Continuing on the theme of Retail Markup summarized in my previous posting , I thought it would be helpful for readers of this blog to see a slightly redacted distribution of the levels of markup displayed by individual I-502 Retail stores in the first full year of the State-legal Cannabis market. As I indicated last time, the folks near the top of the markup “pyramid” are, differentially, serving markets that might reasonably be assumed to contain disproportionate numbers of non-Washingtonians. It’s not all-or-none, but it’s a definite geospatial tendency.
In the following chart, I’ve taken the same markup metric (markup = (retail sales MINUS wholesale cost of product) ALL DIVIDED BY wholesale cost of product). With this metric, 1+ markup is the multiplier between wholesale and retail price (e.g., a “markup” of 2.0 (which I often express as 200%) would imply that a gram purchased for $5.00 was selling at $15.00 (3x multiplier, 200% markup). All of this is before taxes are added in. The focus here is on what retailers are making, not on what the man is skimming.
The following scatterplot sheds light on the pattern of markups in individual stores when plotted against their total sales (across all Cannabis-containing products) during the 12.7-month period ending July 31 2015.
The two “redactions” I’ve applied are that all stores with first-year sales in excess of $3 million were fixed at the $3 million level to protect the innocent (and the, apparently, greedy/opportunistic) from easy outing. I also excluded all stores with less than $100,000 in total sales (thereby removing outliers that might have only been open 1 or 2 months and not yet sold through their initial inventory purchases).
Suggested areas to consider when perusing the graph-
That last statement was a joke, but one dealing with a serious issue. The Cannabis taxes set by our Legislature are large, and that same $15.00-priced bud would actually, on average, have walked out the door at just over $21.50 per gram (when the 43.5% ish excise/sales tax combo hits).
This is capitalism, and it is good. Greed is good, also. So, too, is affordable access to high-quality, high-effectiveness recreational and/or medicinal medicines.
I made the joke in part to focus attention on my opinion that our current 43+% tax rate on “recreational” (and upcoming 37% tax rate on “medical”) is just too much. Particularly when less needy/greedy State (and Provincial) Governments seem to surround our borders.
Lower the tax rate, increase the product volume, and you will very likely increase the overall tax revenue. Seems simple (although it no doubt is not …. I don’t know Government that well, I just know selling drugs).
I’d love to hear your thoughts about this posting (and/or things you’d like to see me cover in future ones).
I’m thinking next week, I’ll detail the initial impact of Oregon’s great tax-free Cannabis experiment going live on the Washington State-Legal Cannabis marketplace….
Either that, or I’ll get distracted by a pretty bird flying by.
50% wins would make for a new season in the last 8 games (almost like a re-boot)
ps – if you see value in my postings, please share the link to this site with any and all you think might benefit. I’m not into social media (doing a blog has pretty much internetted me out). The end simply does not justify the means in my warped view of human interaction. However, if y’all (that is me trying to speak like a pandering Presidential candidate) have the knowledge and skills and inclination, please feel free to leverage your networks to increase traffic to this site. It is my understanding that that is a good thing. I’ll try my best to make it worth your friend’s, tumblee’s, googler’s, pinteree’s or twit’s time.
pps- If you wish to use any of the materials I produce for non-commercial things, please feel free to do so. I’d appreciate acknowledgement (and also that you let me know what you are using and for what purpose). Not necessary, just nice (and might be helpful to you).
ppps- If you are a State-Legal Cannabis Producer, Processor and/or Retailer, then by all means use what I produce in your efforts to make your business better. Just be careful about buying into my jokes as fact … I won’t always call out my more outrageous assertions for the non-factual drivel that they are. If you REALLY want to use the stuff I produce to better your business, consider using my services. I’ll keep most of the jokes out of those interactions. (biz contacts to firstname.lastname@example.org)
pppps- If you are a competitor of mine, I welcome your presence in this market. Please know that I view imitation as a form of flattery. Feel free to use my work (with acknowledgement) – just don’t plagiarize. I cherish a Darwinian competitive market environment. Much as I cherish the cream that rises to the top of fresh milk.
May those that add the most value to their clients win.