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The threat of monopolization in the cannabis industry has become more real as potential federal legalization looms, meaning dispensaries and cannabis businesses must be wary of the “Amazon Effect.” According to a recent white paper entitled “Bigger Is Not Better” by attorney and drug policy activist Shaleen Title, large corporate conglomerates that dominate emerging cannabis markets can jeopardize social equity efforts if left unchecked by the government and other stakeholders.
Particularly, one imminent threat to small businesses not often discussed is the Amazon Effect, or as Investopedia describes it, the “impact created by the online, eCommerce, or digital marketplace on the traditional brick and mortar business model that is the result of the change in shopping patterns, customer expectations, and the industry’s competitive landscape.” This phenomenon encapsulates how big business dominates local, small businesses when it comes to online sales.
The shortcomings of large cannabis e-commerce and marketplace platforms can potentially harm local businesses in the long run despite the potential for technological supportive services, thus enforcing the Amazon Effect within the cannabis industry. If businesses and states alike don’t take these phenomena seriously now, they could risk being pushed out in the future.
Read on to learn how big tech is gaining dominance in cannabis, what influences the space and how we can team up to keep the cannabis industry local.
Big Tech Cannabis Players Take Up Local Marketshare
Large e-commerce and marketplace platforms are pushing out local cannabis retailers. Often marketed as a solution for small and mid-sized cannabis businesses, big tech companies can end up the scourge of regional industries.
E-commerce and marketplace services are extremely popular in legal cannabis markets. Big tech’s growing popularity in cannabis can be intimidating since these behemoths dominate the cannabis industry as the go-to tech solutions for mediating things like cannabis delivery sales. This dynamic creates an “if you can’t beat us, join us” type of scenario, much like those faced by spaces selling out to dark store post-pandemic models.
It’s possible major players in cannabis tech could continue to mimic the anti-competitive bullying practices of big tech in general, but it’s likely you will still need to engage technology services for your “cannabusiness.” The good news is not all big tech platforms hurt small businesses — so how can small cannabis brands find partnerships that meet their goals?
How Do Local Cannabis Companies Dodge Unhelpful Disruptors?
Small cannabis businesses should aim to seek out tech platforms to partner with that meet their unique needs. Due diligence for vetting these partnerships goes beyond finding the biggest name or the cheapest deal: If your brand is not careful, tech giants can take over your customer relationships and make it difficult to compete in the market.
Big tech understands owning data means owning power, which is probably why many offer all-in-one solutions at reduced prices. Cannabis businesses should look to maintain ownership and control of all their customer data in order to grow and thrive. Data will not be the only way tech partners try to take control. Here are a few red flags to avoid a potentially harmful tech platform partnership:
• The tech platform takes away from your company’s profits with added fees to the point where it hurts for your organization to be listed on the platform.
• The tech platform steps in front of your consumer interactions to capture data and offer alternative products.
• The tech platform “hides” your product listings from the general web.
• The tech platform doesn’t verify the legitimacy of all of its retailers.
• The tech platform creates its own lines of products to compete with existing retailers on its own platforms.
Not all tech partnerships are destructive, however. Here are some green flags to look for in a constructive tech platform relationship:
• The tech platform empowers small businesses by making a partnership an avenue of mutually assured profit.
• The tech platform does not compromise brand visibility and increases SEO with product listings.
• The tech platform is not vertically integrated.
Ultimately, when small and mid-sized cannabis businesses are ousted, it largely hurts the maintenance of a free-market model with equally competitive opportunities to succeed.
To help dodge the Amazon Effect, local cannabis businesses can seek out ethical tech platforms and work in tandem to create regional, self-sustaining economic models. To do so requires networking and participation in comprehensive industry-building. Become involved in B2B networks and also stay abreast of policy trends down to the municipal level to impact the most change.
Circular economies don’t just spontaneously happen — they are carefully woven by consumers and businesses with pointed strategies of unified economic purpose. In an increasingly Amazon world, the consideration of careful tech partnerships for small and mid-size cannabis businesses is an integral part of envisioning such a system.