Report: Dealers Still Top Dispensaries for Cannabis Sales

Price, convenience drive consumers to the illicit market.

It’s no secret. Most folks looking to buy marijuana will succeed even if there isn’t a legal shop nearby. And when you factor in price, there isn’t much of a decision for many people when choosing between a legal dispensary and its higher prices versus their trusty tristate dealer.

But at the end of the day, its this competitive landscape that can be the difference between whether licensed operators can exist or not.

A recent report New Frontier Data touched on the issue, offering some tips to expand the legal side and bridge the gap with its unregulated counterpart.

Meeting Customers Where They Are

According to the report, illicit market sales still outpace legal transactions, despite more than half of Americans having legal access to high-THC cannabis. In 2022, illicit cannabis sales reached $74 billion, far surpassing legal sales at $28 billion.

The projection is blunt: Illicit sales are expected to exceed legal ones through 2030, even in states where cannabis is legal.

“Meanwhile, the legal cannabis market is embroiled in competition amongst itself to serve the pool of consumers who already rely on regulated channels,” the firm wrote.

But there are steps the regulated outlets can take to help offset the challenge. For example, the report stressed the need for factual and transparent information about cannabis that is targeted at potential users, particularly older adults and women who have shown interest but remain hesitant.

Educational initiatives could involve dispelling myths, explaining safety and legal aspects, and highlighting medicinal benefits.

Using diverse platforms, for example, social media, community outreach, or Reddit forums, was also suggested to reach a wider audience a bit more effectively when typical advertising rights aren’t a given.

Improving access to legal cannabis channels is another big factor, including establishing more conveniently located retail outlets and user-friendly online platforms.

“Frequent consumers who primarily source from dealers live disproportionately in urban areas, where they may or may not have convenient transportation to dispensaries,” the firm wrote.

“They tend to have lower incomes and purchase cannabis in smaller dollar amounts than retail shoppers but consume very often and so would need to be able to make frequent trips to a dispensary.”

In medical-only states, simplifying the process of obtaining medical cannabis cards – by reducing bureaucracy and costs, and expanding the list of qualifying conditions, for instance – could foster greater legal market participation.

Price Talks

At the end of the day, however, price talks.

The report suggested that offering a broad range of products, from various strains to different consumption forms such as edibles and oils, could attract a more diverse consumer base. And that range should include a variety of price points.

Those who “rely on dealers to source cannabis in adult-use markets have significantly lower incomes on average than consumers who source from friends/family, and both groups have lower household income on average than cannabis retail shoppers,” the report stated.

“Retailers should aim to have products at a variety of price points and offer promotions or loyalty discounts where possible.”

Collaboration with regulators and medical professionals was also noted as a key strategy. Those type of collaborations could lead to more informed policies and regulations, supporting market growth while keeping public safety in mind. Engaging health care professionals in cannabis education can lead to more informed recommendations to patients as well, which would naturally lead to higher numbers of medical cannabis users.

The report also pointed to the benefits of transparency and compliance. Adhering to strict quality control standards, ensuring transparent product sourcing and labeling, and complying with regulatory standards are essential for building consumer trust and sustaining that growth long term.

Adam Jackson

Adam Jackson writes about the cannabis industry for the Green Market Report. He previously covered the Missouri Statehouse for the Columbia Missourian and has written for the Missouri Independent. He most recently covered retail, restaurants and other consumer companies for Bloomberg Business News. You can find him on Twitter at @adam_sjackson and email him at adam.jackson@crain.com.


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