The number of cannabis shops London, Ont. has exploded 10-fold in a year

The way Greg Lawson sees it, he's not just selling weed. He's selling an experience.

"We want a customer to come in and feel safe, not intimated and be educated on what they're doing. Having the right staff, having the knowledge, that's what's going to retain customers."

Lawson is the regional manager of J. Supply Co., an independent chain of provincially-licensed cannabis storeswith locationsin London, Windsor and Thunder Bay, Ont.

Lately, offering thatcannabis experience has been morechallenging because of emergency health restrictions imposed to mitigate the spread ofCOVID-19.

To make matters worse, J. London, once the only game along Richmond Row, has become one choice among many.

"If you go from Victoria Park to Oxford, there are eight stores that have popped up. Within London, we are definitely oversaturated."

Canadian weed purchases doubled last year

During the last year, the amount of weed Canadians bought doubled:from $1.48 billion in 2019 to $2.98 billion in 2020.

During that same period, the number of provincially-licensed cannabis retail stores in Ontariohave seen explosive growth, with the Alcohol Gaming Commission of Ontario (AGCO)indicating it wants to approve1,000 new stores by this fall.

In London, the number of stores hasgone from just four, a little over a year ago, to 40 retailers as of Tuesday, all either already operating or waiting on licensing approvals from the AGCO to open their doors.

To put that number in context, it's nearly twice the number ofLondon's 21LCBO locations, Ontario's Crown-owned liquor monopoly.

The sheer number of stores opening so quicklyraises questionsabout market saturation, industry sustainability and whetherthere are enough customers to buy all that weed.

'Drinking less beer and smoking more weed'

"What you're seeing now is tremendous growth in the number of pot shops in Ontario to the point where it's getting really saturated," said Bruce Winder, a Toronto-based retail analyst and author."I see cannabis shops all over the place now."

Winder believes that growth is being primarily fuelled by changing demographics and shifting consumer habits, with Millenialsand Generation Z looking to weed like previous generations looked to alcohol as their substance of choice.

"That demographic is drinking less beer and smoking more weed," he said.

Winder said pot shop sales are being buoyed by the anxiety of the pandemic and, with more locations, cannabis retail might finally be eating intoblack market sales,which have traditionally been cheaper than the legal supply.

"I think it's putting a dent on illegal sales," he said, adding that with the AGCO opening stores at a rate of 30 per week in Ontario, the province will eventually reach a point where the retail ecosystem can no longer sustain itself.

"You're going to reach a point where some of them don't make it eventually.Over the next few years, I think you'll see a right-sizing where maybe there's some consolidation on the retail side and maybe some pot shops closed."

Back at J. London, where Lawson can see his nearest competitor from his storefront window, strict limits on customer interaction during the pandemic combined with the concentration of stores makes it difficult to distinguish oneself from the competition.

"The problem is we have these big corporations backed by a lot of money and longevity-wise they're going to be able to outpacethe independent people and run them out of business price-wise."

"It's going to come down to a race to the bottom."