Could Amazon end up being ‘the Amazon of weed’?
Since even before states started to legalize weed for adult use, people in the legal-cannabis business, and many of their customers, worried about the prospect of big companies dominating the industry. It might be Coca-Cola or Anheuser-Busch or Altria—the tobacco giant. Or it might be a pot company—like, say, MedMen—that grows into market dominance. Which company, people wondered, will be the Amazon of weed?
Starting a few weeks ago, they began to worry that the Amazon of weed might be … Amazon. That’s because, to the surprise of most observers, Amazon issued a statement declaring its full-throated support for federal legalization of cannabis. Why would the company do that, if not because it wanted to get into the pot business itself?
Well, there is one very good reason. But first, let’s dispense with the notion that it’s because Amazon is plotting a takeover of the cannabis industry, and that once pot is legal federally, Amazon will dump eighths on everybody’s porches and put the squeeze on local dispensaries, just as it did to bookstores. It’s not that Amazon won’t get into the weed business—it probably will—but it seems highly unlikely it will happen anytime soon, even if the federal MORE Act, which would legalize weed, were passed tomorrow. And when Amazon does start selling pot, it likely won’t amount to anything like a takeover of the weed business.
Amazon didn’t even get into the liquor business until 2017, when it acquired all of Whole Foods’ state and local liquor licenses when it bought that grocery chain. It offers booze by delivery in many areas, but it hasn’t made a big dent in liquor retailing, especially when it comes to home deliveries. Meanwhile, Amazon still doesn’t sell tobacco products, and probably never will.
It’s expensive to compete in highly regulated markets like liquor, tobacco or weed, and Amazon is a volume retailer that keeps profit margins low in order to compete on price. It does best with products that are more commodified, and that don’t need to comply with a complex patchwork of state and local laws governing their sale: toothbrushes, throw pillows, computer cables, books.
And the pot market is complicated even aside from all the laws and regulations. Selling weed—or wine—isn’t like selling toothbrushes. As Weedmaps CEO Chris Beals told Business Insider last week, “the Googles, the Amazons, the others of the world have had difficulty dealing with areas where there are really complex products.” Weedmaps is sort of like Amazon—it offers menus of products and enables online ordering. But it’s solely dedicated to cannabis. Beals noted that there is a “high variability” in price and availability when it comes to weed, and argued that Amazon isn’t optimized to deal with markets that are like that, while Weedmaps—and other platforms, like Eaze—is expert at it.
So if Amazon isn’t scrambling to get into pot sales, why did it announce its support for the MORE Act? The most likely answer is contained in the other part of the announcement, where the company declared it would no longer routinely drug-test employees, except those governed by the federal Department of Transportation—meaning drivers: it wants to encourage people to apply for jobs. The infamously parsimonious company has had trouble filling warehouse jobs, in particular. Even as it has fought hard against unionization attempts, it has been raising wages for low-skilled workers and even offering signing bonuses of $1,000 or more.
Whatever the reason, Amazon’s announcement represented a huge win for legalization proponents. The stock prices of cannabis companies soared after the announcement was made. This one company declaring itself in favor of legalization might have as much impact on public sentiment, and lawmakers’ opinions, as a state legalizing adult use.
Of course, the fact that Amazon is unlikely to dominate the pot business doesn’t mean that industry concentration isn’t a real worry. That will most likely happen, if it does, on the production and supply side of things, not so much in retail. Stop worrying about Amazon, and start worrying about Coca-Cola, Altria and Anheuser-Busch.