As the COVID-19 pandemic rapidly spreads across the United States, cannabis consumers quickly are shifting their buying habits from in-store sales to e-tail like online ordering, in-store pickup, and delivery services. How can cannabis retailers swiftly pivot their business models and stay competitive while maintaining social distancing?
Last week, in-store sales surged as customers stockpiled cannabis and accessories in anticipation of dispensaries shutting down. However, many cities across the country soon deemed cannabis businesses “essential,” allowing them to continue to operate. Although this may have quelled many retailers’ fears about being shuttered, it also has forced them to confront offering delivery and online ordering to meet their customers’ changing needs.
“Retailers have had to adapt to the new social distancing environment by changing behavior to delivery and curbside, as well as discouraging cash and encouraging contactless digital payments,” said Eric Kaufman, chief revenue officer at Dama Financial. “We’re experiencing a massive surge in requests for Paytender, our compliant merchant processing and digital consumer wallet that allows scan-and-go payments, which reduces the use of cash and increases public safety.”
Merchants contemplating integrating delivery or online ordering into their operations must bear in mind some important considerations.
Implementation costs
Setting up the infrastructure for a delivery or online ordering service can be expensive. Carefully consider whether your business can cover the upfront costs without affecting current revenue streams. If funding is tight, you may be able to offset costs by having customers pay a fee for the new service.
Local regulations
The rules and requirements for opening a delivery service depend on the state in which you operate and the market you serve. It is extremely important to perform due diligence and seek legal advice on the regulations that apply to your business.
Workforce capacity
With many businesses forced to operate with a skeleton crew, assessing the capabilities of your current workforce is imperative. Online ordering and delivery services will add additional processes to current operations, which will require training and possibly additional staff to implement.
Inventory
Analyze past sales results and evaluate current product inventory streams. Integrating online orders and delivery services will be useless if you cannot meet increased customer demand.
Employee safety
Take measures to ensure delivery drivers and customers stay healthy. This may include taking employees’ temperatures before shifts, providing them with latex gloves and alcohol-based disinfectants, and implementing a touchless ID-verification process in stores and when making deliveries.
Third-party delivery services
Depending on your local regulations, you may have the option of partnering with a third-party delivery service.
Some cannabis retailers may be tempted to believe the rise in online ordering and deliveries is just a kneejerk reaction to the current crisis, but they actually mirror mainstream consumer-packaged-goods market trends. For consumers, convenience is king. From Amazon Prime to grocery delivery services like Shipt and Instacart, takeout delivery companies like Grubhub and DoorDash, and home-delivered meal kits like HelloFresh and Blue Apron, purchasing is driven by consumers’ desire for their lives to be more efficient, easy, and convenient.
The coronavirus outbreak can be viewed as an accelerator for the cannabis industry’s inevitable transition to a digital marketplace. According to Faai Steuer, vice president of marketing for point-of-sale developer Cova Software, “In the previous weeks, our customers have seen a 20-percent to 30-percent increase in deliveries, online orders, and pickups in store. The industry isn’t shrinking; it’s just changing shape.”
