Grey Market Cannabis Sellers Deeply Undercutting Legal Market, Data Shows

Article by Patrick Cain, Global News

CANNABIS Grey market cannabis sellers deeply undercutting legal market, data shows BY PATRICK CAIN GLOBAL NEWS Dry flower is weighed in this file image. GETTY

Online grey market cannabis sellers are competing with the legal market by undercutting it and offering deep volume discounts, data released by Statistics Canada shows.

Sellers in the legal market ask about $10 a gram, on average, and rarely offer discounts of any kind.

StatsCan’s survey of grey-market mail-order marijuana sites showed that very small purchases, under two grams, were in line with the legal market at about $10.

But the more a customer was willing to buy, the more prices fell: at 28 grams or more, the sites charged $5.86 a gram in the third quarter of this year.  In late 2018, they were charging $4.83.

“There is a slight increase in the last quarter for Web-scraped prices,” says Michael Armstrong, a business professor at Brock University. “The thought that came to mind is that if there has been a price increase on the legal side because we still have shortages on that market, maybe some of the black market suppliers have actually bumped their prices up a bit.

“They can still price under the legal market, but take a little bigger margin.”

Offering volume discounts makes sense in many businesses, but especially illegal ones where every transaction carries a risk for the seller, he says.

“Like in other industries, there’s a fixed cost per transaction, whether that’s shipping and handling, or administrative. There’s a a fixed cost of doing an illegal transaction and taking the risk.

Read the full article here.

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