How Cannabis Retail Stores Are Reinventing Themselves to Succeed In Today's Market
Evolve and survive.
For the cannabis industry, the transition from the veiled and often intimidating world of medical dispensaries into a more modern, hip and customer-friendly format is helping to fuel exponential growth and remove the stigmas that continue to hold back the market.
According to a recent report from New Frontier Data, the legal cannabis industry in the United States is projected to grow from just over $13 billion in 2019 to almost $43 billion annually by 2025. A major driver of this growth comes from the innovation in cannabis retail.
Out are the old, stark dispensaries where product was kept locked in bulk jars and where armed guards roamed while customers passed through heavily barricaded doors into rooms with bullet-proof windows. Today, a growing number of cannabis retailers more closely resemble that of a Starbucks or Whole Foods. This evolution into open retail has enabled the industry to expand past just cultivators and distributors and allows brands to reach customers more like traditional consumer packaged goods would.
"It was rough in the beginning during the transition from a medical to a recreational market in 2018, I am not going to lie," says Kristi Knoblich Palmer, co-founder of Kiva Confections, one the largest edibles brands in the nation. "However, both the recreational market and the new retail formats have been a great step in the right direction for both brands and consumers."
Urbana CEO Marty Higgins is one entrepreneur who has helped usher in the era of modern cannabis retail, leaning on his experience from more than 20 years in the restaurant and hospitality industries to reinvent how cannabis stores operate.
"When I entered the cannabis space, it was certainly a different time," Higgins says. "I actually toured more than 100 dispensaries in the western U.S. and noticed they all kind of looked alike. I began asking everyone, why? But no one had a great answer."
The start of something new
Higgins sensed that the cannabis consumer wanted more than what the average cannabis retailer was offering, so he contacted a retail store designer and together they created what would become a model for the modern cannabis store. In 2016, he opened the first Urbana in San Francisco's Inner Richmond District and shortly thereafter another location in Mission.
Higgins' innovations went beyond just aesthetics. He matched the open store concept with a service-centric business model that removed the behind-the-counter budtender and replaced them with highly specialized consultants who did more than just fill orders. These concepts were part of a rising tide that helped "lift all boats" within the cannabis industry.
"Urbana's concept is great because it allows you to go in, grab a basket, browse for as long as you want without pressure and select the brands you like," says Knoblich Palmer. "It has also been really beneficial for us. Our volume is up, and we continue to see a lot of growth."
The new retail format was a hit with consumers and opened up the industry to a whole new set of shoppers. Urbana, as an example, has regulars that range from 21-91 and from every demographic.
The open-retail format has since been replicated by a number of shops throughout the industry, which Higgins says is the way it should be.
"I'm happy to see a lot of the open retail formats," says Higgins. "Somebody had to take that risk and prove that this type of retail experience was right for our industry. Frankly, I am surprised that many still stay in that old, behind-the-counter, jewelry store-type approach."
Innovating through a pandemic
The COVID pandemic forced cannabis retailers to evolve and innovate again.
"On the first day of the lockdown, we got shut down," says Higgins. "We all fought hard to get our businesses back up and running prior to cannabis being deemed an essential business."
Even after reopening with the special exemption, Higgins says Urbana saw a dramatic drop-off in sales.
"The lockdown created a shift in trends for all of us," he says. "Every aspect of consumer purchasing and behavior patterns went online."
Noticing the trend early, Higgins pivoted quickly and almost overnight Urbana developed an e-commerce platform where shoppers could order online and then have the product ready for pick-up or delivery.
"Developing our e-commerce platform allowed us to extend our service past our physical retail brick-and-mortar stores," explains Higgins. "People were very appreciative of having that option, because not everybody wanted to come inside."
The move paid off, and Urbana expanded its delivery service to include customers across the bay in Marin County, which prohibits cannabis retail establishments.
Going digital also gave Higgins an idea on how to further highlight the brands that Urbana carries in-store. Instead of individual brands being dependent on labor-intensive in-store demos, Higgins began promoting them directly to Urbana shoppers via digital channels including email, text messages and social media. The early results have proven to be a huge success and delivered a significant increase in sales.
Paying it forward
Higgins says he continues to think beyond Urbana and instead considers the industry as a whole, offering his knowledge and expertise to store owners and even brands needing a retail makeover.
"I believe that there's enough for all of us to succeed and have successful businesses," he says. "When I was first starting out, there were a number of people that were very generous with their time. So, whether it is a dispensary or a brand owner that has reached out, I've freely given any advice or suggestions that I thought could help."
Higgins is also happy to see that cannabis is finally catching up with other industries that have regular trade shows to provide unique opportunities to connect, collaborate and access capital, helping to ensure the success of the entire industry.
"When we were getting started in 2015, trying to figure out our way, I think there was a feeling from many of us that we were building an industry as much as we were building our businesses," he says. "So we need to be able to connect with other operators, meet with investors, share ideas, as well as learn how to optimize and scale our businesses."