The Failure of Big Tech to Support Local Cannabis Businesses

Cannabis businesses and dispensaries must be aware of the threat of monopolization as the federal legalization of cannabis looms. 

FREMONT, CA: A potential federal legalization of cannabis has made the threat of monopolization more real, forcing dispensaries and cannabis businesses to be wary of the "Amazon Effect." According to a recent white paper titled "Bigger Is Not Better," large corporate conglomerates that dominate emerging cannabis markets can threaten social equity efforts if the government and other stakeholders do not intervene.

Investopedia defines the Amazon Effect as "the impact created by the online, eCommerce, or digital marketplace on the traditional brick-and-mortar business model as a result of the change in shopping patterns, customer expectations, and industry competition." This phenomenon illustrates how large corporations dominate local, small businesses in online sales.

Despite the potential for technologically supportive services, the shortcomings of large cannabis e-commerce and marketplace platforms may harm local businesses in the long run, reinforcing the Amazon Effect within the cannabis industry. If companies and governments do not take these occurrences seriously now, they risk being displaced in the future.

Cannabis players to take over local markets with big tech

sizeable online retail and marketplace platforms are displacing local cannabis retailers. Large tech companies are frequently marketed as a solution for small and medium-sized cannabis businesses, but they can end up being the bane of regional industries.

In legal cannabis markets, e-commerce and marketplace services are wildly popular. The growing popularity of big tech in the cannabis industry can be intimidating, given that these behemoths dominate the cannabis industry as the go-to tech solutions for mediating things like cannabis delivery sales. This dynamic creates an "if you can't beat us, join us" scenario, similar to those faced by spaces selling out to dark store models following a pandemic.

Significant players in cannabis technology may continue to imitate the anti-competitive bullying tactics of big tech in general, but, likely, you will still require technology services for your "canna-business." Big tech platforms are not all detrimental to small businesses; therefore, how can small cannabis brands find partnerships that meet their needs?

Check Out This: Cannabis Business Insights

How do local cannabis businesses avoid disruptive competitors?

Small cannabis businesses should partner with technology platforms that meet their specific requirements. In conducting due diligence on these partnerships, seeking out the largest brand or the cheapest deal is insufficient. If a company is not cautious, tech titans can seize control of customer relationships and make it difficult to compete in the market.

Big tech is aware that data ownership equates to power, which is likely why many offer all-in-one solutions at discounted rates. Cannabis businesses must maintain ownership and control of all customer data to prosper. Here are a few warning signs to avoid a partnership with a potentially harmful tech platform:

The tech platform's added fees reduce a company's profits to the point where it is detrimental for businesses to be listed on the platform.

The technological platform anticipates consumer interactions to collect data and suggest alternative products.

The technological platform "conceals" product listings from the public Internet.

The technological platform does not validate the legitimacy of all of its merchants.

The technology platform develops its product lines to compete with established retailers on its platforms.