The obstacle course that lies ahead of the fledgling cannabis retail industry
The teething problems of finally bringing this ancient commodity to market are unlikely to stop it happening eventually
Our exposure to cannabis is, for lack of a better phrase, getting higher. With past squeamishness dissipating and an increasing number of countries deciding to decriminalise it, cannabis is now showing up in beverages, body lotions, sweets and pain relief gels. There’s a faintly faddish similarity to the craze for product developers in the early 20th century to include radium in practically any existing product, from chocolate to water to suppositories, after its discovery by Marie and Pierre Curie in 1898. Much of this was down to purveyors of quack medicine hawking its supposed curative properties, when they were anything but…
But unlike radium, cannabis doesn’t poison you, and has been used medicinally and recreationally for centuries. People have been smoking and baking with it – even Queen Victoria used it as a painkiller. However, as it’s been a controlled substance for most of the last century, what we know about its chemistry and physiological effects is mostly anecdotal, as researchers and pharmaceutical companies have until recently refrained from getting involved with it.
The early adopter advantage for countries legalising recreational use
You may be forgiven for thinking that countries that have already taken the jump to legalise the recreational use of marijuana (the psychoactive strain of cannabis) are the most likely to become frontrunners in all subsectors of the market. But these pioneering markets – such as the Netherlands, Canada and an increasing number of US states – have a slew of regulatory and supply-related hurdles in front of them that they need to jump before their markets can mature, enabling them to truly capitalise on their economic and social risk-taking.
The Netherlands, for example – famous for its “coffee shops” and libertarian attitude to cannabis for the past 50 years – can’t jump onto the global cannabis growers’ bandwagon as it’s hamstrung by the fact that, although smoking pot is decriminalised in the country, supplying it is not. Therefore, unless coffee shops go out of their way to buy from private growers whose stock doesn’t exceed five plants, they will need to source their offerings elsewhere – such as the black economy.
In Canada, where cannabis for recreational use was legalised in 2019, an initial “green” rush was halted by the double whammy of sluggish supply and a lack of demand at the premium prices of the legal market. As a result, contrary to legislators’ intentions, almost half of customers stuck with the well-oiled black market.
In the United States, the country best posed to lead the charge for recreational cannabis, retail marijuana sales are expected to reach $8.7 billion (£6.2 billion) in 2021. However, business in the 17 states where marijuana is already legalised is held back by federal law under which the use and sale of cannabis of over 0.3 THC content is illegal – as well as by a degree of resultant, and understandable, consumer hesitancy.
The thriving UK cannabidiol market
This brings us to the two most important compounds of the cannabis sativa plant, or cannabinoids: virtuous CBD or cannabidiol, and dubious THC (Tetrahydrocannabinol), the psychoactive component that makes you high.
Britain may not be a frontrunner in the recreational cannabis market, but it is certainly a leader of the pack in products which harness the supposedly beneficial abilities of cannabidiol to ease symptoms of cancer, anxiety and depression and relieve inflammation and pain.
The CBD-infused beverages market in the UK is said to have the potential to take on the £1.2 billion energy drink sector. Moreover, the pandemic has seen CDB products soar as customers increasingly sought out healthy purchasing options.
To crack down on proliferating poor quality products with THC content exceeding the UK watershed (0.2 per cent), or not delivering on the CBD percentage promised on the label, edible products containing cannabidiol were classified in January 2019 as novel food (anything that wasn’t consumed to a significant degree in the UK before the classification was introduced by the Food Standards Agency on 15 May, 1997).
Another factor that has necessitated rigorous quality control is cannabis’s propensity to absorb detrimental substances from the soil, such as pesticides and other contaminants. This has given rise to a flourishing global cannabis testing market serving food and beverage, medicinal and recreational cannabis markets alike.
The deadline for CBD businesses to submit valid novel food applications to permit the continued sale of CBD products in the UK was 31 March 2021.
However, influential retail publication The Grocer found that on 19 April, the list of products with validated novel food applications were owned by only three brands. As an act of generosity as well as pragmatism, the FSA decided to allow products with submitted but not-yet-validated applications to stay on the shelves with the presumption that they will in due course be granted status.
Although strict regulations, such as the FSA’s for CBD products, are often seen as underhand efforts to thwart a booming business, they should bring consolidation and increased credibility to the market and the players that survive. Besides, the cannabis industry, following the legalisation of CBDs and medicinal cannabis in several countries and recreational in a few, is most probably beyond the point of no return.
Zita Goldman
Zita Goldman covers digital transformation with a focus on demystifying digital technologies and showing how they fit into a broader sectoral, macroeconomic, legislative and societal context. She has a passion for connecting the dots of current business and financial news and explaining inconsistencies, for giving hype a reality check and looking behind buzzwords for fresh meaning.
Rapid delivery grocery apps have flourished during the pandemic – but will they permanently change how we shop?
Billions of dollars are flowing to support companies you may never have heard of – startups with memorable names such as Zapp, Deliveroo, Getir and Gorillas. These speedy delivery companies have become the go-to for many grocery shoppers trying to avoid busy supermarkets during the pandemic, and have caught the eyes of venture capitalists.
Investors have closed over US$7 billion (£4.9 billion) in deals backing these companies in the first quarter of 2021, nearly four times the value in the previous quarter.
These new players promise an enticing service: apps that let consumers order groceries with delivery times of a mere ten minutes for a small markup, currently around 10 per cent.
But is there still a place for these rapid delivery services in a post-Covid world? Much of that depends on whether shoppers can – or want to – change their delivery habits.
Changing consumer habits
As the pandemic hit in early 2020, consumers quickly shifted their grocery shopping habits. Instead of risking disease exposure and waiting in long queues, consumers started to rely on delivery services, and for many, it became a habit.
These services’ relatively small markup for groceries, given the convenience of the almost immediate delivery, is exactly what these companies need to achieve their goal of changing consumer habits. In contrast, the more traditional delivery services of large supermarket chains typically deliver groceries without a markup, as long as the minimum spend is met.
Research has shown that many consumer decisions, such as which coffee to buy, are habit-driven. After all, consumers would take hours in the supermarket if they had to ponder anew each product choice. Instead, they typically buy the same pasta they bought last time without much thought.
Like these choices, ordering groceries via app has become a habit for many people that doesn’t require much deliberation. Rather than planning meals for the next few days, consumers might factor in the option to rapidly order anything they need. This might create a habit of following every whim or satisfying every ice-cream craving.
Habits are difficult to break, especially when the habitual behaviour seems to carry little cost. Every smoker knows this logic: a single cigarette has virtually no harmful impact on a smoker’s health, so it seems not worth the effort to resist temptation. However, the costs of having multiple cigarettes add up, ultimately endangering the smoker’s health.
For rapid food delivery, the costs to the consumer are also relatively small – at first. Prices might be a bit higher, but the convenience seems worth it. Ordering easily via app becomes tempting, and there are no obviously compelling reasons to resist. Many companies will also throw in initial discounts for first-time customers.
Once a consumer has ordered rapid delivery a few times, the service is likely to replace past behaviour, like a quick trip to the corner shop. If the consumer then continues ordering rapid delivery, a habit is formed. In fact, research shows that consumers who perform a behaviour regularly for about six weeks have created a habit.
Currently, rapid grocery delivery is only available to consumers in large cities. Despite the stereotype that such services would mostly be used by tech-savvy younger consumers who are experienced with app-based services, many older consumers also value rapid delivery.
The long-term costs
At the moment, the future costs of a rapid delivery habit are relatively invisible, but after the pandemic, you can expect to see costs – financial and social – materialise.
As delivery companies gain market share, they might hike prices up slowly. So far, rapid delivery companies have been backed by venture capital to finance their costs, but they will need to be profitable in the long run to survive. So some price increases in the future seem inevitable, as has been the case with other venture capital-backed consumer apps.
Also invisible are the social costs. Smaller grocery stores and restaurants that are often family-owned may be pushed out of the market. Although rapid delivery creates jobs as well, delivery drivers face tight deadlines and receive low wages with little job security.
Forming new habits
Once a habit is formed, it’s difficult to break. But transitional phases, such as returning to the office after a long time working from home, can nudge people to rethink unwanted habits. As life slowly returns to pre-pandemic normality, consumers have an opportunity to reevaluate which business models they want to support.
Consumers wanting to reevaluate their habits should do the following:
- Compare your bank statements before and during the pandemic to identify what has changed.
- Reflect on these changes: what changed for the better, what for the worse?
- Ask yourself which business you would be truly sad to see close. Try to frequent these more often.
- Think about whether you are losing anything when you shop online. Maybe you miss meeting people serendipitously in person, or checking out new products in the supermarket aisles.
Covid-19 changed consumer lives dramatically and rapidly, with little time for reflection on these changes. Now, the reopening is slower, and consumers have the opportunity to anticipate and actively plan for the coming changes. This opportunity should not be wasted, but should be used to change consumer shopping for the better.
Janina Steinmetz, Senior Lecturer in Marketing, Cass Business School, City, University of London
This article is republished from The Conversation under a Creative Commons license. Read the original article.
Retailers need to respect consumer privacy or pay the price
Richard Jones, Chief Marketing Officer at Cheetah Digital
As consumer attitudes towards data privacy shift and regulations rise to protect them, it’s up to brands, including retailers, to shift with them. Here’s how.
We’re coming to the end of an era – the data free-for-all era, where marketers could use any means possible to track and target consumers with zero regard for how it made them feel. Right now, as we watch monolithic tech companies shift their entire models to fall in line with privacy regulations and consumer privacy desires, it’s time for retail marketers to shift with them, to a better way of connecting with consumers.
You can’t fake knowing who your consumers are
It used to be that Facebook, Google or third-party integrations would let you personalise campaigns at scale. Marketers could splash their ads and campaigns in front of their intended audience, but they would never have to really know that audience because these platforms did it for them. Now, with the depreciation of the third-party cookie, the blocking of tracking on iOS 14, and other privacy-related actions, it’s time for retail marketers to take charge of their futures by owning their own data.
How the value exchange plays into this strategy
Here’s what Google is advising – know your consumer. In fact, it has recommended that all marketers start building out their own first-party databases and will support those that do. The International Advertising Bureau (IAB) is telling marketers to build these relationships using a value exchange.
What’s a value exchange? Simply put, it’s offering consumers something in exchange for their data – data that you can then use to build out campaigns that appeal to that individual alone. This includes sharing special offers, personalised discounts, exclusive access and more. It goes beyond simply gathering every data point – it’s intentional and done with respect and openness to the consumer about how and when their data will be used (this collected data is known as zero-party data).
The technology to do this is readily available, either through “experience” platforms that make it easy to collect, parse and integrate data into campaigns, or through a loyalty programme that wraps up the data-gathering and rewarding engagement into one platform.
Cheetah Digital’s Customer Engagement Suite (CES) is a tool that puts the value exchange at the heart of its customer engagement strategy. It helps marketers to manage every stage of the customer lifecycle, while sitting atop, and being fed by, a Customer Data Platform (CDP). It offers an Experiences platform, a Messaging platform, a Loyalty platform, and a Personalisation platform all seamlessly integrated to help you understand who your customers are, and gives marketers the tools to connect with consumers at the moment it matters most. It’s the tool that puts data ownership in the hands of the brand marketer instead of third parties.
What if retail marketers don’t change their strategies?
Retail marketers have an abundance of data and they’re some of the best candidates to start collecting the zero-party data that can come from offering a value exchange. They’ve got one of the most engaged audiences – it’s simply a matter of marketers tapping into their existing connections.
Or, they can continue to try and passively work with the walled gardens of third-party platforms. They can sit back as consumers grow tired and fed up with being tracked and snooped on across the internet. They can watch as tech companies and privacy regulations make their current third-party databases obsolete and irrelevant. They can fade into the obscurity of the likes of Sears and RadioShack.
The savviest retail marketers, however, will see this as an opportunity ripe for change. They will digitally transform their data strategies, refocusing their efforts into gathering data and building campaigns that grow their relationships with consumers, because those relationships are what matter. They’re also what will carry brands through the next wild and unpredictable shift in marketing practices.
Set your brand up for success with a future-proofed data strategy, learn more about the Cheetah Customer Engagement Suite by visiting www.cheetahdigital.com.
Cheetah Digital is a cross-channel customer engagement solution provider for the modern marketer. The Cheetah Digital Customer Engagement Suite enables marketers to create personalized experiences, cross-channel messaging, and loyalty strategies, underpinned by an engagement data platform that can scale to meet the changing demands of today's consumer. Many of the world’s best brands, including Neiman Marcus, Hilton, Walgreens, and Williams-Sonoma trust Cheetah Digital to help them drive revenue, build lasting customer relationships, and deliver a unique value exchange throughout the entire customer lifecycle.
A digital platform to manage retail business
Edward M Durbin, Director Global Retail Industry Group, VMware
Despite online sales booming last year, retailers are in a desperate race of digital catch-up.
It doesn’t matter whether retailers are big or small, with physical stores or online-only, that source direct or have complex supply chains and logistics to manage; they are all in the same fight when it comes to digital experiences. To win the hearts and minds of consumers, retailers can’t just talk digital; they need to think digital-first.
As Matthew O’Neill, Industry Managing Director at VMware points out, “There is a ready-made digital audience hungry to experience new online services, but they’re not yet excited or compelled by what they’re being offered over the last year. Retailers have a real opportunity to differentiate themselves by taking a digital-first posture, creating apps that attract, engage and retain consumers either online or in their stores. Retailers with digital in their DNA have everything to play for.”
The role of apps is critical. Retailers appear to realise this – a Forrester study noted that 86 per cent of retail CIOs said promoting better customer experience through improved apps is “very” or “extremely” important. Or, as Jarek Matschey, Retail Industry Director EMEA at VMware, puts it “applications are the new storefront for customers, and they are the most important tools for the employees.”
Jarek Matschey, Retail Industry Director EMEA, VMware
The point about employees is an important one, and often overlooked. Giving employees the right tools and access to relevant and timely information not only makes them more productive and allows them to deliver a higher level of service to customers, but also keeps them safer and shows employers care for their well-being. All enabled through apps.
Of course, wanting to deliver better experiences through apps is one thing; being able to actually deliver it is another. Eighty five percent of respondents to the Forrester study said that choosing the right platform for each application (whether on-premises, or private, public or hybrid cloud) was either “very” or “extremely” challenging.
Those CIOs struggling with choosing the right platform need to reset, think about what they actually need their apps to do, and then find the environment that best supports those requirements. It might be they need to capture customer data with an engaging, agile and flexible app that can work across multiple devices and operating systems, so public cloud could be the answer. Yet they then need to keep that data secure and stored in compliance with privacy regulations, so the back end of that app might reside in an on-premises data center. So, rather than being all-in on one type of cloud, they actually need a multi-cloud model which allows them to move apps, workloads and data around as they require it.
What it all comes back to is building a platform. Consumers and employees expect new experiences that make their lives easier – apps are the platform from which to do that. The apps themselves need to be supported by infrastructure that enables them to operate at an optimum level – here, cloud (in all its forms), is the supporting layer. Underpinning all of that is a digital foundation which makes life easier for the retailer – allowing them to
develop and deploy apps, manage multiple clouds, and secure it all, in a consistent manner.
In doing so, retailers can create a platform on which to thrive. Or, as Matschey puts it, “retailers who are able to adapt, who are able to use customer data, create the right applications for their employees to be efficient, create the right apps to interact with their customers, will be the winners.”
Watch the full videos here.
For more information on how VMware can help with your retail modernisation journey, visit VMware’s dedicated retail site or email jmatschey@vmware.com or edurbin@vmware.com.
To read more on key trends from NRF 2021, click HERE to get the e-book.
