What Cannabis Retailers Can Expect in 2021
2020 disrupted the retail cannabis industry. For success in the cannabis sector in 2021, operators should set their sights on these four areas.
From a global pandemic that disrupted nearly every market to a historic presidential election year, 2020 was unprecedented for the cannabis industry in almost every way. The year brought on new and market-altering challenges when it came to supply chain and statewide lockdowns. It also presented several opportunities to the industry after state governments deemed cannabis an essential business.
With cannabis demand at an all-time high (and millennials preferring it to alcohol as their substance of choice), a new administration in the White House, and an ongoing global pandemic, those in the cannabis sector— from cultivators and processors to distributors and retailers—need to look back to look forward and bring a new mindset into 2021 focused on increasing predictability and reliability across the board.
For success in the cannabis sector in 2021, there are four major areas operators should set their sights on.
1. Changes in buyer behavior
The move from retail stores to online ordering, home delivery, and curbside pickup happened quickly to meet demands that emerged during statewide lockdowns and stay-at-home orders across the country. But while consumers welcomed a rapid shift, the bar was low for adapting purchasing options, and operators were eager to dive into any solution that worked. In 2021, as stay-at-home orders ebb and flow state by state, operators have the opportunity to perfect home delivery and curbside pickup over the next several months to continue these options long after the pandemic ends.
Beyond how consumers shopped, the products they shopped for also saw significant changes. Sales and consumption of edibles skyrocketed as inhalable forms of cannabis became less appealing compared to options that would have less of an impact on their respiratory system, hemp CBD sales saw a sharp drop amid the COVID-19 immunity supplements boom. New types of consumers turned to cannabis for reasons beyond just recreation, such as mental health management and sleep aids.
Consumer preference can quickly change, making staying relevant in the industry a challenge companies will continue to face in 2021. Continually innovating new products will be essential for this year. The industry should expect to see product innovation booms as it relates to the expansion of cannabis flower strains, beverages, and edibles, as well as an influx of exciting marketing campaigns and partnerships.
2. Setbacks in compliance enforcement
The industry has seen very little by way of large political setbacks in the last few years. While there have been some delays here and there, legislation's directionality has been mainly in the industry's favor. It is likely to continue through the next four years of a Biden presidency. But with increased legalizations across the nation, cannabis compliance and enforcement are also expected to increase. In 2020, the key to survival in cannabis was resilience and the ability to pivot quickly, as operators saw near-daily announcements and changes in compliance from the state and local governments, many specific to the COVID-19 pandemic.
The quicker that a business can adjust to these changes, the better that company will continue to perform long term. For this reason, cannabis operators should treat their compliance activities with the utmost care, allocating more of a budget and more attention to it than in previous years. Honoring new and rapidly-shifting COVID guidelines and cleanliness and safety standards will be something that continues to be an essential burden for operators.
3. Need for banking
There is no denying that the last few years have seen big strides among the legalization of cannabis and a new industry's growth. However, banking and payments remain a significant issue for cannabis operators. Unlike other legal, regulated industries in the US, banks bar the cannabis from operating with credit cards, bank cards, and many other kinds of banking services, despite raking in a combined total of $6.59 billion in tax revenue from legal, adult-use marijuana sales nationwide last year.
2021 will see a more robust, continued push for cannabis banking reform, especially with the current Democrat-led House and Senate. The House of Representatives introduced The Secure and Fair Enforcement (SAFE) Banking Act in 2019 as a means of permanently protecting financial institutions in legalized states that want to offer essential banking services to marijuana businesses. Passage could be a seismic shift for the industry, with so many companies still operating on a cash-only basis as they're unable to obtain or keep a bank account.
With ongoing momentum for state and federal legalization and the severe economic impacts of the coronavirus pandemic, credit unions will be forced to rethink the cannabis industry this year.
4. Disruptions in supply chain
A survey conducted by the Institute for Supply Management between February 22, 2020, and March 5, 2020, found nearly 75 percent of companies report supply chain disruptions in some capacity due to coronavirus-related transportation restrictions. While the cannabis industry was no exception, equipment and supply shortages were not the only factors that disrupted cannabis businesses in 2020. Lack of personal protective equipment presented its specific challenges for those that didn't halt business operations.
Looking forward, operators need to establish a resilient supply chain that does not rely on options in just one single region and one that takes potential future disruptions into account. When vetting potential vendors this year, operators need to ask detailed questions about the location that vendors are sourcing materials, what kind of setbacks they saw as a result of the COVID-19 pandemic, and what other supply chain disruptions they've faced in the past.
2020 changed the cannabis industry forever but pushed it forward in many ways, creating endless opportunities for operators through new audiences and customers, streamlined systemic processes, and increased innovation. We're likely to continue to see these trends throughout the year and areas where cannabis operators need to stay sharp to stay successful throughout 2021.
Entrepreneur Leadership Network Writer