A lot of people—especially in Palm Springs—are wondering out loud whether the local cannabis market is saturated.
So … is it?
In economics, market saturation occurs when a specific market has met and is no longer generating new demand for a certain product or service. This could happen due to a number of factors, including increased competition, a decreased need for a product, or obsolescence. However, none of these factors apply in the case of cannabis in the Coachella Valley.
But are there just too many cannabis stores?
Let’s look at the numbers and put them in context. There are currently 52 operating retail cannabis stores in Cathedral City, Desert Hot Springs, Palm Desert, Coachella and, predominantly, Palm Springs. The other four valley cities do not allow cannabis retail stores.
Statewide, as of Sept. 15, there are 885 storefront retail and 460 “delivery-only” licenses active, according to the California Department of Cannabis Control. There are an additional 381 “microbusiness” licenses, but not all of these include a retail component. For simplicity, let’s say there are currently 1,550 retail licenses in California. (It’s also worth noting that not all licenses have an operating business attached to them, as it takes quite a bit of time and money—often more than $1 million, according to cannabis-business software company Cova—to actually open and operate after licensure.)
There are 39.51 million people in California, according to 2020 Census figures. In the state, there are 2,960 Starbucks stores. There are 31,473 McDonald’s, Jack in the Box stores and the like (fast-food restaurants). In other words, there is one Starbucks for every 13,348 people in the state. There is one fast food restaurant for every 1,255 people in the state. As for cannabis, there is one retail license for every 25,940 people, using our aforementioned figure of 1,550 retail licenses.
In the Coachella Valley’s nine cities, there are 370,135 residents, according to the 2020 Census. Since there are 52 cannabis businesses, that means there’s one for every 7,118 residents. However, a number of nearby residents in unincorporated areas or Riverside County/San Bernardino County cities that don’t allow cannabis businesses come here to shop. We are also vacation and tourism destination, and many of these millions of visitors per year come, in part, to use legal cannabis during their visit.
One local retail store owner reported nearly 50 customers per day in this last 12 months, and about 13,000 unique customers in the year. That’s not bad. Of course, each retail outlet is different in size and offerings, but it would seem that a number of local retailers are doing just fine.
And the demand for cannabis is growing, too. According to Flowhub and Gallup, only 12% of American adults were active cannabis users in 2019, leaving loads of room for growth. Nationwide cannabis sales increased by 67% in 2020, and support for legalization is at an all-time high of 68%. Some 14% of American adults reported using CBD, for things such as pain, anxiety, sleep issues, arthritis and headaches. According to Marijuana Business Daily, experts anticipate the cannabis market will continue to grow, in light of the designation of cannabis businesses being “essential” during the pandemic, and the fact that investor interest remains high.
In the Coachella Valley, the Greater Palm Springs Convention and Visitors Bureau is in process of creating a long-term cannabis-tourism promotional campaign, based on its own analysis of potential growth, new interest and positive outcomes for the regional hospitality industry.
Let’s focus in on Palm Springs, which is the valley city that has embraced cannabis businesses the most. According to Veronica Goedhart, the director of Palm Springs’ Department of Special Program Compliance, she has heard a few complaints that “there is a cannabis store every block”—but when she asks about the negative impacts, the complainants can’t come up with any specifics. She surmises that remaining cannabis stigma is the cause, and the market will find its own happy stasis.
According to Goedhart, cannabis stores have done a tremendous job of cleaning up spaces that have been empty for a long time, and have improved street safety with their security teams. If someone does bring a complaint regarding a specific negative impact, her team makes a site visit.
In conclusion, the Coachella Valley cannabis market does not seem to have reached saturation yet. There still seems to be plenty of room to grow—so don’t be surprised if cannabis is available for purchase next door to the nearest Starbucks one day soon.