Higher prices and barer shelves: California cannabis retailers face frustrated customers

Licensed marijuana retailers in California are struggling to cope with customers angry about price hikes and less product choice – a direct result of the state’s new packaging and testing regulations that took effect July 1.

Here’s a look at some of the concerns related to the state’s current business environment as well as how some companies are tackling them:

1. Negative reviews are piling up and sales are down in many places.

Poor customer critiques online – particularly on sites such as Yelp and Weedmaps, which help drive foot traffic for many licensed retailers – are hurting the bottom lines of some MJ businesses as customers complain about higher prices and limited product selection.

Retailers in California’s large cities – where the illicit market thrives in unlicensed brick-and-mortar stores and online – say they’ve seen an uptick in poor reviews and a 40%-70% decrease in sales since the regulations were implemented.

“We can try to explain to people what’s happening and why,” said Adolph Ward, co-owner of Around My Way, a licensed delivery service in Oakland. “(But) customers couldn’t care less about regulations and legalization.

“The only things the average customer cares about is that the selection (in the regulated market) is smaller and the prices are higher.”

And, some retailers observed, through no fault of their own, price and selection are why licensed players are taking a beating in reviews and losing customers to the illicit market.

Other retailers – some in small cities – say they’ve fared better with sales, reporting increases or small losses. But regulations have caused the customer experience to suffer, they noted.

“It is absolutely nothing we can control,” Ward said. “We can share our opinion, lobby, mobilize and activate, but ultimately we’re not regulators.”

2. Customers are openly upset about costs and confused by regulations.

Look at online reviews for some licensed dispensaries in California and you’ll notice a theme in comments posted after July 1, when the packaging and testing regulations took effect.

Customers say they’re being “ripped off,” prices are “astronomical” or products are “overpriced” or “way, way too expensive.”

They’re also angry or perplexed about the state’s 15% retail excise tax on medical and recreational marijuana.

When the excise tax is tacked on to the average local sales tax, 23% or more is added to retail receipts for recreational marijuana.

“We try to explain why these changes have happened, but regardless of what we say, customers still place the blame on us,” Kevin Reed, owner of The Green Cross dispensary in San Francisco, wrote in an email to Marijuana Business Daily.

Across the board, prices on products have increased. Consider:

  • At The Green Cross, an eighth of an ounce of indoor flower retailed for $35 last year. That price increased to $46 in January, then dropped to $15-$30 in June when retailers were unloading product before the new rules kicked in. Now, an eighth of indoor flower retails for $32-$50 pre-tax.
  • At Lakeside Herbal Solutions, before July 1, an eighth of indoor flower with a high percentage of THC retailed for $35, including sales tax. Now, those same eighths are closer to $62, including sales tax, state excise tax and the added costs of compliance throughout the supply chain.

To keep pace with compliance costs, retail markups are at 100% across the board at The Green Cross, Reed observed. Before July 1, flower markups were reportedly 70%-80% and concentrate markups were 77%.

While customers are feeling the pain of price bumps, retailers are hurting, too.

“(Retailers are) paying five to six figures in sales tax,” said Chris Jennings, the owner of Lakeside Herbal Solutions, a Clearlake dispensary. “You can do a million in sales and your profit margin is 5%. No one’s making more than 10% profit on sales.”

3. Supply has dwindled.

Consumers also are blasting retailers for their inventory shortfall, which can be attributed to the new regulations because:

  • Additional compliance costs have put some California vendors and cultivators out of business or scrambling to get their licenses approved.
  • Available product is stuck in a bottleneck of lab testing. Only a handful of fully operational labs are running extensive tests on products statewide.
  • Distributors are rationing what little product they have, allocating most to bigger dispensaries and larger cities. Or, they’re unwilling to drive long distances to deliver to smaller cities.

That means there’s a shortage of compliant product industrywide, Reed said.

Before July 1, The Green Cross had more than 40 strains of flower on its shelves. One day earlier this month, it had just 10.

“Now there’s very little difference between a retailer and the black market,” Ward said. “In fact, the black market probably has a larger selection now than most retailers.”

4. Businesses are handling complaints in a variety of ways.

Last month, Elizabeth Tabor, the owner of Mount Shasta Patients Collective in Mount Shasta and La Florista in the city of Weed, asked other California retailers on social media how they’re handling customer grievances.

She got 123 responses, including a handful of helpful tips – some of which Tabor had already implemented in her dispensaries.

For example, Tabor posted large signs in her dispensaries’ waiting rooms explaining the regulations. The signage has prompted conversations between customers and budtenders, who are trained to provide more details.

She also printed postcards with the state regulatory groups’ contact information so customers can let them know how their retail experience has changed.

Tabor also implemented a return policy. If customers don’t like a new product – one they’re trying as a replacement for something that’s unavailable – they can bring it back.

To mitigate consumers’ frustration, Jennings at Lakeside Herbal Solutions suggested retailers:

  • Take time to explain the new regulations and the delays in lab testing.
  • Emphasize they’re working with vendors to stock compliant, quality product.
  • Update menus in real time on company websites as well as online sites.
  • Encourage customers to monitor businesses’ social media pages, where the companies can share photos of new in-stock products – with a disclaimer for customers to call ahead about availability.
  • Post in-store signage with expected arrival dates for new products. Ensure customers know the dates are subject to change.

Joey Peña can be reached at [email protected]

21 comments on “Higher prices and barer shelves: California cannabis retailers face frustrated customers
  1. John on

    Let’s place the blame where it belongs, the municipalities. The failure of municipalities to honor the will of their citizens to provide licensing for business and thereby access to legal, regulated cannabis products is by far the dominant factor in all of California’s problems. When there are more illicit shops in the city of Los Angeles than legal retailers in the entire State, you know the system has failed. With such a small legal ecosystem, and such a huge compliance expense to get up and running, of course the selection has fallen away and prices have spiked!

    Reply
    • Tivana on

      It is so obvious that the pot war continues and has swayed in favor of those that DO NOT WANT POT on the market. The charter of the regulators is to LIMIT the usage of marijuana – period!!!
      These make it hard to exist as a business in a money centric society and the trends favor the suppression of marijuana in most states.

      Washington became the first state to vote to legalize marijuana. Colorado was second. In the peoples’ initiative section 27 includes this sentence that says it all, “SEC. 27 para 5
      (5) The state liquor control board shall regularly review the tax levels established under this section and make recommendations to the legislature as appropriate regarding adjustments that would further the goal of discouraging use.”

      As you can see the people who vote for legalization are being hoodwinked, fooled and flamboozzled into a scheme that will discourage the use of marijuana not encourage its use. Prohibition is better than legalization and unethical regulations.

      Reply
  2. Don Doug on

    TAXES – Newbies and people in the industry in CA are funny. Complaining about 15% excise tax !!
    OMG, a total of 23% including the local taxes!! What a joke….

    Taxes in WA are 37% excise, before a 10%+ local tax rate. That equals over 47%. compared to your 23%. You should be thanking your industry regulators and state legislators, every day, for how easy you have it.

    Reply
    • Lippke on

      Have you been to Oregon lately? Now, they do it right!
      Capitalism rules there, and wouldn’t you know it they have more than they can consume, so they have more than they need. I saw cheap weed for as little as $2 a gram! The connoisseur can get a gram of a 29% thc flower for $15 including tax. Then that same store gave me 10% discount off the final price because I mentioned I was an NCIA member! This was not isolated as I visited other stores that were ready to give deals to keep customers. Sometimes capitalism is not the answer, but for our industry, it is. California lets copy Oregon and change the federal laws so we watch prices fall and quality go up. Only a customer centric approach from all stakeholders in cannabis will make everyone happy in the long run. Even the grower who finds their niche will be stoked, right?

      Reply
      • Tivana on

        You watch, the regulators are working on reining in Oregon’s pot use. It is getting more and more difficult to do business in Oregon.

        Reply
      • Ronald Melhorn on

        The US Federal Government needs to wake up. The legalization of Marijuana by the Federal Government is long overdue.
        Off this subject but extremely important. Cannabis(HEMP) removes more Carbon Dioxide from the Earths Atmosphere than the amount of Carbon Dioxide it can release after harvest. If Cannabis(HEMP) was grown on an industrial Scale. It Would bring in Hundreds of Billions of Dollars into our economy. It will easily Produce enough Bio Diesel Fuel to Supply our Country Needs, from the seeds oil and will not take away any food production. There’s over 3 Million Acres of Fallow Farmland in our Country. Then the left over byproduct from the seed is high grade domestic Farm Animal Food. Everything but the Leaves and Roots of Cannabis(HEMP) would be used. These can be added to the Farmland for organic matter. Growing Cannabis( Hemp) doesn’t require chemical fertilizers or Pesticides. It will readily grow on the worst soil conditions and improve the soil conditions.
        Back on subject. I smoked Marijuana a few times in1973 and once in 2016. For myself using Marijuana any other Plant or any Synthetic Drug that would get myself HIGH is a NO. I also don’t drink Alcohol or use Tobacco Products.
        This is my feelings on Marijuana. I’m 100% for Marijuana if it has real Medicinal Properties but only for People that its use will improve their well being, but I’m not People using Marijuana just because they want to get HIGH. I’m not for the Recreational Use of Marijuana. Then who the F¥€k am I or any Federal,State or Local Governments to tell anyone what they can or cannot do to their Body.
        I will always vote YES for any Bill that will create a law legalizing Marijuana. This Bill will be ridiculous. Growing and using Marijuana should have never been against the law in the first place.
        Off the subject! Using Ethanol as a fuel produces Carbon Dioxide Twice. First, the Yeast used to convert the sugar to Alcohol , produces Carbon Dioxide. Second, Using Ethanol as Fuel produces Carbon Dioxide. It actually produces more Carbon Dioxide than Fossil Fuel Gasoline!

        Reply
    • Pat on

      DD, Come to Ca. Be a small cultivator. And then go fill in all the blanks and get your business up and running. Then tell us how WA compares to Ca. You’re ridiculous.

      Reply
  3. Jag Mickard on

    And then there is this . I am a private grower of over 40 years ( black market if you will) My past medical customers (older folks) who were perfectly legal in my collective for years before “legalization” can not stand the dispensary product compared to my organic out door and custom strains only available by me. So now we are the criminals and operate under the table. Every effort I have made to contact a legal dispensary or a way to share my product acceptable by the new laws, has been given the cold shoulder by the legit outlets. I get it. To them I am just a local stoner. They are in short supply and I have more than I know what to do with. No complaints. I just hate seeing so many birth pangs in this new industry all the while I am holding on to the best weed in town with no effective way of sharing it with anyone other than my small circle of friends.

    Reply
    • James D on

      Wow!. The industry is finally starting to be accepted and in fact “legalized” in some states. Yet you have” no effective way of sharing”…Really? Why don’t you simply consider the idea of becoming legal and legitimate? After all isn’t that what you all have been bemoaning for for many, many years? Frankly , in Oregon, it is the black market that seems to be hurting those of us who are trying to be fully legal and legitimate. Tough deal for those trying to follow the law and having to deal against those who prefer to continue their wayward ways despite the whole society starting to have open arms. It is truly a conundrum. I am just an observer from Idaho. Try having this ordeal here!! Ha

      Reply
      • Tivana on

        You watch, the laws in Oregon will be changing to favor the regulators that limit the use of marijuana in the state. Legalization is a trap and once you play that game doing business will get more difficult not less. This is what is happening in Washington state.

        Reply
    • Rebecca on

      Jag, I am an aromatherapist who makes formulas with plants, flowers, trees and roots. I would be interested in speaking with you as I am organic and need good sources for my products which go to old folks too with cancer and multiple illnesses for truly health purposes. I completely agree with your comments as I too have to deal with folks directly due to the regulations and costly licensing and fees – not to mention that someone has to package your products now and someone else has to label and someone else distribute. How many more people in the food chain can you pay and still make a profit???

      Reply
    • Tivana on

      forget the legal outlets — they are a trap and the growth pangs you see will continue forever until it is so over regulated very few will be doing business legally anymore. Just look at what they did to alcohol and you will see marijuana going down the same path with the same outcome. Old school growers are now bootlegging moonshiners.

      Reply
    • Miguel Angel Medina on

      Mr. Mikard,
      If you have the time and are interested in discussing the issue/s in your comment please feel free to contact me.
      Have a great holiday, Sir.

      Reply
  4. mike on

    what are they regulating so hard for. for 100 years people have bought and smoked with no adverse medical issues and only their lives ruined by laws that nobody wanted. now regs are so overbearing that prices have jumped to impossible through legal dispensaries. the article shows $50 for an 1/8 or $400 an oz or a whopping $6,400 a lb. is this all part of the plan to get the buyers used to the higher prices so when big tobacco and booze get the nod from the state to take over, they can drop it by half like they did with gas so we are happy to get it under $4.00.

    Reply
    • cfbcfb on

      Not exactly “no adverse medical issues.

      Google “Cannabinoid hyperemesis syndrome”.

      Its been around forever, except ER docs had no idea what it was and people using an illegal drug weren’t going to tell them about it. VERY much becoming a broader issue with higher THC level products, readily available concentrates with 80-90% THC levels, and legalization allowing patients to talk about it with their doctors.

      In a nutshell, when you use too much too often, your stomach will start to feel like you ate 50 habanero peppers, you lose your appetite, feel nauseous and may vomit every 5 minutes. Complete cessation is needed and may take 4-30 days before you want to eat again.

      Bonus: since you aren’t eating your fat stores, loaded with THC for a heavy user, get tapped and increase the THC load you’re trying to get rid of, and since most elimination is through feces that isn’t really happening either.

      It may lead to kidney failure due to severe dehydration from runny poop and vomiting.

      I have it (and it sucks) from 6-8 hits a day from an 80% vape pen every day for a few years now. Severe nerve pain from a stroke and its been my only real relief. Now that’s gone too.

      Reply
      • xochi on

        From a vape pen whose cart was filled w/ what? An extracted product amended w/ glycol after winterization w/ solvents and other adjunct ingredients also likely tainted w/ the residue from applications of ????? on the raw flower itself, which was also concentrated in the extraction process….. hehehehehe… sooooo funny.
        Check some info on what pesticide residues can do when vaped. Seriously. The natural, raw product is NOT the issue, man. You have been poisoned for the ‘convenience’ of vaping, like most steambreathers. You’d be better off rolling flower and burning cones. Crack a book and then let’s all get back to basics. Go solventless and get real.

        Reply
  5. Doc on

    I know for a fact my decision-making is better when I’m totally stoned than the Cannabis Control Board’s is on their very best day.

    Reply
  6. larry liedtke on

    If all you whinners would plug in a light and grow your own!!!!! If I can do it you can to,now get some seeds and a light and discover the joy of growing your own medicine!

    Reply
  7. Jeff Crimmel on

    This is opening the door for the growers who sell to their friends just like they did before it became legal in CA. $50 for an eighth is high. Don’t blow this CA.

    Reply
  8. Billy Shears on

    If you compare SoCal prices to NorCal, the folks in Los Angeles are enjoying half-price cannabis. Top-shelf in the SF Bay Area or Sacramento is about $60 for an eighth. In cities as far north as Bakersfield they pay that much or less for a quarter of the same. I can’t recall ever finding it economically sensible to drive down the 5 to buy ANY product but after finding this out I’m planning to go visit friends in LA so I can pick up a couple of ounces at the huge discount.

    Why is there a 100% difference in prices between North and South?

    Reply

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