Anticipating the Holiday Season for Cannabis

Taking a page from the e-commerce giant Alibaba, which runs massive sales annually on November 11 (or 11.11) for the unofficial Chinese shopping holiday Singles’ Day, the rewards app Shopkick recently announced a new “10.10 Shopping Festival”. Consumers buying from direct-to-consumer and retail brands through the Shopkick app collect rewards points in the form of “kicks” (as in kickbacks) that can be redeemed for gift cards for stores like Target, Walmart, and others. In addition to special deals, Shopkick also incorporates a philanthropic element by matching a share of “kicks” earned during the weekend in contributions to the St. Jude Children’s Research Hospital.

Reward points and charity tie-ins aren’t new retail tactics. But the timing and execution speak to how successful growth strategies align with consumer macrotrends. Let’s unpack how 10.10 manages that alignment and potential implications for the cannabis industry.

A new journey of discovery

Covid-19 has pushed brick-and-mortar sales online, which is obvious. What’s less obvious from a distance but painfully apparent to online shoppers is that the discovery process is now online as well. Focusing on cannabis consumers specifically, browsing many dispensary websites is nothing like the experience of a Shopkick app. Digital asset management for cannabis is in its infancy as are, relatively speaking, many ecommerce (or “clicks-to-bricks”) software solutions. Cannabis consumers might encounter missing images and product detail pages (a la Amazon, et al.) with scanty data. As a result cannabis companies should devote more time tracking down and “plussing up” any mentions of the brand – be it product information, store photos, anything that potentially reflects on the brand particularly any visuals – that appear on intermediary sites. Especially for brands in broader distribution, this can be a heavy lift as every part of the in-store and online experience must present the same high-quality information to the customer.

Conversely the discovery process of physical stores has changed as well, potentially to the benefit of smaller players. With so many having transitioned to remote work, consumers are in a new mindset. Any disruption to old habits can create opportunity.

In a study of consumer sentiments on the 2020 holiday season and the impact of the coronavirus, market researchers at Criteo discovered that 33% of US consumers had discovered previously unknown small merchants and 83% said they intended to keep shopping from the newly discovered stores. While that data doesn’t translate perfectly to the cannabis market, many consumers are now in a much tighter orbit to home and previously overlooked dispensaries can stand to benefit.

Readying for the holidays

The 10.10 event seizes on another series of intertwined macrotrends driving consumer behavior. First, the holiday shopping season continues its creep to Labor Day. Anyone visiting a big box retail store in recent days doesn’t need to see any data on that point. However consumer expenditure for the 2020 holidays is expected to ramp up sooner and sharper than usual. Shopkick is positioned to benefit by pulling those expenses forward with aggressive promotions surrounded by a halo of altruism. Rolling the rewards right back into an incentive for follow-on purchases puts participating brands at the front of the line for planned expenses and impulse buys.

Overall, spending will be blunted by the ongoing economic fallout of the coronavirus. Deloitte forecasted a 1-1.5% year-over-year increase, a much smaller uptick than the 4.1% increase in 2019.

For the cannabis industry, peeling back the number on that figure suggests two opportunities: first, small gifts and treats for budget conscious consumers and luxurious special occasion offerings for high income earners. Deloitte’s forecast is a blended number of two scenarios. The first scenario assumes consumers “remain nervous about their finances and health, and must commit more of their spending toward necessities” resulting in a 0-1% increase. Cannabis brands will likely continue to ride the seemingly recession-proof wave of rising sales but mindful consideration of the broader context will be important to build and grow engagement with consumers.

The second scenario results in a more optimistic growth estimate of 2.5-3.5% if wealthier consumers see the market, economy, and public health steadying. That estimate already has two strikes against as wages and unemployment show little improvement and Covid-19 blooms again across the country.

However for cannabis brands seeking a holiday connection with higher income consumers, the specifics might not matter as greatly because the underlying purchase driver remains the same. Consumers accustomed to big ticket expenses will be looking for an alternative way to splurge now that many have shelved family vacations and other costly traditions.

Beyond the Cannabis Advent Calendar

The Wall Street Journal splashed a full page article on upscale CBD products across the most recent weekend edition. The author’s emphasis on taste (and the rich colors of the accompanying product shots) illustrates just one means by which the industry can position for a successful holiday season. While not linked explicitly to holiday gifting, the assortment of products fit nicely into Deloitte’s blended forecast: small indulgences or cost-effective special gifts on the one hand and premium products suitable to the lux consumer (and her friends and family) on the other. This example from the mainstream market signaled how at least one aspect of the dynamics explored above will play out in what will be an unprecedented holiday season.

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