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How to Compete with the Cannabis Black Market

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Industry Posted Jan 18 2021

Cannabis in the United States is booming - unfortunately, this is also true for the marijuana black market. Even in states that legalized recreational marijuana, black market cultivation and sales are nearly at all-time highs. However, we remain hopeful that continued legalization and a nationwide reevaluation of the cannabis industry will bolster legitimate businesses and make black market operations a thing of the past. Fortunately, there are things you can do as a cannabis business to compete with the black market and help build communities that better understand the industry and the need to go fully legitimate.

What is the Black Market?

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You may be wondering, "does the black market exist?" The answer is loudly and unavoidably yes. The cannabis black market is a system of illicit cannabis organizations that illegally operate outside the scope of any laws or regulations. Recreational marijuana is legal in 11 states and medical marijuana is legal in another 22 - each of those 33 states have regulations to which cannabis companies must adhere. Everything from the growth and cultivation to the transport and sale of marijuana that does not operate within current legal parameters is part of the black market. Since 2014 when the first legal dispensaries opened, the black market USA has grown to become responsible for over $60 billion in annual cannabis sales.

Why Are Black Markets a Problem?

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$60 billion is a massive amount of money, especially when compared to the $17 billion legal cannabis market projected for 2020. At well over 3 times the size of legal cannabis operations, the marijuana black market possesses a large threat to the environment, our safety and the advancement of legalization efforts. In states like California, where marijuana is completely legal, roughly 80% of the marijuana grown is illegal. This illegal farming and distribution undermines the legitimacy of legal marijuana operations and continues to give critics a reason to call cannabis a taboo. 

Consumers choose to purchase marijuana from the black market oftentimes because of cost. As the legal and illegal markets compete with one another, a massive surplus of marijuana is accruing. This surplus forces regulated prices to increase while black market operations can continue to compete with decreasing costs, which means consumers choose to buy illegally. The downside of this is twofold: the consumers get unregulated, potentially unsafe products and the legal dispensaries and cultivation operations hurt financially. 

There is a third reason why black market marijuana is a big problem: the environment. Cannabis farming is innately taxing to the environment, but legal operations are subject to strict regulations that ensure less damage to the environment (zoning, cultivation caps, etc.). Black market operations, such as the ones in California, are almost entirely located on public property, damage endangered ecosystems and deplete necessary water sources on a seasonal basis.

How to Compete With the Cannabis Black Market

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The black market is a difficult thing to compete with because it can offer consistently lower prices. However, there are things the illegal black market cannot provide consistently, which are exactly the things that legitimate cannabis businesses need to provide to best compete. Below are five ways you can increase your loyalty base and actively compete against black-market weed.

Focus on Quality

Black market marijuana operations may be able to offer cheaper products, but they lack regulation and quality by association. As a legitimate brick and mortar shop that follows state regulations, you can provide a much more impactful quality guarantee. Focus on the quality of your cannabis. Make sure the product you supply is coming from well-known, reputable farms and stock a variety of brands, strains and styles. The quality of your product and the diversity of your selection can make you stand out, even amongst other legal competitors. The more you have to offer that you can quality-guarantee, the better.

Provide Discretion for Customers

Potential customers may be wary of buying marijuana at a storefront because of public exposure. To counter this, make sure your dispensary promotes discretion.  Design your website to have a clearly-stated privacy policy and don't ask for personal information (name, address, etc.) unless you have to. Another great way to make wary customers feel more comfortable is by offering curbside deliveries (or even delivery services, if your city and state allow it). Additionally, keep your packaging clean, ambiguous and odor-proof. By creating a system that draws less attention to your customers and their purchase of marijuana, you will likely gain the business of individuals uncomfortable with the social implications of buying marijuana.

Educate Staff

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There are certain negative connotations with black market sales, including their ability to go bad or end poorly for the buyer. As a legal shop, you can be a safe place where consumers can make purchasing decisions in comfort. A big part of creating an inviting, comfortable atmosphere is through knowledgeable and friendly staff members. Make sure your staff is up-to-date on what you offer and the newest industry trends. You should also educate your staff on customer service. By providing a safe place with a friendly, knowledgeable staff, you're offering something that the black market will never be able to directly compete with. 

Create Educational Material

One of the best ways to compete with black market cannabis is to highlight your legitimacy, something they cannot do. Creating educational material can be a huge legitimacy booster that also builds your brand and increases your business's chance of being seen online. Create a blog that addresses industry and local cannabis news. Design cannabis infographics and product charts to help customers figure out what they should buy and why they should buy it from a trusted, legal source like your dispensary. By being a cannabis educator, you will distinguish yourself from other businesses and underline the reasons why legal cannabis is the smarter choice.

Get Involved in Your Community

Dispensaries, as brick-and-mortar shops with high-profit potential, are a benefit to local economies. Your customers are members of the local community and share a physical space alongside other businesses, organizations and residences. Be part of that community. Give back, volunteer and donate. By getting involved in your local community, you can spread the word about your business and highlight the benefits of shopping at a legal dispensary. Black market cannabis will never be able to benefit local economies the way legal cannabis does - promote and highlight this. Be part of something bigger and people will positively respond.  

Help the cannabis industry compete against the black market. Share your ideas on how we can all win out against the black market, build stronger cannabis communities and encourage legitimate marijuana activism!


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