Updated: Mar 24
This article is brought to you by the new Higher Learning LV Core Cannabis course.
A May 2022 research study entitled "Reasons for Purchasing Cannabis From Illegal Sources in Legal Markets: Findings Among Cannabis Consumers in Canada and U.S. States, 2019–2020" that was published in the Journal of Studies on Alcohol and Drugs investigated the reasons that consumers purchase cannabis from underground sources, avoiding legal dispensaries with the goal of identifying "potential barriers to purchasing legal cannabis among consumers in Canada and U.S. states."
The study reported that "nonmedical cannabis" was legalized in Canada in 2018, only the second time that a nation had decided to discontinue marijuana prohibition (following Uruguay in 2014). "In the United States, medical cannabis has been legalized in 36 states," reported the research, noting that adult-use ("recreational") cannabis is still a Schedule I Controlled Substance at the federal level.
The researchers noted that a primary goal of adult-use cannabis legalization is the displacement of the illegal or unlicensed market. As such, they analyzed the effects of legalization on cannabis consumer behavior and why some cannabis users continue to purchase from the underground despite the availability of legal dispensaries featuring laboratory-tested products.
"The researchers noted that a primary goal of adult-use cannabis legalization is the displacement of the illegal or unlicensed market."
The study noted that hard scientific research is lacking to explain the barriers to legal purchasing among consumers, but noted that some investigations have been conducted in legal jurisdictions. "In the national Canadian Cannabis Survey, consumers reported that price, quality/safe supply, and convenience were the leading factors" that determined where they sourced their marijuana.
The design of the study was that of a self-completed web-based survey that was conducted during September and October of 2019 and the same period in 2020. Participants were recruited through the Nielsen Consumer Insights Global Panel. 45,735 participants responded to the 2019 survey, while 45,680 were involved in the 2020 data gathering effort.
The study excluded survey respondents who had not used marijuana during the previous 12 months (32,846 people), those who reported purchasing from legal online or physical retail stores as their only cannabis source (4,366 respondents), and those who stated that they did not purchase cannabis from an illegal source (3,065), leaving a final sample of 11,659 respondents in Canada and the United States "who had purchased illegal cannabis in 2019 and 2020."
"Reasons for purchasing illegal cannabis were assessed among cannabis consumers who had purchased at least some of their cannabis from an illegal source," noted the study's authors. The web-based survey included questions such as "What were the main reasons you bought marijuana from illegal/unauthorized sources instead of legal/authorized sources?" that were followed by a list of canned responses.
The research found that cannabis consumers in both the United States and Canada preferred legal sources when the price was the same or nearly the same between illicit and legal channels.
The study identified a range of reasons held by cannabis consumers who prefer to shop on the underground (sometimes called the "legacy" market), including better prices, a desire for anonymity, better quality, a lack of availability of legal retail outlets, and improved convenience.
In addition to cost, the study reported that the location and availability of legal dispensaries, and their overall convenience to cannabis users, "is another important factor influencing consumers' transition to the legal market." It noted that mature legal markets attract more marijuana customers than new ones that feature fewer stores and, thus, offer less convenience to many cannabis consumers. The study found that delivery services in Canada and the U.S. "may improve access to cannabis for consumers who cannot access physical stores."
Reasons that consumers prefer to shop on the underground include better prices, a desire for anonymity, better quality, a lack of availability of legal retail outlets, and improved convenience.
The study identified higher prices and inconvenience as "key reasons for purchasing from the illegal cannabis market in both Canada and the United States." Overall, the research found that cannabis consumers "are sensitive to the price differential between legal and illegal cannabis."
As might be expected, the study found that cannabis consumers who live closer to retail stores have "a higher likelihood of purchasing legally." As legal markets mature and the number of retail stores increases, consumers are considerably more likely to shop with legal sources than on the underground. The simple mechanism of more competition in the retail market also serves to lower product price points, attracting even more consumers from the legacy market.
As might be expected, the study found that cannabis consumers who live closer to retail stores "have a higher likelihood of purchasing legally."
"This is consistent with a previous study finding that U.S. respondents in legal states with more established retail markets were more likely to report that, compared with illegal cannabis, legal cannabis was 'more convenient to buy,'" noted the researchers.
The study determined that the most common reasons cited by consumers as barriers to purchasing cannabis from legal retail sources were higher prices and inconvenience compared to underground dealers. "Regulators will need to balance public health and criminal justice priorities in order to establish a competitive market price for legal cannabis that encourages legal purchasing," reported the study.
🎧 Like what you just read? Listen and learn with our highly educational weekly Cannabis Commerce + Chemistry Podcast. At under 30 minutes per episode, it helps industry professionals stay current on trending topics.