Detroit Free Press: Professor Jeff Stoltman on the market realities of opening a marijuana business

With medical marijuana dispensaries showing up in many locations and Michigan voting on legalizing recreational pot this fall, a lot of entrepreneurs are lining up for what looms as the next business gold rush. But like in gold rushes of the past, some of these entrepreneurs will make millions, some may just get by, and many will get flattened. Jeff Stoltman, professor of marketing and entrepreneurship at Wayne State University's Mike Ilitch School of Business, said a lot of his students look at opening a marijuana business as a sure thing. Stoltman said he pushes his students who are interested in the pot business to dig deeper into market realities. "They’re looking at this tremendous explosive growth in the states where the cannabis business was liberated a little earlier and there is this ‘Why not here, why not me?’ They don’t dig too deep to find out who is really benefiting the most of those kind of operations and what was the path that they took and can they replicate that here.” We've seen these instant boom industries before. In the 1990s, Starbucks grew from about 150 locations to 10,000 as coffee shops opened on seemingly every corner. But a lot of Detroit coffee shops, including some Starbucks, closed in the inevitable shakeout. Since then other boom industries — brew pubs, say, or the grocery delivery businesses — have shown that startup costs can run high, competition is stiff, maintaining quality is difficult and a winnowing of weaker entrants is inevitable. "You’re going to see a period of rapid expansion, there will be winners and losers," Stoltman said of Michigan's pot entrepreneurs. "That market map, that competitive landscape will look very crowded very quickly. And just the economics of it will mean that some of them will survive and many of them will not."

Read the full story in the Free Press.

View all news stories