Marijuana: Challenges for Retailers When States Legalize it and the Federal Government Does Not
There has been a growing demand for legalization of Marijuana in the US. By October 2017, 61% of the US population has been backing the legalization of Marijuana. Currently, 9 states have legalized it for recreational use while an additional 21 states have permitted it to be used for medicinal purposes. Cannabis retailing is now moving from the street corners to the state-of-the-art dispensaries and stores. Though the respective states have legalized the use of Marijuana for different purposes, the federal government has still not legalized it. This creates considerable confusion among people on the legal status of Marijuana. The retailers are also faced with many challenges in a legal environment where Marijuana use is legalized by the states and not permitted by the federal government. Some of the key legal challenges being faced by the retailers in such a dichotomous situation are provided below:
Lack of Clarity on Government Stance and Policies
The biggest challenge faced by marijuana retailers in the US is the lack of clarity on the federal government’s stance and policies towards marijuana industry. It is difficult for the retailers to expand their business without clarity on federal government’s policy stance. In a study, it was revealed that 47% of business owners said that they had no plans to change their growth plans due to lack of clarity on the part of federal government’s policy stance. 34% of them said they were being cautious and observing the government’s approach before taking any major decision on business expansion. Ideally, they should be cautious and plan expansion cautiously which will help protect them from uncertainties.
Nearly two-thirds of the states in the US have legalized marijuana use for different purposes. More states are following suit and this offers tremendous potential for the marijuana retailers to expand their business. However, these expansion opportunities also come with drawbacks. Retailers who do not have sufficient resources may to make the investments for expansion will fall behind and may have to eventually go out of business. Small manufacturers and retailers who want to operate in multiple states across the US can get cash strapped quickly.
There is an oversupply of marijuana and this has led to falling of prices. Marijuana is legalized for recreational purposes in California and recreational market regulations will make it harder to export the stuff out of state. This will lead to oversupply and further drive the prices down. The dip in prices may eventually force many smaller retailers to shut shop.
Restrictions on Marketing
States have placed many restrictions on the manufacturers and retailers for advertisement of marijuana. They cannot place an advertisement within at least 1000 feet of a school area where children spend time. They can’t advertise in public or private vehicles and also in other places like arenas, stadiums, state fairs, shopping malls, arcades, and farmers markets. There are other state-specific restrictions and regulations that the retailers have to comply with for marketing purposes. These restrictions make it difficult for the retailers to effectively market marijuana.
Adherence to Standards and Compliances
The stance of the US federal government on the marijuana industry is still not very clear. The marijuana manufacturers and retailers should do their best to comply with the safety, ethics, and state laws. They should ensure complete adherence to standards and compliances to be on the safe side. The retailers are mostly working without appropriate checks and balances and adherence to compliances which will become a major problem for them in future. The best thing that they can do is to push to legitimize the marijuana industry.
Marijuana retailers face lot of difficulties in accessing banking services from the banks and financial institutions. Banks need to comply with the federal regulations and in most cases, they will not take clients from the marijuana industry due to fear of legal repercussions. This shuts the door on marijuana retailers for accessing banking services and they have to operate in all-cash mode. This makes accounting in the business very difficult and also makes it tough to keep track of the taxes and paying them on time. As long as marijuana remains listed as a Schedule I drug, the industry and marijuana retailers will face a tough time in accessing banking and financial services.
Building Brand Identity
Building brand identity and awareness is very important for any business. Marijuana retailing is no different and it is critical for the retailers to create a brand identity that differentiates them from the competition which helps them to define and develop their brand over time. They need to be focused on branding and define the nice of the market they are falling into. Retailers are not being very picky about branding and the kind of stuff they are selling. They need to inculcate brand building which will help develop a better connect with the potential customers and increase the sales. A product that is not well branded is not going to find many takers in the market.
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March 01, 2019