One of the primary challenges facing the cannabis dispensary model is its lack of diversification. Unlike other consumer packaged goods categories, such as food, beverages, or personal care products, cannabis is confined to a store sales approach for one singular product: cannabis. This is due to the industry’s unique characteristics and complicated rules and regulations further hindered by unfavorable taxation conditions. This limited distribution model severely limits the potential customer base and, as a result, inhibits the industry’s growth potential. By relying solely on a dedicated and limited number of dispensaries, the cannabis industry fails to tap into the vast consumer reach and enormous infrastructure of established retailers.
The singular-store approach of cannabis dispensaries presents a significant barrier to broad consumer accessibility. These dispensaries are typically located in specific, often less desirable regions or neighborhoods, limiting access for a broad range of potential customers. This lack of convenience hinders the industry’s ability to cater to a broader, often more conservative demographic and maximize its market potential. While a few cannabis delivery services in metropolitan areas are trying to overcome these limitations, these services have to deal with other significant obstacles limiting their reach and viability.
The sustainability of any business model depends on its economic viability. Cannabis dispensaries, while currently profitable in many regions, face significant challenges in the long run. Dispensaries’ limited audience and location-specific nature may lead to concentration in certain areas, resulting in reduced profitability and increased competition, while other areas are underserved. Moreover, the high operational costs associated with running a dispensary, such as security, compliance, and licensing, further strain the economic sustainability of the singular store approach.
Another significant concern for economic viability is the high theft rate at dedicated cannabis dispensaries. Due to the nature of their business, cannabis dispensaries often become targets for theft and illegal activities. The valuable inventory of cannabis products and the cash-based nature of many dispensaries make these establishments vulnerable to criminal activity. Dispensaries must make significant investments in expensive security measures, including security staff, surveillance systems, alarms, and secure storage, to prioritize the safety and security of their staff and customers. Even one of the pioneers in the industry and Marijuana multistate operator, MedMen, abruptly closed stores last week in Emeryville in the Bay Area and San Jose in the Silicon Valley. and another store closure in West Hollywood.