Retail cannabis chains are on the rise as Colorado’s retail marijuana market matures, a growing number of stores are controlled by a handful of retail chain operators.
It’s a sign the retail cannabis industry may be headed in a direction similar to traditional retail businesses, where players like a Wal-Mart or Home Depot squeeze out smaller mom-and-pop stores.
In Colorado, retail cannabis chain retailers are opening more stores across the state than those entrepreneurs who are opening stand-alone shops.
Roughly 9% of recreational retailers in the state currently own and operate three or more stores – up slightly from 7% in January 2015.
However, the percentage of individual stores owned by retailers with three or more locations has risen over 12 percentage points from January 2015, so that today nearly one in three stores is run by a chain, such as Native Roots or The Green Solution. It’s clear evidence that Colorado’s largest retailers are getting even bigger.
The 2 percentage point uptick in the number of retailers with three or more locations means only a handful of businesses are morphing into “chain” store operators.
In short, established chain operators are becoming larger versus new chain retailers entering the market.
For example, Native Roots – one of the more prevalent retail chains in Colorado – now has 16 recreational retail licenses, up from seven in January 2015 – a 129% increase. Over this same period of time, the total number of retail stores in the state increased from 378 to 479, a 27% increase.
Such rapid growth among established players relative to the state as a whole is not entirely unexpected, and it underscores the advantages larger, well-financed retailers have over their smaller competitors – particularly when it comes to opening new storefronts.
Veteran retailers that have been through the application process multiple times are in a much better position to capitalize on licenses that open up in municipalities that previously placed moratoriums or bans on recreational businesses. Seasoned chain operators, for example, are able to draw on previous experience to put forth competitive bids that assuage the concerns local officials may have with newer market entrants.
Though the market is beginning to coalesce around a few large players, it remains fractious – approximately 80% of Colorado recreational retailers have just one adult-use storefront.
Smaller, independently owned businesses are able to persist based on the strength of the market itself, which continues to post record-setting sales figures three full years after launching.
But inevitably the double-digit sales increases will level out and the retail environment will grow even more competitive. Large retail chains – many of which operate their own cultivation facilities – will be in a much better position to grow their businesses once this happens.
With tight control over their own supply chains and the ability to leverage economies of scale, these retailers are able to profitably sell products at a lower price point than their smaller, independent competitors can reasonably afford.
The parallels between Colorado’s retail marijuana market and the traditional economy grow stronger as the former matures, suggesting that retail chains are likely to become even more ubiquitous as time goes on.
Reposted from Marijuana Business Daily written by Eli McVey firstname.lastname@example.org
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