Lockdown
It is late April, 2020. Most of the world continues to be in COVID-19 or Coronavirus lockdown.
Businesses of all types around the world are closed. There are some essential services open, by and large the world has come to a screeching halt.
Governments and their people are wondering how economies will restart, and what will be the shape of the world once this pandemic passes.
The retail landscape’s shift to online will accelerate. Brick and mortar stores will always have a place, but the movement that started more than 20 years ago will have motivation and traction like it’s never had before.
While people have been buying more online, the sudden acceleration of this behaviour has pushed already established distribution systems to extremes. Witness how grocery stores who already had online buying and home delivery systems in place are suddenly overwhelmed. Witness how delivery couriers such as Canada Post are so stretched as to publicly state that people can expect delays. Witness how even mammoth companies such as Amazon and Walmart are struggling with fulfilment.
And we can expect this surge of online purchasing to become the norm.
What we cannot expect in Canada’s two largest provinces is for the provincial governments to get out of the way of retail ownership.
Retail Monopolies
In Canada’s two most populous provinces, the only way one can legally purchase cannabis online is through the government owned and operated websites.
This means that the Quebec and Ontario governments control ALL RETAIL sales and customer experiences.
Think about this in other terms. Compare this to the sale of just about any other product or service.
Both Quebec and Ontario strictly control the sale of alcohol beverages, although Quebec allows for considerably more physical retail distribution than Ontario. i’ve discussed this already, but think of another product where the only way to legally get it is from the government?
So while individuals and industries are being encouraged to start new businesses, to take risks, to develop skills for a post-pandemic world — the two largest provinces in Canada have legislated that one of the fastest growing industries in the world can only be served by them.
This makes no sense.
This stifles entrepreneurship. This encourages the market to be dependant on the government. This forces businesses to be limited in scope. This stops freedom of choice.
And marketers know better than anyone, people often prefer to have a choice.
Different Brands for Different Tastes
Companies around the world create different brands for different consumer preferences. They take what is essentially the same product and sell it in a blue, green, or red container. They know that some people prefer blue, some people prefer green, and some people prefer red. They know they can get more people to use their products just by putting them in different containers and putting a different brand on them.
Even at a retail perspective, there are several companies that have different branding for different consumer experiences.
For example, take a look at how grocery companies across Canada have a variety of retail and online experiences for different consumer tastes and demographics.
The largest Canadian food retailer, Loblaw, has twenty-two different segment banners.
And this is just for the people who sell FOOD. We all need food. And the grocery industry is notoriously competitive, with margins in the 1% range.
If the food industry in Canada can withstand so much diversification — despite the tiny margins — why is the cannabis industry not allowed to diversify?
I’m not going to buy the argument about safety — just about everything sold at a grocery store will have to pass some sort of government inspection along the way. Canadians generally trust our food sources because we know that there is oversight at some level.
As there is with food, there is oversight at every level when it comes to absolutely everything having to do with cannabis. People who are buying cannabis from legal sources in Canada can be assured that the product they are buying is inspected along the way.
With so much government oversight, do we need to limit the retail arm of the sale of cannabis to only government?
Absolutely not.
In fact, limiting the retail sale of cannabis to only governments is bad for everyone along the way.
Because, as consumers, we want choice.
And countless companies — especially Canadian companies — would love to be able to sell more product but are unable to because of distribution bottlenecks. Cannabis stock prices and companies have taken a brutal beating.
Increasing Entrepreneurship
Which brings me back to the current pandemic, and the world we will live in once this time has passed.
There are so many people who are anxious about their incomes. There are so many people thinking how to create an opportunity for themselves. There is so much opportunity in the cannabis marketplace.
And the government is telling people to go out and learn new skills, and to take chances, to become self-employed, to think about their incomes and careers during this forced lockdown time.
Except — do not try to enter the legal cannabis marketplace. (The government hates competition.)
Monopolies: Learn to Increase Your Profits
If all sales of cannabis were through the government at the wholesale level, then the government would be able to get their slice of the revenue pie as well as maintain their control over the safety of the product.
The SQDC — Quebec’s cannabis monopoly — would probably be able to boast much greater profits than the nearly $12 million recently reported if all they did was open up the retail market and have all sales go through them.
Allow more individuals and companies to enter the retail space — whether with physical stores or with an online presence.
Even still, if the government set itself up as the fulfiller of these products — you know, to maintain the safety element — there would still be a lot of opportunities for different companies to start.
So while we are locked down, locked in, and looking for a way forward, perhaps this is the time for us to consider how we will act to push government in a way that will open more opportunities for entrepreneurs rather than keeping us all burdened with legislation.
