Medical and adult-use marijuana retail franchise Diego Pellicer is commonly referred to as “the Starbucks of weed” - a far cry from the image of shady, underground pot operations that has traditionally dominated public conception of the industry. In trend with the U.S. recreational cannabis retail landscape (which exists now in some form in eight U.S. states, plus the District of Columbia), Diego Pellicer (DP) stores provide a differentiated, formal, and decidedly premium retail experience. The second U.S. location opened February 14 in Denver following a $1 million renovation (the first opened in Seattle in October 2016) as an independent brand licensee focused on owning and operating legally compliant dispensary and grow operations. I spoke with Diego Pellicer Colorado CEO Neil Demers about what goes into introducing a new retail format and CPG product to the mainstream retail landscape—and what traditional retailers can learn from cannabis.
- Retail 101 is industry agnostic. “‘If you build it, they will come’ is not true,” Demers explains. The basics of retail – conducting industry research, knowing the market, and a fundamental understanding of what it takes to open stores, are more important than ever in the increasingly competitive cannabis business. DP’s standard operating procedure borrows heavily from traditional retail, and there are defined merchandising strategies in place. Consultants from the beauty industry helped DP Denver maximize shelf space and impart effective design across the 2,300 square-foot selling space, similar to how a typical Walgreens, CVS, or Sephora store might be configured.
- Knowledgeable employees are critically important for brand equity. Customer service and the consumer journey must be maximized. Demers stresses that this is critical to Diego Pellicer’s success: all touch points along the consumer path to purchase need to be thoughtfully considered as part of a simple and enjoyable experience. This involves placing a big emphasis on extensive employee training, and DP budtenders are encouraged to share consumer feedback and suggestions at staff meetings and at the end of each day. Alignment with the consumer mindset is inherent in the industry culture and this, combined with deep product knowledge, creates a more authentic interaction with shoppers. “A strong team can identify quality products,” says Demers. “We carry strong brands, but also staff a lot of industry vets with an understanding of the market and the voice of the consumer.”
- Affordable luxury can be inclusive. Diego Pellicer stores are positioned as a one-stop cannabis shop: high-end, but competitively priced. Says Demers “We don’t turn anyone away, but at the same time we do have a target customer.” The luxurious, indulgent store environment is designed to be particularly welcoming to shoppers who are cannabis connoisseurs, yet have had a difficult time finding a shopping experience that aligns with their tastes and values. In addition Demers explains that, to communicate with their discerning target consumer yet still have mass accessibility, they follow a good-better-best assortment strategy with three tiers of cannabis flower products and a range of accessories.
- Passion is fundamental to the industry. I asked Demers what traditional retail can learn from the cannabis industry—one which is unique in that it has long been consumer-defined and consumer-driven. Demers explains that it all comes down to a shared belief in and enthusiasm toward the product: “The only way we have been able to turn an illegal industry into a legal industry is through willingness to compromise. It all starts with advocates and enthusiasts; people who believe in the product and its benefits. Even if we can’t have the most ideal situation we have been able to negotiate, and to educate the public, which led to medicinal legalization. Empowerment and education and advocacy led to the great shift in public opinion and wider legalization of recreational cannabis. We are fueled by passion.”
Kantar Retail POV: Cannabis and its ancillary products span channels and industries, and the emergence of a new retail format and CPG product has the potential to shake up the status quo. Suppliers must embrace—and learn from—this disruptive force to meet shifting consumer demand.