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David versus Goliath battle expected in cannabis retail

David versus Goliath battle expected in cannabis retail

Hopeful cannabis retailers are scrambling for a chance to open stores in Calgary, but there are fears many will not survive in what may become a crowded market.

Brandon Lau, a Calgary commercial real estate agent who has facilitated leasing deals for 18 proposed cannabis shops in Alberta, said he expects a David-versus-Goliath battle will unfold between small and large retailers.

“You can clearly see who has a stronghold and who is coming very well-heeled to the table with their A-game, versus some of the people who don’t understand what they’re up against,” said Lau, of Avenue Commercial.

“Sometimes it’s the Goliath that I find that just might have the advantage over someone who may not have the experience in setting up and running businesses.”

Retails may face steep learning curve

A report released Wednesday by the professional services firm Ernst and Young suggests many retailers face a steep learning curve to rise above the pack and compete in the rough and tumble of retail.

It says retailers have the chance to become household names, but they will have to build their brands while addressing any community resistance and attempting to change the public image of pot.

The report says retailers should decide whether they will separate themselves based on solid customer service, product selection and quality, or cost, adding it’s “difficult, if not impossible,” to perform well in all three areas.

Calgary city hall has received hundreds of applications from would-be retailers eager to set up shop amid estimates legal weed could yield billions in annual sales across the country.

Large retailers, like Calgary-based Smoker’s Corner and Edmonton’s Fire & Flower, have indicated they aim to open the most number of stores possible, with provincial rules stipulating that one group cannot hold more than 15 per cent of cannabis licenses.

Smaller shops will have to carve out niche

Nathan Mison, spokesman for Fire & Flower, said his company wants to open nine stores in Calgary and hopes to edge out competitors by hiring staff who’ll educate customers about the various products and trends in what has long been an illicit industry.

“Our goal is to be one of those groups that tries to have that kind of market share,” Mison said, when asked if Fire & Flower intends to be a Goliath.

Lau said larger companies are often better prepared with marketing and business plans, feasibility studies and forecasts of their finances, compared to smaller operators.

“At what point will the David be able to succeed after two or three years of operation, knowing that it’s such a saturated market?” he said. “With the whole cannabis bandwagon, at what point is a business going to be viable and can afford to run a location that’s 350 metres down the road from another location?”

Still, he said smaller shops may eventually carve out a niche with customer service and products not available in bigger stores.

Vlassis Douvis is the owner of Hemp Roots. (Reid Southwick/CBC)

Vlassis Douvis, whose family wants to open two cannabis retailers, said he’s not intimidated by signs that Calgary’s retail market may start with many players. He said there are too many applications for pot shops that he believes the market can handle, and that “a lot of them will close eventually.”

But he doesn’t plan to be one of them.

“We always have what you call a business recipe — we deal on a person-to-person level,” said Douvis, who owns Hemp Roots, a head shop with three locations in Calgary.

Douvis said he knows most of his customers on a first-name basis and believes many of them will stick with him at his proposed dispensaries. He said he started his first head shop “on a shoestring budget in numbers that most people wouldn’t even consider,” and expects to eke out similar success selling legal weed.

But he doesn’t expect to get rich.

“We’ll make a good living, but if anyone expects to be a millionaire they’re in the wrong business.”

Full story is available here.

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