HAZEL PARK, Mich. (WXYZ) — Increasing competition in the cannabis industry is forcing some companies to change their business model while others are keeping the course.
According to state data, there have been nearly 140 new recreational retailers opening in just the last eight months, with over 500 now licensed in the state.
It’s a tight market in the city of Hazel Park, where there are a number of cannabis companies in close proximity. That includes New Standard, which has nine locations across the state.
“We really don't gauge on our competitors and on pricing. It’s really about guest experience,” New Standard COO Mary Turon said.
Turon says she doesn't feel it’s any more difficult to operate today despite increased competition, adding they’ve spent years building their customer base.
“It's literally like a relationship, almost like going to your dentist or someone you know and they feel comfortable and that’s what keeps people coming back,” Turon said. "It's working, that strategy is working and if you’re not based on price, I firmly believe revenue will come, but you have to start the basics with treating people right.”
Besides increased competition, prices have also changed. In June of 2020, the average retail price of an ounce of flower was roughly $400. Today, it’s about $122.
“Everybody is under the impression when you first hear cannabis, you’re just making millions, you must be printing money," said Alex Leonowicz, the COO and co-founder of Redbud Roots. "But at the end of the day, it’s like any other business.”
Leonowicz says his company, which is based in West Michigan, has started focusing less on retail and more on manufacturing for other retailers.
“The days where it was $4,000 a pound, those days are long gone," Leonowicz said. "It will never come back, so you need to learn and adopt in this space where the margins are a lot tighter.”
“It's not the gold rush people thought it once was,” said Jacob Ownbey, the owner of Great Lakes Holistics.
Ownbey says his strategy is focused on having the cheapest prices, calling his store the "Dollar General of pot."
“Everyone is trying to build these expensive, exquisite brands trying to make it an experience and for us, we treated it like a commodity and trade it as such,” Ownbey said. “It's who can really understand margins and understand moving material and keeping a long-term customer base.”
As cannabis competition grows, companies are focused on creating their niche and putting in place a long-term business model to outlast those that don't.
"I think there's a lot of people that rushed in thinking it was the new green rush and there was millions to be made," Leonowicz said. "Those days were short, they were a long time ago and they’re just not going to be there anymore.”
