of stock continues to be a common problem in the cannabis busines—both in mature and new markets.

For this reason, it's critical that the supply chain is secure long before the ribbon cutting. If you’re in a state that requires vertical integration, then you might be supplying your own product. In other states, you’ll be sourcing it from growers. A question to ask: Can these suppliers handle your demand, or will they run dry? This would be good to find out before your grand opening.

Some states require a third party to transport the cannabis from the grow site to the dispensary. Medical patients are typically given priority over customers to make sure they’re not deprived of the medical cannabis they need. It is crucial that you factor in details like this when you’re stocking up for opening day.

If, for whatever reason, you are unable to stock an item that your customers and patients are requesting, be transparent with them about why, and when, they can expect to see their preferred product back on shelves. 

Related: The Bright Future of Cannabis Retail

2. Know your market 

What do your customers want? Cannabis products are not all the same. The main formats are flower, edibles, and vape, but there are plenty of others, including chewables, gummies, capsules, and ground flower. Just the flower alone presents an infinite variety of strains beyond the main strains of indica and sativa, which is why you have budtenders to explain all varieties to overwhelmed customers.

The most important thing is understanding which formats are legal in the state where you’ll be operating. For example, New York allows medical cannabis in inhalable formats, like vaporization oil and ground flower, and also as a capsule, tincture or chewable.

It’s also important to try and anticipate how popular certain formats will be for certain customers. Flower cannabis is generally the most popular, but sales for other formats can spike in unexpected ways. When Nevada started selling recreational cannabis on Jan. 1, 2017, lines of customers were snaking around the dispensaries in Las Vegas. And the majority of those customers were tourists. This placed a considerable strain on supply, and some dispensaries ran out. But even the ones that remained open noticed that the edibles were always the first to sell out, and they were difficult to restock. The unforeseen phenomenon is that many tourists prefer edibles because they offered a discreet way to get high because many hotels don’t allow smoking, even in Vegas. In fact, many hotels don’t allow cannabis at all.

3. Don't skimp on parking and security

If parking and security don’t seem like big issues with medical patients, they will be on the first day of rec sales, when adult-use customers are lining up outside This has definitely been an issue in Massachusetts, which legalized rec sales on Nov. 20, 2018.

To avoid future chaos, dispensary owners and managers must be aware of city laws and zoning restrictions involving parking. This has been one of the more controversial issues for dispensaries catering to recreational patients, due to complaints from residents In Massachusetts. It’s not unusual to see jam-packed dispensaries in otherwise sleepy towns, with security guards managing traffic in packed parking lots and maintaining order in long lines of customers. This prompted one dispensary to post online its parking dos and don’ts for rec customers, with rules like don’t park in front of the dispensary, don’t park in the lot reserved for medical patients and handicapped guests, and don’t park at the businesses next store. 

At another dispensary in Massachusetts, the parking lot wasn’t big enough to handle the influx of rec customers so a satellite parking lot was established two miles away. But the off-site parking lot that was also controversial because it’s near a school, and neighbors were worried about the traffic.

4. Be a good neighbor

 In fact, you need to be the greatest neighbor in town, deflating anti-cannabis stigmas with your friendly, can-do attitude, your adherence to local laws and your respect for all surrounding residents and institutions including schools and churches.

We tend to focus on state laws when individual states legalize, but local laws involving taxes, zoning and security are just as important. Make sure you’re in compliance from day one! The biggest challenge here, even for the well-meaning, is knowing what those laws.

The NIMBY (Not In My Backyard) philosophy is applied towards all sorts of businesses and projects, including those of the my benign sort (like dispensaries.) Some people just don’t want to be near a dispensary, because they erroneously believe that dispensaries are bad, mainly because they don’t know anything about them. Education is key in dealing with this problem.

Related: Tips For Opening A Dispensary Where Nobody Wants You

It’s important to include communities in your decisions. Your neighbors need to know that there’s nothing to fear from the dispensary next door. The best way to deal with a NIMBY scenario is to assuage the public by understanding their concerns. Community is important, and dispensaries need to be the best neighbors.