When Is It High Time To Legitimize Your Product?

What credit unions can learn from an industry experiencing widespread brick-and-mortar revolution.

 
 

Imagine a retail chain that couldn’t advertise using mass media. How could or should it market itself to current or potential customers?

For one growing industry, the answer involves remodeling its now legal retail locations into “clean, curated, and sophisticated” spaces.

The industry? Marijuana.

Today, 28 states and Washington, DC, have legalized medicinal marijuana. In addition, eight of those states and DC allow some amount of recreational sales. And the rate of legalization is picking up. Ten states have legalized medicinal marijuana since 2012, and five in 2016 alone.

NUMBER OF STATES WITH LEGALIZED MEDICINAL MARIJUANA BY YEAR

The total includes Washington DC, which legalized medicinal marijuana in 2010.

As more states legalize some form of use — California, Massachusetts, Maine, and Nevada all passed measures to legalize recreational marijuana in November — retailers are being presented with a huge opportunity to grow their customer base.

Per AdWeek, “Pot sellers are reaching beyond the typical stoner dude and going after what one industry pioneer has dubbed, the ‘Chardonnay mom.’” It’s an expansion and renovation strategy not dissimilar to the way the credit union branch is being transformed to serve the next generation of member.

To do this, retailers are updating their wares to offer tamer products to new users. But before the sales can be made, new customers need to feel comfortable setting foot in a store to buy a product so often associated with bulletproof glass and burly security guards — that is, if it’s being purchased in a store at all and not a garage or van.

Yet, marijuana retailers still face significant economic challenges. Because marijuana is not legal on a national level, the large majority of banks and credit unions do not conduct business with these retailers for fear of federal money-laundering charges. That means most retailers are stuck conducting their business in cash, leaving them vulnerable to robberies and acts of violence.

Credit unions have shown greater willingness to serve this sect of businesses. Fourth Corner Credit Union is appealing its way through the legal system to become the first credit union for the marijuana industry, though thus far unsuccessfully. But other institutions, such as Maps Credit Union ($612.9M, Salem, OR) and Salal Credit Union ($495.2M, Seattle, WA) do serve this industry — albeit with strong, risk-mitigating policies.

And perhaps credit unions are entering the industry not a minute too soon. Per Cowen research, the sales of medical and recreational-use marijuana are expected to hit $50 billion by 2026, up exponentially from the $6 billion in sales in 2016. In addition, much of the sales gains are coming from buyers over 26 years old, a segment that grew more than 30% in the past several years, compared to a 4% gain in 18- to 25-year-olds, according to Vivien Azer, managing director at Cowen & Co., who analyzes the cannabis industry.

These new pot shops are drawing positive comparisons to Apple Stores, Nordstrom’s, Las Vegas hotel foyers, Tesla dealerships, and even palaces like Versailles.

Retailers are focusing on colors that are warm and welcoming, not cold and sterile. In addition, they’re opening things up and expanding consultative services.

For example, Bloom Dispensary in Phoenix renovated its space in late 2016. According to mgretailer, though the company wanted to look and feel “medical” when it first opened, many customers commented how it felt more like a mental institution than anything else. And after seeing 600 or more visitors each day, the space started to show wear and tear.

“People can now see all of their product choices right in front of them, which has translated into more sales,” says Bloom’s marketing director Stephanie Pereyra to mgretailer. “[The space] is no longer sending a scary message to our guests when they walk into our dispensary. It now feels more like a bank and less like a convenience store.”

Another example is MadMen’s in West Hollywood, which renovated its location to include floor-to-ceiling windows, iPads on walnut display tables, and advertising for, among other things, athletes and pet owners. Sounds like one of those new-look credit union branches, doesn’t it? The whole thing cost about $150 a square foot, according to AdWeek.

Bright lights, iPads, and walnut wood at MadMen's in West Hollywood. Image courtesy of MadMen's.

In addition to the look and feel, these shops are constantly communicating with customers, educating them on the product’s sourcing as well as its effects.

They’re trying to “take the intimidation out of the buying experience,” Azer from Cowen & Co says. “And they’re legitimizing the product category.”

At the end of the day, whether it be pot retailers or credit union branches, the idea of brick-and-mortar is the same: to serve the needs of the customers or members who walk in.

Because credit union members are increasingly doing their banking online and on mobile — 55% of credit unions now offer mobile banking — branches are evolving from primarily front-line sales focused into centers for consulting and advice. Yet, brick-and-mortar is still a powerful touchpoint for credit unions, and one in which the industry continues to invest. They just aren’t designed like they were in 1980, because that standard is outdated.

Just like selling pot out of a garage.

 
 

March 30, 2017


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