Thinking of opening a cannabis dispensary this year? Cannabis retail is exploding, and many savvy entrepreneurs are looking to enter the booming industry. But we want you to be prepared.
Opening a Dispensary in 2021
It’s no secret that the cannabis industry has seen a significant boost in recent years since Colorado and Washington became the first states to legalize recreational marijuana. Many states have since followed suit, and in 2020, several more states joined the movement, including New Jersey, Montana, and South Dakota. So, if you’re thinking about opening a dispensary in 2021, it may seem like there is no better time.
But as the tides shift, new challenges are arising. And while the legal landscape appears to be shifting in a friendlier direction for cannabis, it isn’t quite smooth sailing just yet.
Here are a few challenges that are facing the cannabis industry in 2021 and potential obstacles to keep in mind if you’re thinking of opening a marijuana dispensary this year.
An Ever-changing Regulatory Landscape
As has always been the case with the cannabis industry, the incongruity within the legal landscape across the nation (and the world) makes operating in this space significantly more difficult than in many other industries.
If you are opening a plant-touching business, such as a dispensary, you will face heavy scrutiny and be subject to hefty regulations. Each state requires specific licensing for the business, and often for the employees working for you as well.
Make sure you’re up to date on all of the regulations affecting your business in your state. This is where hiring an attorney who specializes in marijuana will be critical. You want to ensure that you stay compliant to avoid fines or even jail time.
Banking and Financial Challenges
Another common obstacle anyone looking to open a dispensary will face is financial restrictions. Because the United States government still considers cannabis a Schedule I illegal substance under the Controlled Substances Act, this poses certain limitations on operators’ ability to partner with various financial institutions.
Many banks refuse to work with businesses in the cannabis industry due to the added scrutiny they might face. Unlike other industries, it can be nearly impossible for a marijuana dispensary or other marijuana-related business to even open a bank account for their business.
Again, seeking the help of experts who specialize in the legal and financial aspects of the cannabis industry will help you to avoid being penalized and ensure your business is secure and compliant.
Marketing and Advertising Restrictions
It’s not as easy for cannabis operators to advertise as it is in most other industries. You can’t buy Facebook ads, or really any digital ads outside of banner ads on cannabis-specific publications.
Traditional advertising channels, such as radio, TV, billboards, and print, prohibit sponsored cannabis content. But digital platforms face similar limitations. This leaves business owners with a very limited means of marketing their brands and products. Word of mouth and networking is key, but that might not cut it. You’ll want to get creative with your advertising strategy.
For tips on how to promote your cannabis products, check out our blog on alternative cannabis advertising strategies.
Consolidation and Competition
As the legalization of cannabis expands across the country and we shift closer to federal legalization, the market faces new challenges in the form of bigger, more established brands. The volume of competitors is constantly growing, but there is also a major consolidation happening across the industry.
Brands that have been around in the space since the beginning of legalization are buying up smaller operators. Additionally, big brands from other sectors are looking to get a piece of the pie. “Addiction” industries, like alcohol, tobacco, and pharmaceuticals, are investing in cannabis and buying up many existing firms with the mission of selling cannabis on a large scale.
There are also many brands that have nothing to do with cannabis, like Coca-Cola, that are moving into the sector as well. These big brands have the scale and means to be a significant competitor to smaller, newer businesses.
All of this competition, especially from heavy-weight brands inside and outside of the industry poses challenges to entrepreneurs looking to startup in cannabis. Of course, there is still an opportunity for small players. But before taking the leap, hopeful business owners should factor these considerations into their long-term strategy.
Opening a Cannabis Dispensary is Not Impossible
Despite the many challenges you will face, opening a dispensary in 2021 is far from impossible. But being aware of these obstacles and developing a business plan with them in mind will help you to run a successful operation.
In addition to seeking legal guidance from a law firm that specializes in the cannabis industry, choosing the right technology is a critical step. Retail Control Systems can help you avoid many of the common pitfalls that cannabis owners encounter by supplying you with state-of-the-art technology designed specifically for cannabis retailers.
Contact us today to schedule a demo of NCR Counterpoint, our top-of-the-line cannabis POS system, today!