The recent (yet long-awaited) surge of new storefronts in Ontario has been a major contributor to record-breaking cannabis sales in the province, but the fast pace of expansion will likely lead to a “thinning of the herd,” warns Marijuana Business Daily.
How low can you go?
The Ontario Cannabis Store — which, you’ll recall, is in competition with private retailers — is still committed to support the opening 1,000 storefronts by September 1. Retailers worry that incoming competition could mean prices drop so low, profit margins will be flattened.
“It’s impossible for this many stores to all sell to the small market that we have here and remain profitable,” said Trenton’s Island Smoke owner Mark Phillips.
Clusters cause concern
Retailers would be wise to look beyond price for ways to differentiate themselves in the market, particularly those in dense “clusters” of stores all hoping to serve high-demand areas like Toronto’s Kensington Market or Queen Street West, where community organizers and local politicians are taking note.
Experts told MJ Biz that targeting specific market segments is a good idea, while also watching cash flow and maintaining healthy reserves will help weather the storm.
Some opportunity remains
While clusters in overly dense areas will shrink, weed deserts in populous municipalities like Mississauga could permit stores in the near future. But it will be understandable if some hopefuls look at the landscape delay or change their plans.
“I know that the OCS wants to see 1,000 stores by September,” Vetrina Group’s Krista Raymer told MJ Biz, “but I don’t know if that necessarily will be how it plays out in the free market, with retailers being able to make the decision about when they open.”