November 3, 2024
Since the legalization of cannabis in Ontario in 2018, the cannabis industry has experienced massive growth. However, this growth has brought intense competition, particularly on price. Major chains known for their value-based retail models have created an environment where consumers expect lower prices. This "price war" has resulted in widespread price compression, where dispensaries must reduce their margins to stay competitive.
Because all cannabis retailers in Ontario source their products from the same provincial supplier — the Ontario Cannabis Store (OCS) — the ability to lower prices is limited. Retailers don’t have flexibility in purchasing costs, so many feel compelled to compete almost exclusively on price. While this can attract customers in the short term, it poses significant challenges for independent retailers trying to maintain profitability.
The cannabis price war in Ontario is being driven by the influx of value-based retailers that prioritize low prices above all else. Value Buds, for instance, has emerged as a dominant player by offering deeply discounted products, driving down overall market prices. This makes it increasingly difficult for smaller, independent cannabis retailers to keep up without sacrificing their margins or compromising the quality of service and experience they offer.
Despite the pressure to lower prices, competing solely on price is not a sustainable business strategy for most retailers. Here are some ways cannabis dispensaries can differentiate themselves and survive during this period of intense price compression:
Providing excellent customer service is a powerful way to differentiate your dispensary. Customers, particularly those new to cannabis, often seek guidance on product selection, effects, and usage. A well-trained and knowledgeable staff can deliver a personalized shopping experience that adds value beyond just the price of the product. Establishing your store as a place where customers feel understood and informed can create long-term loyalty.
In a competitive environment, strong branding is crucial. Your store’s branding — from its logo and colour scheme to the design and layout of the physical space — should reflect its unique identity and connect with your target audience. The shopping experience you provide, whether it's a boutique feel, a community-driven space, or a sleek and modern environment, can make your store stand out.
Though all dispensaries in Ontario source from the OCS, there’s still room for differentiation through product curation. By leveraging the OCS’s Flow Through program, retailers can offer rare or exclusive products not readily available at competitors. Additionally, focusing on premium products, local brands, or niche items can attract customers willing to pay more for a curated selection rather than the lowest price.
Connecting with your local community can help build a loyal customer base. Host educational events, sponsor local initiatives, and engage with customers both in-store and online. By positioning your dispensary as a community hub, you can foster a deeper connection with your customers, which drives loyalty and keeps people coming back — even if they can find lower prices elsewhere.
Investing in technology is a key strategy for thriving during a price war. Offering online ordering through a robust e-commerce platform, integrating loyalty programs, and engaging customers with targeted digital marketing can help extend your reach beyond your local community. Dispensaries that embrace digital tools to enhance the customer experience can drive sales while remaining competitive.
The price war in Ontario’s cannabis market mirrors similar challenges faced by other industries, such as craft beer and organic food. In these sectors, small businesses have managed to thrive by focusing on quality, customer experience, and brand loyalty, rather than simply competing on price. Successful businesses have embraced their niche, providing specialized products and experiences that larger, discount-focused competitors cannot.
In the current price-sensitive market, it’s critical for cannabis retailers to not only differentiate themselves in-store but also expand their digital presence. This is where Poof.ca comes in. As a dedicated online marketplace for cannabis retailers, Poof helps dispensaries connect with a broader audience through digital marketing, product promotions, and online discovery.
Poof.ca allows retailers to showcase their unique products, boost visibility, and reach new customers who are increasingly shopping online. By leveraging Poof's platform, dispensaries can drive traffic to both their online and physical stores, standing out in a crowded market by offering more than just price-based promotions.
In summary, while Ontario’s cannabis price war is creating challenges, there are ample opportunities for retailers to thrive by focusing on differentiation, customer experience, and community building. By working with Poof.ca, dispensaries can enhance their digital marketing efforts, connect with new consumers, and ultimately grow their business — all while staying competitive in a rapidly evolving market.