MJBizCon 2022 Analysis: Cannabis Industry Oughta Turn That Frown Upside Down

By: Jim Roddy, President & CEO at the RSPA

For most of us in the retail IT channel, the allure of the emerging cannabis vertical isn’t the lifestyle; it’s the market’s growth trajectory – past, present, and future. We all want to latch onto a rocket ship and watch our sales and profits soar to new heights. But rocket riding is far less stable than cruising in a sedan at 60 mph, so you have to endure the turbulence and volatility that comes with going a thousand miles a minute.

That’s my top-of-mind thought after attending MJBizCon 2022, the world’s largest cannabis business conference, Nov. 15-18 at the Las Vegas Convention Center. More specifically, the positives (+) and negatives (–) I gleaned from the show were:

  • (+) MJBizCon showcased nearly 1,500 booths. That’s one exhibitor for every attendee at this year’s RetailNOW.
  • (–) I lost count how many times I heard the phrase “growing pains” because cannabis revenue the past 12 months has slowed compared with prior years.
  • (+) I haven’t seen the final MJBiz attendance numbers for this year (35,000-40,000 were expected), but it had to be way up from 2021. The show floor covered more square feet and aisles were filled from open to close each day.
  • (–) At MJBizCon 2021, I talked with about 50 exhibitors and planned to meet with them again this year, but more than half of them didn’t have a booth again. I’m unsure if they just walked the show, went out of business, stepped away from the cannabis vertical, or something else. I am sure that’s a sign of market volatility.
  • (+) There’s more growth on the horizon. According to the show organizers, the legal cannabis market in the U.S. will hit $33B in 2022 and should expand to $52B in 2026.
  • (–) Most of the technology vendors I talked with were underwhelmed with their traction in the market. Their assessment reminded me of my former college basketball coach when he would criticize us for not putting points on the board: “That was a lot of activity with no productivity.”

I thought after immersing myself in the cannabis market for three days I’d come away with clarity for how soon the retail IT channel could reap significant sales and profits in this space. Instead, I walked away certain of something else: additional perseverance and patience will be required for the VARs, ISVs, vendors, and distys seeking success in the cannabis market.

When the wave crests, sometimes you just have to paddle – and don’t complain about the calluses on your hands and salt water in your wounds. Just keep paddling and keep navigating the current until the next big wave comes.

One group that showed unwavering enthusiasm at the event was the RSPA Cannabis Community. After Wednesday’s official MJBiz events concluded, nearly 50 of us toured the Planet 13 and Reef dispensaries. There were lots of new connections and great conversations about actions the retail IT industry can take collectively to elevate cannabis merchants. There was no fretting or wallowing like we heard from many others outside our group. Perhaps it’s because we’re veterans of the non-cannabis business world. We’ve seen market ebbs and flows before and know what to do.

Don’t panic. Don’t worry. Don’t rue what could have been. Just get to work on finding your niche and providing superior value.

What’s Behind the Cannabis Market’s Turbulence?
MJBiz CEO Chris Walsh’s state of the industry presentation to kick off this year’s event was serious in tone. “We’ve had a party for a long time in this industry,” he said. “Now we’re going through what all businesses go through. We’ve got to buckle up and make some hard decisions. There will be a culling. The market will right-size itself. Some people in this room won’t make it.”

That’s not exactly a win-one-for-the-Gipper pep talk. If coach Herb Brooks preached that way to his U.S. Olympic hockey team before they played the Soviets in 1980, there would be no Miracle On Ice to speak of. Walsh had data to support his assessment, and what he detailed will help all of us understand why MJBiz ’22 was more subdued. Drags on the cannabis industry include:

  • Mature markets (California, Colorado, Nevada, Oregon, Washington) stagnating sales
  • Many companies who are all-in on cannabis are struggling financially
  • Adult use election losses in Arkansas, North Dakota, and South Dakota
  • Macro-economic forces (inflation up, supply chain slow, investments down)
  • Capital for cannabis collapses
  • Some illicit markets are thriving

So What’s the Good News?
My perspective is the cannabis market has been spoiled. It’s like an NFL team that starts 9-0 and then goes 4-2 over its next six games. Most other teams would kill to win two-thirds of the time, but it feels like a setback when you’re used to nothing but winning. One hope for an upcoming boost to the cannabis market is through pending legislation.

Several MJBizCon panelists predicted the SAFE Banking Act, a bill designed to protect banks that serve legal cannabis-related businesses (which the RSPA Cannabis Community discussed in-depth earlier this year), will pass during this year’s lame duck session of Congress. One insider said she knows 65 Senators who are on board, and she all but guaranteed SAFE will pass in the next six weeks. While SAFE won’t solve every issue related to the legality of the market at a federal level, it would be a significant step forward.

I don’t like mixing politics and RSPA business, but because the growth of the cannabis market is tied to legislation – I mean nobody has to lobby on behalf of grocery stores for that market to operate legally – we have to talk politics. Comments from MJBiz speakers on this subject included:

  • “Having a sitting President address cannabis is huge. Things like this add up. We see this industry move forward in increments. It used to be presidential candidates wouldn’t address cannabis.”
  • “(The cannabis industry) is on fire in Washington! The President of the United States directed his agencies to review and examine scheduling. We are on the precipice of something great!”
  • “Public polling continues to be on the side of cannabis banking access.”
  • “Some of this change is driven by the desire to appeal to young voters. Young voters are paying attention to this. Young voters have sent a message to the President and Congress.”
  • “Lots of prominent voices in Congress are cannabis friendly.”
  • “States have been moving forward. If we focus on moving state legislatures, the federal government will follow.”
  • “Cannabis legislation is not one-size-fits-all. Each market will tell you what it needs to move forward.”

Cannabis Customer Experience Opportunity for VARs, ISVs
The most uplifting MJBizCon session I attended featured three dispensary owners sharing how they create a memorable customer experience. The lessons for VARs and ISVs – and the dispensary decision-makers they sell to – were plentiful:

  • “Be all over your store analytics and market analytics. You want to be looking at leading indicators, not lagging indicators.” Crystal Millican, Cookies
  • “We are looking to connect with consumers in different ways. We want them to spend time at the store – feel welcome and safe to do that – instead of just selling as much volume as possible.” Lilach Mazor Power, MAZOR Collective
  • “We have a lot of customers who are first timers. We have conversations with them in-store, we host cannabis 101 classes, we have a timeline of the history of cannabis on the wall. We need to build an experience that makes them want to come back again and again.” Whitney Beatty, Josephine & Billie’s
  • “I don’t want you in my store for 15 minutes. I want you in the store for 45. What does the best for us to engage our customers is education.” Beatty
  • “To get people into stores, you have to create a destination. We do meet-and-greet sessions with our cultivators. You have to know who your customers are and then create moments that will drive them to the store.” Millican
  • “We want to create an online shopping experience that is easy, fun, and smooth.” Mazor Power
  • “We started with a counter (before switching to mobile devices), but we learned we didn’t want a barrier between our customers and their personal shopper. We want a conversation while the budtender takes the customer on a journey, and we want them to enter the order as they choose.” Mazor Power

A Fertile Market for Security VARs?
MJBizCon is light on information technology – and heavy on light technology for growers – but the show organizers did throw us a bone dedicating a session to cybersecurity. The breakout titled “The Threat Is Real: Cyber Attacks and Data Breaches in the Cannabis Industry” featured Ben Taylor of the Cannabis Information Sharing & Analysis Organization (ISAO), Anna Mentzer-Hernandez of mobile device management provider Jamf, and Christopher Clai of Green Thumb Industries. Among their insights:

  • Very few cannabis orgs have formal information security teams.
  • Operators don’t talk with each other, so they don’t know the challenges each other are facing.
  • The cannabis industry is becoming more of a tech industry.
  • Until you’ve been breached, you don’t know what it looks like.
  • There are more regulations coming down the pipeline for consumer privacy. You have to understand what information is necessary to maintain and don’t keep what you don’t need to.
  • Align with vendors who meet security standards.
  • I know the saying “call the FBI” is counterintuitive in this industry, but they can help you when you’ve had a ransomware attack.
  • The amount of targeting I’ve seen in this industry is higher than anything else I’ve ever seen. Hackers are likely targeting because of the industry’s growth.

Finally, Let’s Talk Cannabis POS Software
Why in the Blazes did it take me this long to mention dispensary point of sale software? Because most every cannabis retail software vendor bypasses the channel and focuses almost exclusively on direct sales. (The only exception I’m aware of is KORONA POS from RSPA member COMBASE USA. Randy Roe, their Director of Business Development, attended MJBiz with the sole intention of finding VAR partners to take KORONA to market in more dispensaries.)

So, with software and credit card payments not readily available to be sold in the cannabis space, what’s the play for retail IT resellers? I’ve already revealed the answer: customer experience technology and security (both cyber and physical) lead the way. Those are two opportunities – loyalty, alternative payments, digital signage, labels, and data warehousing are others – for you to become a trusted technology advisor to dispensaries. It’s time for the retail IT channel to get more creative in this space and provide the superior value that only we can.

Jim Roddy is the President and CEO of the Retail Solutions Providers Association (RSPA). He has been active in the retail IT channel since 1998, including 11 years as the President of Business Solutions Magazine, six years as an RSPA board member, one term as RSPA Chairman of the Board, and several years as a business coach for VARs, ISVs, and MSPs. Jim has been recognized as one of the world’s Top 100 Retail Influencers by RETHINK Retail, a Leading CannaTech Influencer by The CannaTech Group, and is regularly requested to speak at industry conferences on SMB best practices. He is author of two books – The Walk-On Method To Career & Business Success and Hire Like You Just Beat Cancer – and is host of the award-winning RSPA Trusted Advisor podcast. For more information, contact JRoddy@GoRSPA.org.