Cannabis consumers are historically very deal driven. A large percentage of consumers are still buying from the illegal market.
Dating back to the days of strictly medical marijuana, dispensaries and delivery services have relied on new customer discounts, 4/20 specials, free giveaways, and, most recently, Black Friday deals.
In 2019, consumers spent $69B during black friday weekend. Although only a fraction of those sales were for cannabis, it’s become relevant for our industry. As we look towards the holiday season, I wanted to take a look at whether deals can drive new customers or bigger basket sizes as brands and retailers clamor for 40% year over year industry growth.
Unfortunately, 60% of cannabis grown in California goes to the illegal market. That means a healthy portion goes out of state illegally, and another good chunk is sold by that dude you text sometimes.
This is a scary statistic if you are a legal retailer. The lack of government enforcement and high taxes on consumers are creating the perfect environment for illegal cannabis sales. So how do we bring these people into legal stores and ordering legal delivery? The first way to figure out how consumers transition from the “Grey Market” is to consider the factors that drive consumers.
Price Matters. 66% of all e-commerce consumers said they “made a purchase they weren’t originally planning to make solely based on finding a coupon or discount” (RetailMeNot). This is a powerful statistic alone, but when combined with data that says 49% of ALL cannabis transactions include a deal or coupon (Flowhub), it’s clear that specials and cannabis deals matter in the industry.
Convenience. If you live in Los Angeles, Seattle, or Denver, cannabis is very easy to obtain, with retail stores on virtually every corner and billboard. In some legal states like California, delivery services can make buying weed even more convenient. Unfortunately, even in many legal states, there is still a serious lack of access in many jurisdictions. Many cities and jurisdictions do not allow retail, and are often very far from delivery depots, which makes at home delivery expensive and unreliable. The truth that is for many consumers texting your dude is still more convenient.
Product Fit. This is very where the conversation gets more interesting. Consumers are increasingly interested in manufactured products like edibles, vapes, tinctures, and beverages, and the illegal market struggles to fill these needs. As more new and different consumers come into the cannabis market, this may be the biggest driver of change away from the Illegal market. Testing requirements are also becoming increasingly important to consumers who just don’t know what is on or in illegal cannabis.
It’s clear that if you are a cannabis retailer, online or off, deals are key. However, a deal is only as good as the number of people that are able to use it. So, how do you get your deals in front of customers?
There are options like Weedmaps, Leafly, billboards, bus signs, social media. But did you know that you can now legally place ads on mainstream publishers like Food & Wine, Conde Nast, Newsweek and thousands others? I was skeptical too before I started advising The Flower Agency. TFA’s technology brings audience based programmatic advertising to the cannabis industry. The idea is to precisely target consumers based on their buying habits outside of cannabis purchases.
If someone likes craft beer or high end kombucha, the likelihood they would try an infused beverage is much higher. If they have previously been to your dispensary, it makes sense to serve them an ad for your new delivery service. This nuanced data is the balance needed to cope with the lack of Google, Facebook, and Instagram in cannabis advertising. It won’t solve all cannabis ecommerce issues, but it is a powerful addition to your marketing mix.
The cannabis industry may never be completely rid of the illegal market, but the combination of new products, increased access, and special pricing to get people to try new legal options will turn the tide over time. As we look towards the holidays and 4/20, it’s crucial that retailers appeal to both new folks and more core consumers. The best way to do this is still through deals, specials, discounts, and events like Black Friday.
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