In early 2020, the cannabis industry achieved a major milestone. At the onset of the Covid-19 pandemic, state governments quickly declared cannabis dispensaries “essential” businesses, allowing them to remain open during mandated shutdowns of many other retail and service industries. In other words, they were permitted to operate much like other essential retail operations, such as grocery stores and pharmacies.
As 2020 became the year of home delivery, these essential businesses were embracing ever more efficient technology to serve their customers. And, they certainly reaped the benefits; Instacart, for example, after bleeding millions a month throughout pre-pandemic 2019, finally reported its first profitable month in April 2020. As a direct result of increased demand due to the pandemic, online restaurant orders wrapped up the year with a staggering $44.94 billion in sales, more than double the $20.08 billion pulled in during 2019. And that upward trend shows no sign of slowing down: Recent data shows that sales for meal delivery services grew 36 percent year-over-year as of March 2021.
Cannabis sales have certainly followed the way of restaurant takeout. A recent analysis of the data by Leafly reported that in 2020, nationwide sales of cannabis (including both medical and adult-use) increased by 71 percent over 2019. Overall, throughout the U.S., consumers purchased $18.3 billion in cannabis products in 2020 — a significant increase from $10.7 billion in sales in 2019.
In a July 2019 Gallup poll, 12 percent of U.S. adults said they smoke marijuana — and those are pre-pandemic numbers. Like most other Americans, they are accustomed to the ease and convenience of the same online shopping and home delivery experiences they’ve enjoyed for years. The demand is likely going to grow; New York, the fourth most populous state in the country with the quintessential delivery-friendly state of over 8 million people, just legalized cannabis for adult use.
Cannabis businesses looking to best serve those customers — and retain their loyalty and business — need to evolve much like their counterparts in other industries, such as groceries, fashion, and beauty, to offer a shopping experience as easy, intuitive, and reliable as ordering a bag of oranges.
This game of catch-up can’t be chalked up to a lack of forward-thinking cannabis operators; the renegade history of the cannabis industry itself certainly helped foster a reticence toward technology. Combine that with federal prohibition and varying state compliance concerns, and that helps explain why many smaller operators have defaulted to the “no-frills” route when it comes to their online presence.
I believe now is the time for cannabis businesses to adapt their technology and take a cue from what has driven success in other online retail industries. Four of the most effective I’ve found include:
Custom storefronts: Many successful e-businesses, and certainly all of the biggest brands, know the value of creating their own custom online store instead of relying on third-party fulfillment or “last-mile” services. A virtual store — especially in a business like cannabis — can enhance the customer’s shopping experience through add-on elements like product information and recommendations.
Shortcuts: “Insta” is more than just a buzzword. As we’ve especially seen when it comes to shopping for groceries, customers overwhelmingly respond to the ease of “instant add/reorder.” In the cannabis industry, as consumers become more educated on products, brands, and their own preferences, expect this feature in cannabis buying to become a favorite.
Better searches/filters: Consider developing enhanced browsing menus, like shopping by the desired effect (e.g., calm, sleep, etc.) and visual representations of products, intuitive to customers’ preferences and buying habits. The fashion industry was actually a pioneer in this aspect of online shopping. This certainly creates a more dynamic and engaging shopping experience for the customer. More importantly, on the back end, it creates for businesses virtually unlimited data points to categorize their products and target likely customers.
Loyalty programs: Like other businesses increasingly catering to a delivery demographic, cannabis businesses are also seeing the benefits of implementing similar add-ons to their ordering and delivery platforms. Customer loyalty programs, when built in to the entire platform, can not only calculate rewards points but also curate other promotions and products to maximize points or apply sales discounts. This is a driver in bringing customers back to your store — increasing customer retention in retail by just 5 percent boosts profits by 25 percent to 95 percent.
Of course, new technology alone is not a panacea for the cannabis industry’s challenges. In California, the state’s Bureau of Cannabis Control made changes in January 2019 that allowed all licensed retailers to offer delivery. It was a prescient move in the weeks leading up to the Covid-19 pandemic shutdowns; however, many brick and mortar dispensaries have been slow in adding this service, creating a clear digital divide between “real world” retailers on the one hand and delivery companies of any size on the other.
Admittedly, some of these in-store-only retailers may not need to turn to all-in-one platforms and other new technologies to maintain their sales status quo. Instead, they choose, to varying degrees of success, tried and true lower-tech methods like social media, interactions with customers and brands online and in-store, and localized incentives and promotions. But and with additional concerns like zoning restrictions, commercial rents, and other operating costs, the pressure is on these smaller shops to keep up with the increasingly intense competition.
The ability to entice, service, and retain more customers than ever using increasingly in-demand online platforms can, thus, empower small businesses to actually grow by having the tools to compete on a more level playing field in the multi-billion-dollar cannabis industry. To keep up and compete in 2021 and beyond, cannabis businesses should rethink their approach and meet customers where they’re at.