Everything “direct to consumer” (D2C) in cannabis is in flux. What’s happening today in states like Massachusetts, California, and elsewhere has never been tried before until relatively recently. (At least not by anyone carrying a state-issued license.) Consumers are increasingly turning to online ordering facilitated by sophisticated platforms like BLAZE, a leading provider of enterprise software for the cannabis industry. D2C opens possibilities ranging from same-day delivery from dispensary storefronts to distribution-only warehouse facilities to roaming food truck-like vehicles stocked with all the local favorites.
Some have even envisioned geofenced “drops” enabled by delivery capabilities as well, creating hot spots at shows and events. It’s this level of innovation that makes the delivery “channel” so intriguing. Will Jay-Z follow up his investment in pizzeria-on-wheels company Robot Pizza by fielding a fleet of mobile Monogram-badged shops? Why not?
Brands like Kiva are already disrupting the status quo by cutting out the middleman altogether. The impact of brands’ offering D2C remains to be seen and isn’t addressed here. What’s of primary interest for this discussion is the future of delivery, and what “weed on wheels” might look like in the future.
Recent discussions with cannabis industry leaders and innovators on delivery give some insight into the current state of delivery and how the consumer relationship with cannabis brands is changing. Here is the fundamental question: does opening up the option for cannabis consumers to receive products directly deliver (pun intended) any benefits beyond the obvious?
Cannabis At Your Doorstep
Consumer demand for the flexibility, convenience, and privacy afforded by delivery has always been high. It’s difficult to imagine how cannabis is somehow a special case if Drizly can drop off a bottle of cabernet, GoPuff can hand you a six-pack and a bag of chips, and Walgreens can offer to send out your Xanax refill this afternoon. The argument against providing access to cannabis anywhere outside a licensed storefront has (and likely always will) called out issues – some real, some less so – involved with executing such an everyday transaction in an industry as complicated as cannabis.
Just talking about cannabis “delivery” as you might with groceries doesn’t make sense. Location is everything. Consumers might have a range of options available to them or, as in states like Washington, there may be far fewer. (Note a recent press release by Pelican Delivers claiming to be the only option in the state.) For example, a recent Vice article on “weed couriers” chronicled the evolving dynamics in New York City which don’t look at all like Las Vegas or Springfield, Massachusetts.
The Industry On Delivery
Some states have been bringing cannabis delivery online for years. In NIMBY-plagued California, progress has been made one stumbling step at a time. Elsewhere, like Massachusetts, Covid accelerated solutions to fill the gap between socially distanced cannabis consumers and the “essential” dispensaries allowed to remain open. In states where delivery has been made possible, the lift for dispensaries has not been insignificant. Commenting on the effort required to spin up delivery in Massachusetts, Alex Carll of Canna Advisors called it “one of the hardest things to implement and keep going on a daily basis” he has seen in his ten years of work in cannabis retail.
Delivery undoubtedly creates an intriguing wrinkle in the cannabis consumer experience. For example, as Carll points out, cutting out the in-store visit could mean a delivery consumer doesn’t get the “personalized service” of a dispensary “that is not necessarily coming through on the delivery side.” Then again, as he says, “there certainly are a lot of people, especially medical cannabis consumers, who aren’t necessarily comfortable” going into a physical location.
Asked about the issue, Tamika Samson, CEO of Massachusetts cannabis delivery company Kush Kart, shared her perspective. Samson is the first black female CEO and majority owner of a delivery operator business in Massachusetts and was a participant in the second cohort of the Massachusetts Cannabis Control Commission’s Social Equity Program.
“Going into a store is especially less attractive for those who are immunocompromised, elderly, ill, or just too busy with work and family responsibilities. Having access to cannabis delivery, especially when confusion about cannabis and stigma persists, creates a low-stress and discreet experience without the issue of being stigmatized (or wasting time) by standing outside in line.”
Tamika Samson, CEO of Massachusetts cannabis delivery company Kush Kart
Asked to share his thoughts, a comment by Michael Diaz-Rivera, entrepreneur and owner Denver’s of Better Days Delivery, builds on Samson’s points:
“We know that medically this plant is a necessity to many people that don’t have access to traditional transportation. Solving patient needs in rural areas has been a tremendous benefit.” He also called out a challenge some consumers face that doesn’t get much airtime in the industry: “Parents are oftentimes a hindrance because they can’t take their kids into a dispensary.”
Michael Diaz-Rivera, entrepreneur and owner Denver’s of Better Days Delivery
“Flexible Consumers” Look Beyond Convenience to Welcoming Dispensaries
As delivery expands, we should see dispensaries align even more closely with consumers who value shopping in brick-and-mortar dispensaries. For example, recent research by High Yield Insights hints at where operators might double down on these points of connection. For example, a certain segment of cannabis consumer report “convenience” as far less important than most when selecting a dispensary. Of the 1,400 current consumers surveyed across 24 adult use and medical states in a recent study, 849 respondents didn’t rank “convenience” among the top three drivers when planning a shopping trip. These “Flexible Consumers” look much like most cannabis consumers mulling over where to shop with a few notable differences:
Not Like Buying Broccoli
The “knowledgable staff” data point recognizes the much-touted role of budtenders in the retail experience, an encouraging sign given the resources dedicated to the face of dispensaries. That only 32% of all respondents report the same as among their top three criteria shouldn’t be too concerning. No doubt most operators know the shopper well enough to invest in a curated, personal experience or, if that’s not part of the store’s vibe, focus on other aspects. That’s not to say missing out on the personal touch should be discounted. Asked about the issue, Chris Piazza, Founder and CEO of accessories brand CannaDevices, noted the risk posed by “the lack of education that occurs” and “the benefit of going into a dispensary with good budtenders is the knowledge shared with the consumer. This is an important part of the purchases, it is not like buying broccoli from the grocery store, there is a bit more to these things.” The better providers make educational resources easily accessible online but face-to-face interactions are probably impossible to replace.
Will Delivery Put Customer Loyalty At Risk?
Loyalty is a driver known as a key to creating “stickiness” with some dispensary customers. While some shoppers might relish the tactile feeling of tucking away a freshly stamped frequent shopper card, the data collected in digital interactions can fuel more advanced VIP programs and custom offers for those who don’t care as much for physically shopping the store. Finally, the role assortment – and the importance of getting it right – suggests a linkage between choosiness over convenience but also calls to mind another issue universal in retail: stockouts.
Every cannabis shopper will eventually find that a favorite product is out of stock. In a retail setting, good budtenders can recommend an alternative. But how much of a challenge does this pose for delivery providers? We’ve all been there. Your order (from Amazon, Instacart, that local Thai place, whatever) shows up and something is missing, it’s the wrong product, or what’s in the box doesn’t look at all like what you saw online.
Chris Violas, CEO of BLAZE, addressed the issue in a recent exchange:
“We get ahead of [stockouts] by setting the workflow up front so we don’t have any of these issues with stock ever at all,” Violas said. “Our inventory system is real-time and we’re in constant communication with our partners. We support the Nearby API, so when the client comes to the website and puts in her address, the BLAZE system pings the website, and the menu is updated before we even present it to the customer, showing only those items that are currently in stock at the dispensary that will be providing the delivery based on her location. That qualification is happening up front to ensure that we only service items in stock for a particular customer in a particular region.”
Chris Violas, CEO of BLAZE
Stockouts might be among the worst issues driving away customers. In a 2019 study of mainstream retail shoppers, 39% of consumers reported ditching an entire shopping basket after discovering a product was out of stock. Given a sufficiently advanced ordering and fulfillment system like that described by Violas, delivery providers can maintain customer satisfaction.
Solving for NIMBY and Expanding the Total Addressable Market
The other key benefit for consumers, and for some in the industry as well, is the “reach” delivery enables. The infamous patchwork nature of local legalization strands some consumers in communities far from the nearest dispensary. Delivery can solve this challenge. In an email exchange, Lex Corwin, Founder and CEO of craft cannabis brand Stone Road put it simply: “Over half of the municipalities in California restrict commercial cannabis activity – meaning no stores [thus] delivery is critically important to reaching communities otherwise cut off.” On the flip side, Corwin neatly captured a key benefit to the industry as well: “I think more delivery is a pro for the industry as it widens the TAM (total addressable market) of cannabis in general.”
Yet for smaller brands like Stone Road, delivery can be a mixed blessing. With increased competition from delivery, providers put more pressure on brands for discounts and promotions. He reports a potential challenge when dealing with larger-scale providers for which brands “must have a certain amount of marketing spend. This limits the number of brands who can compete but on the other hand, you also have the more niche services who specifically promote these craft, diverse founder and/or equity brands.”
On Corwin’s last point, there’s an opportunity for the industry to think of delivery not only more holistically but also in terms of the core values shared by most cannabis consumers. For example, many cannabis consumers are passionate advocates for sustainability. Some delivery companies have given the issue some serious thought. Tamika Samson offered her take:
“One way that Kush Kart is adding more value for our customers is by protecting our environment and taking the initiative to minimize our carbon footprint. Our warehouse is less than two miles from the protected National Seashore on Cape Cod, so we’re reducing our impact on the environment with a fleet of exclusively electric vehicles, reusable delivery bags, and working with wholesale partners who make environmentally conscious decisions regarding their operations.”
Finally, Michael Diaz-Rivera offered some words on inclusion and the role the cannabis industry can play to open new business opportunities for those seeking to join the regulated market via cannabis delivery ventures:
“Cannabis consumers believe in a diverse, equitable, and inclusive cannabis marketplace and they see how everyone can benefit.”
Michael Diaz-Rivera, entrepreneur and owner Denver’s of Better Days Delivery
Questions? Comments? We’d love to hear from you. Email [email protected]
Photo by Cova Software on Unsplash and Vasilios Muselimis on Unsplash
