Recreational Marijuana Businesses vs. The Black Market

Posted by   on  Dec 18, 2014  in  Recreational Cannabis

Look, we all knew the black market would stick around after the legalization of marijuana. The question that remains is how much will its continued existence affect the strength of the black marketindustry on the whole?

Washington rolled out a slow, cumbersome and expensive system. Consumers looking for a deal, albeit an illegal one, will probably continue to call up their long-term contact rather than pay top dollar for heavily regulated bud.

Just as many continue to make and drink moonshine, illegal marijuana won’t go away. So, here’s what you and your customers should know about how the black market’s continued impact on your new business.

Washington’s Hope for the Black Market

Washington officials tried to approach legalization from a rational viewpoint. They never expected that the establishment of retail locations would eradicate a black market that has long held sway. Instead, the Liquor Control Board expected only to capture around 25 percent with this first round of business licensing.

That goal kept optimism at bay for the state and should have as well for new businesses. Starting such a complicated schema from scratch will assuredly take time in order to successfully disrupt a long entrenched market.

Still, that goal to capture a quarter of illegal sales might not have been completely realistic in light of the difficulties the state had in establishing the industry.

Price Points

Many believe that Washington and Colorado are losing the battle with the black market right out of the gate. Even though both states attempted to take a realistic stance of the implementation of the industry, the high cost and product shortages continue to drive consumers towards their familiar sources.

The long entrenched black market has set up a sustainable system that, in many cases, has one very important thing that the new businesses continue to lack: trust. It might sound a little counterintuitive, considering it’s basically a criminal network, but loyal users have spent years creating relationships with the people that sell them their marijuana. It doesn’t apply to all cases, but users often know their dealers and have a basic level of trust established with them.

Of course, the black market extends far beyond the street corner.

Shadowy Future

Earlier this month, NPR reported that the small legal industry might actually have a global effect. Legal marijuana might already be undercutting Mexican farmers who illegally grow their product and then ferret it into America.

While this has implications for international economies, it might also affect the incoming supply of local black markets. If producers stateside carve out a sustainable niche, it might stymie the black market sources just enough to cause a shift in pricing. International farmers might move onto a different crop because of the lower price and the black market might dry up over time.

Keep On Keeping On

So, how can the state, and the federal government for that matter, try to wrest market share out of the black market that has held it for so long? And more importantly, what can marijuana businesses do to keep consumers coming?

For the new businesses, the best answer is to keep doing business. A lot of the slow start to Washington’s industry can be found in the caution approach the state took. But now that it took those first steps, supply is expected to increase, leading to lower prices, attracting more users from the black market.

The state, for starters, can lower taxes. The outgoing former head of the Liquor Control Board said much the same recently.

Fear not, pot-repreneurs, its very much in the state’s best interest to evaluate how to give the new industry the tools it needs to keep undercutting the black market. After all, it gets a lot of money out of this and will probably try to get more.

About Peter Allen Clark

Peter Allen Clark has covered the growth of the legal marijuana industry since 2012 in numerous outlets. From consumers to entrepreneurs to lawmakers, he has spoken with many levels of this groundbreaking industry. He can't wait to see (and write about) how the conversation will evolve in Washington and America at large.

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