The current crisis is no joke. Whether or not you think the virus itself is overblown, the economic impact is and will be felt for months. We don't know how the future will look, but we should expect the change to business to be a multi-quarter one.
One indication of the future is to look at the past. Many people are comparing 2008 to the current economic crisis because that is the most recent crisis we've all lived through. While it is wise to learn from the past, I would argue that this time it is different.
I said it, the dreaded "but this time it's different". When I hear those words, I usually run in the other direction. Although, when thinking about cannabis and commerce as a whole, I truly think it is different. Let's explore why.
The Aspirational Economy
American consumerism is at all-time highs. Social media has only accelerated it. From 2008 until now, we've seen the massive rise of Facebook, Instagram, Snapchat, and TikTok. Influence is at our fingertips, we see what people are doing and buying at all times. We are inherently social creatures that look to others for validation. From Elizabeth Currid-Haklett's book The Sum of Small Things:
"The consumption of socially visible material goods to convey socioeconomic status has been in place for thousands of years."
Think about the correlation between the rise of social media and DTC brands. It wasn't only because technology enabled it. It's because access to influencers opened up and consumers were more exposed to this.
In his 1957 book, The Hidden Persuaders, Vance Packard argued that the rush of consumer goods meant advertisers, marketers, and promoters needed to create consumer desire, perpetuating a cycle of materialism.
This is more relevant today than ever before. The tools changed, but the tactics haven't. A recent study showed 44% of Gen-Z made a purchase decision based on an influencer recommendation. This is the aspiration economy at work. While the frequency may change, consumerism will continue to thrive in the U.S.
The Wellness Movement
Since 2008 – and the stress that came with it – we've seen the wellness space explode to the tune of $4.2 trillion globally. Yes, with a T. $540 billion of that is categorized as "Fitness / Mind-Body".
The movement to treat our mind and body as temples will play right into what the cannabis industry has been promoting for years. CVS is seeing the writing on the wall and rolling out their "Calm & Comfort Wellness" section in 4,500 stores. According to the same article, sales for melatonin are up 38% in one week. The Visual Capitalist showed a 166% increase YoY in vitamin supplement purchases in March.
I predict this will have a positive effect on the cannabis industry. This doesn't mean every brand and dispensary is safe, but as an industry the wellness movement play's into the cannabis narrative. Brands need to be aware of this and leverage their value proposition to bring in new consumers looking for alternatives.
The combination of the wellness movement and the aspirational economy is a winning formula for cannabis brands.
The Infrastructure Problem
The main difference I see between 2008 and now is the problem itself. 2008 was a fundamental problem. It was a global meltdown of the entire economic system. The system itself was fundamentally flawed. The "Great Recession" caused demand to disappear overnight.
Our current crisis isn't a fundamental problem. It's an infrastructure problem. What do I mean by that?
The banking system is okay. The systems in place that keep the economy trucking along are okay. What we're discovering is a weakness in our supply-chain and our digital infrastructure. Modern America is built on outsourced supply and suburban shopping malls.
The U.S. has the most square feet of retail space per capita at 23.5. Compared to Canada at 16.8. Asia has been able to come back online so quickly because they've been pushing their commerce to go digital for years. Japan is at 4.4 and China is 2.8.
Simply put – the U.S. is not structurally fit for the future of commerce but demand is still there. In 2008, demand disappeared. In 2020, supply can't keep up. There is no doubt that consumer habits have changed and purchase frequency may be volatile for a bit. But, consumption is alive and well in the U.S. It's just shifting gears. There are already early signs cannabis purchase habits are getting back to normal in California. This is coming from the most recent BDS report.
I'm excited for this next wave of cannabis and commerce. In my last post I talked about The Great Acceleration. This is exactly that. The crisis is pushing us to modernize. This is not 2008 again. Demand is still there. We are simply adjusting our habits to a potential new way of life. For cannabis, the combination of the aspirational economy and the wellness movement is a winning formula that will drive growth over the coming years.
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