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Brick-and-Mortar Retail Losing CBD Sales to E-Commerce?

CHICAGO — While convenience stores have remained open during the coronavirus pandemic, the emerging category of cannabidiol (CBD) products at least for brick-and-mortar retailers may be taking a hit, with online sellers benefiting the most, reported Brightfield Group.

CBD sales across all brick-and-mortar retail is falling by as much as 30%, the Chicago-based data research firm said. At the same time, online sales of the CBD category appear to be stronger, according to Bethany Gomez, managing director of Brightfield Group.

For the convenience channel specifically, Gomez said retailers may encounter challenges with the CBD product category because many c-store shoppers buy on impulse. Unfortunately, a CBD product purchase, which tends to be a higher ring, may not fall into that category.

Prior to the pandemic, CBD products had been steadily growing as a category for c-store operators. In CSP’s 2020 Category Management Handbook, c-stores represent 56% of the approximately $125 million in hemp and CBD product sales in markets measured by Chicago-based research firm IRI. The c-store channel rang up $70.8 million in CBD product sales in 2019.

Here’s what else made headlines in the CBD space:

Retail sales slip as consumers buy more online

Regulatory outlook remains gray due to FDA uncertainty and mixed enforcement messages

Two companies issued letters for allegedly saying products could treat addictions

Retailers test the growth potential of cannabidiol products but remain cautious

C-stores commanded the highest share of dollar sales

Supply chain buckling as demand rises during pandemic

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Coronavirus pandemic may be diverting consumers to online supply

Insiders Hope Brick-and-Mortar Pot Shops Will Give Ontario’s Lagging Cannabis Sales a Boost

Legal cannabis sales have been lagging in Canada’s most populous province, but with brick-and-mortar pot shops slated to begin opening in Ontario on April 1st, many industry insiders are hopeful that will give the legal weed business a much needed boost.

“I think having brick-and-mortar stores, it’s proven to actually inflate the market quite a bit,” Nick Pateras of Lift & Co. – the Toronto company contracted to train Ontario’s retail cannabis workers – told CBC News. “I think you’ll see a pretty sharp spike; three to four times the monthly average pretty quickly.”

That spike is desperately needed for the province’s marijuana market. Since recreational cannabis was legalized last October, Ontario has seen it’s month-to-month sales drop twice. Meanwhile, provinces with much smaller populations (like Alberta) and much stricter marijuana regulations (like Quebec) continue to surpass Ontario’s cannabis sales.

A number of factors have caused Ontario’s struggles. First and foremost is the province’s decision to delay the opening of brick-and-mortar stores until this spring. While every other Canadian province had at a handful of licensed retails ready to open their doors on Day One of cannabis legalization, Ontario could only offer online sales through the Ontario Cannabis Store – a provincial website that has been dogged with problems since it launched.

Limiting the market to online sales has made buying cannabis less accessible for many Ontario residents. It’s also much riskier. Right now, American customs agents can search the credit-card records of any Canadian traveling to the United States. And since cannabis remains federally prohibited in the US, border officials can slap Canadians with a lifetime ban from entering America if they find evidence that a credit card was used to purchase marijuana. That’s why Canada’s Privacy Commissioner Daniel Therrien has urged shoppers to only use cash when buying legal marijuana.

“A lot of people don’t want to hand over their credit card and have the purchase traced back to them,” explained Pateras, “so they’re looking to go into a store and using cash.” And they’ll be able to do that as early as tomorrow.

Of course, opening brick-and-mortar stores won’t solve all of Ontario’s problems. The province’s licensed retailers will still have to compete with illicit cannabis dispensaries, which have remained popular throughout the province in the wake of legalization. The illicit dispensaries have also had much more time to create a customer base, establish supply chains and figure out what products consumers want to buy, so pulling customers away from them could prove challenging for licensed cannabis retailers.

On top of that, we still don’t know how many stores will be ready to open their doors on April 1. While the government of Ontario has officially licensed 25 shops, not all of them will be ready to begin selling cannabis on Day One, and nobody knows how long it will take for all 25 to get up and running. So Ontario’s marijuana market will likely continue to struggle for the foreseeable future.

The legal cannabis industry has been struggling to get its feet in Canada's most populous province. But, with brick and mortar pot shops slated to begin opening on April first, many industry insiders are hopeful that will give the legal weed business a much needed push. ]]>