As one of the country’s fastest-growing industries, opening a cannabis shop in 2022 may seem like a no-brainer. However, it’s not exactly the overnight wealth generator that some entrepreneurs expect. As a heavily-regulated industry, simply opening up your front doors can be a long process. And, as a steadily growing number of retailers open up shop, some areas are already struggling with saturation. 

If you’re looking to open a cannabis shop in Southwestern Ontario, here are a few things to consider before you jump in. 

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Cannabis in Ontario

Shortly before cannabis legalization in October 2018, the province of Ontario swapped its planned public retail model to a hybrid model, with the first group of private shops opening in the spring of 2019. Despite falling behind other provinces in the number of cannabis shops, Ontario quickly took the lead in total cannabis sales nationwide. Two years later in 2021, following waves of new retailers entering the market, Ontario would take the national lead in total cannabis shops too. 

Today, nearly four years after legalization, cannabis-based businesses are still a popular trend amongst independent entrepreneurs and large-scale corporations alike. However, this positive momentum is leading to new challenges for business owners as the relatively new industry becomes more competitive. 

Saturation Concerns in Today’s Market

Despite the existing surplus of cannabis businesses that have set up shop over the past few years, new cannabis shops continue to open across Ontario. As of June 2022, nearly 1,500 licensed retailers are open for business across the province. And with nearly 500 applications currently under review by the Alcohol and Gaming Commission of Ontario (AGCO), the number of active cannabis businesses could hit 2,000 in the near future. 

While the rate of new cannabis retailers entering the market has slowed compared to the first 3 years of legal operations within the province, these numbers are raising concerns among industry experts and existing business owners. 

However, despite the rising competition between retailers, frequent shop closures aren’t a reality just yet. Between the summers of 2021 and 2022, less than 35 cannabis shops in Ontario closed their doors. So while broad saturation is a growing concern, Ontario’s cannabis industry is still in the early stages of understanding the nuances of local markets. 

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Licensing and Special Requirements

Many entrepreneurs can often underestimate the level of red tape that comes with operating a licensed cannabis business. Unlike most retail business models in Ontario, opening a cannabis shop requires you to obtain special permits and authorizations in addition to traditional business licenses. If you are considering opening a cannabis shop, make sure you understand the full extent of your regulatory responsibilities.

The AGCO’s Cannabis Retail Regulation Guide offers a detailed overview of what you’ll need to open a licensed shop in Ontario. 

Other Considerations

While not all markets are experiencing saturation concerns to the same extent, many cannabis retailers are facing other challenges surrounding the long-term profitability of their business. Although the legalization of cannabis has made an abundant supply of safe and accessible products available to consumers, not all cannabis users have made the switch.

Experts estimate that somewhere between 30% and 50% of Canadian cannabis users are still purchasing from illegal sellers. While both federal and provincial governments are looking to reduce this number down the line, many independent cannabis businesses are simply having a hard time competing with the legacy market. 

It’s also worth mentioning that for most cannabis shops in Ontario, margins can be quite slim. Despite the fast-paced growth of the industry as a whole, opening an independent shop isn’t exactly a get-rich-quick scheme. Of course, with great business planning and positive market conditions, a cannabis business can enjoy long-term success. However, if you’re looking for a tried and true business model, exploring other industries may be the best option for you. 

Ask a Hospitality Agent

Although many retailers are continuing to enter the market, cannabis could still be a profitable business venture based on your unique circumstances. Like any retail business, the best place to start is by reaching out to a hospitality real estate specialist. As an expert in the local business landscape, they’ll have the extensive technical knowledge and key market insights to support your entrepreneurial goals.

Looking for expert advice regarding your small business? Our experienced team can help. Let’s chat.