Summer Business: Sales Hold Up, As Consumer Dynamics Shift
This summer will lack the usual outdoor events, sports games, concerts and festivals that make it the cannabis industry’s holiday season. But insiders suspect sales will hold up anyway.
“We don’t expect the normal seasonal pattern to be massively disrupted,” said Roy Bingham, executive chairman and co-founder of cannabis data firm BDSA.
Before the pandemic, BDSA had projected a $16.3 billion in total U.S. sales for 2020, up from $12.4 billion last year. The projection still seems accurate, although sales may be slightly higher, despite COVID-19, Bingham said.
Since the pandemic’s initial impact, consumers are reverting to more familiar behavior. While at first consumers hoarded products, that has slowed as supply chains have largely held up. The spike in delivery has also settled down, as shoppers return to stores. Overall, cannabis sales seem to be following their standard seasonal patterns in more states. July and August are often strong months.
Is cannabis recession proof?
The bigger question to Bingham is the extent to which cannabis sales defy the economic downturn. Consumers need to be careful with spending and that drives them to more cost-effective products. So they may seek lower-cost items, Bingham said.
Tourism is a major factor for some states and it remains to be seen how much people travel this summer. But the tourist effect in general is gradually declining as more states open REC markets, Bingham said.
Colorado dispensary chain Green Dragon just saw its best weekend since February, aside from the panic buying early in the pandemic, according to co-CEO Alex Levine. “Hopefully, this is a sign,” he said.
The increase coincided with the unofficial June 15 start of summer in the mountains. He expects the July 4 holiday to more definitively predict sales for the season. “That’ll be the real determination,” he said.
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E-commerce, wellness take spotlight
But business has changed since before the pandemic. Notably, COVID accelerated a shift to e-commerce.
“That trend’s here to stay,” Jon Lowen, co-founder of consulting firm Surfside, said. Surfside helps businesses use data to determine consumer trends.
Lowen said brands and dispensaries have the opportunity to communicate directly with consumers through digital purchases and to better understand what they want. That means creating a better experience, such as websites and functionalities that make it easy and fast to order online. That also means collecting data to understand what people like and don’t like, and what drives their purchases. Much of that interaction had previously been mediated by budtenders.
Normally, cannabis brands align with travel and leisure for the summer. “This year is totally different,” said Matt Rizzetta, CEO of the New York-based North 6th Agency public relations firm.
Now, he says, the interest is in e-commerce, wellness and mental health. Cannabis products addressing health and wellness are doing well and Rizzetta expects that to continue.
In e-commerce, cannabis businesses with the easiest platforms for people to use are doing well, he added. COVID has prompted greater scrutiny of businesses’ e-commerce engines and interactive capabilities, making businesses focus on users’ online experience.
“Those were afterthoughts” before the pandemic, Rizzetta said. “That’s really happened now for the first time in cannabis because of COVID.”
What else to watch
Insiders are watching various factors this summer. One of those is whether increased access to delivery will continue or customers return to shops. Lowen said e-commerce and delivery have given customers more choices for where to shop. When customers visited dispensaries before, they often chose the closest one. Now it’s easier to get deliveries from dispensaries that are farther away.
Rizzetta is also curious about regional trends as states reopen. For instance, delivery is strong now, but that could change as consumers feel more comfortable leaving their homes.
“I’m going to be watching that very closely,” Rizzetta said. “Nobody really knows what to expect there.”
Correction: This story initially misstated Roy Bingham’s title.