How Cannabis Ecommerce Challenges Are Driving Web Innovation

No market, niche or otherwise, will survive without a strong presence in ecommerce. Whether it’s business-to-business (B2B) or business-to-customer (B2C), ecommerce must be a part of any business and marketing strategy. If your business is behind the curve on omnichannel strategies, you’re inviting problems. It’s simply incumbent on any business to optimize the buying experience. And, that means putting price, product, and purchase in front of the customer so the buy decision can be swift and actionable.

Ecommerce will define the cannabis industry

Sears, Kmart, Macy’s and other legacy retailers are closing stores in the hundreds, marking the continuing decline of old-school marketing. Social media, smarter devices, and digital cash have changed shopping. Customers access product instantly, review features and benefits and click to buy. Providers must have a presence on all channels and transaction technology in place if they’re to compete.

The part of the cannabis industry selling what you might call “things” is one aspect of the commerce. But the part of the industry that sells cannabis and derivatives presents a different challenge.

Related: 5 Tips for Breaking Into the ‘Budding’ Marijuana Industry

Cannabis things

Cannabis things include hundreds of personal use items such as vaporizers and supplies, bongs and pipes, storage containers and more. If they’re legal, you can buy them readily on Amazon or other major ecommerce retailers.

Of course, there’s also the growth systems, irrigation controls, lights and piping, fertilizers, hydroponics, hothouse supplies, all the things involved in farming and harvesting, and even oil extraction — everything except the seeds and plants.

CO2 Extraction

co2 extraction machine
Image Credit: Organa Brands

As well, there’s sales materials, cabinetry, displays, ventilation, vaults, point-of-sale devices, security systems and everything else it takes to comply with regulations on medical marijuana dispensaries or recreational use shops. If you can find it online, you can buy it online. But, if you’re the provider:

  • You must exploit outbound and inbound marketing.
  • You need website design and management.
  • You need content copy and information resources.
  • You need credit card transaction administration and more.

Customers have to find you easily, and that means exploiting Search Engine Optimization (SEO), Search Engine Marketing (SEM) and Pay-Per-Click Advertising (PPC). Providers must have a lot of irons in the fire and handle them adeptly. And, each of these irons comes with their own cost. “Some ad platforms shy away from industry related promotions. We’ve had to be extra nimble and creative to grow our audience, finding and working through cannabis friendly channels,” says Rob Green, CEO of NugTools, maker of the Nuggy, a pretty cool “swiss-army knife for smokers.”

Related: The 411 on 4 Smoking Hot Marijuana Startups

Barriers to ecommerce

Except for hemp products, cannabis and its derivatives cannot be sold online without restrictions. It’s possible, but not legal, to purchase in most United States locations. There are workarounds and discreet ways to buy product, but they put you at risk for prosecution and penalty. As a result, you can expect ecommerce technology to pursue solutions where possible. After all, the law is the problem — not the technology. Regulations present several specific problems:

  • States have built dense regulations for control of the seed-to-sale process, including detailed rules on brick and mortar dispensaries and stores. But, they have said little about ecommerce.
  • Sales across international or U.S. state borders invite difficulties with tariffs, customs, and taxes.
  • In a 70-page statement (2011), the Drug Enforcement Agency (DEA) claimed, “Specifically, smoked marijuana has not withstood the rigors of science–it is not medicine, and it is not safe.”
  • In an August 11, 2016 announcement, the DEA reconfirmed its position, “marijuana remains a schedule I controlled substance because it does not meet the criteria for currently accepted medical use in treatment in the United States, there is a lack of accepted safety for its use under medical supervision, and it has a high potential for abuse.”
  • The United States Postal Service prohibits shipment of controlled substances, and FedEx, Parcel Post, and UPS all prohibit shipping in principle.
  • CreditCards.com (2013) reported, “nearly all banks and credit card companies, reluctant to run afoul of federal drug and banking laws that remain on the books, refuse to do business with even state-licensed sellers of marijuana. This compels business owners and pot buyers to deal only in cash, which carries its own risks.”

Such decisions force cannabis dealers into a cash-only business which Bend, Oregon’s, The Bulletin notes, “Cashless transactions are not only convenient for consumers, but dispensary owners say they reduce the amount of cash on hand.” It’s also worth noting that businesses must have a bank account to process credit card transactions. And, while the Treasury Department permits banking for marijuana businesses, it does so only under heavy regulations.

Even in states where medical and recreational use has been legalized, banks are almost unanimous in their refusal to open accounts. These issues are all part of the same problem: Ecommerce cannot succeed without the ability to transact revenue.

Dakota Sheets, President of Colorado-based Resolution Limited, sells popular cleaning products, Res Caps. He’s hit commercial hurdles expanding his company’s online presence. “We began selling online in early 2016 and often times processors consider companies ‘high-risk’, even though they don’t sell physical cannabis product.” To work through this, Sheets has found positive returns using his own website and working with multiple ecommerce providers.

Related: San Diego Company Bids to Become First Marijuana Business on NYSE

Options for ecommerce

Innovation clicks in anytime commerce is challenged, and the same imagination that created ecommerce is chasing solutions in technology: Apps are competing for user attention. Some help customers locate dispensaries and stores nearby. Others display menus at your preferred vendors. Still, others connect B2B suppliers to accelerate or improve the supply chain.

Some providers are pursuing omnichannel approaches to anticipate customer needs, optimize their presence on social media and reach more people through more devices. If customers aren’t coming to them, providers want to be the face of the industry to mobile prospects.

Even social media exposure can be a challenge for cannabis businesses. Facebook and Instagram delete cannabis related accounts all the time, requiring brands to rebuild their presence and online followings from scratch. But email works well.

“We go straight to inboxes, helping cannabis customers save money and learn more about the brands they love with the Daily Leaf and our Daily Leaf Deals newsletter,” reveals Andy Yashar co-founder of DailyLeafDeals.com, an Oregon & Washington-based website and weekly newsletter connecting brands and businesses with thousands of subscribers. “Since the industry is in its infancy, customers are learning so much about products, processes, and brands, we produce innovative content to bridge the gap.”

Other technologies offer options to the cash-only problem. For example:

  • The American Cannabis Exchange offers a digital e-wallet called ACEpay, “a pre-paid Visa or MasterCard that’s linked to their ACEpay account [usable] anywhere major credit cards are accepted, granting both dispensaries and consumers the ability to conduct business safely and efficiently. Card purchases are eligible for rewards at nationwide businesses and restaurants, which are chosen by each card user.”
  • CannabisCardPay’s CardTec MobilePay 3300 provides the same access through Apple and Android apps.
  • MassRoots is just one of many apps that build communities of users who chat about experiences and offer answers to questions like “where and how do I buy on the web?”
  • eCannabis.com is building a presence where product can eventually be sold. It currently offers a Green Card entitling holders to news, benefits and deals, hoping to create a membership base and shopping habits that will convert where legalization permits.
  • Tradiv.com is one B2B wholesale platform connecting “cultivators, infused product manufacturers and dispensaries.”
  • Blue Line Protection Group, Inc. will also present a platform “that will increase the product selection that marijuana dispensaries offer their customers while improving their efficiency” reducing the employees’ time-intensive supply chain process.

Given the promise of the cannabis economy, it’s easy to conclude that suppliers, providers and customers will drive ecommerce solutions. But it may not be as soon as advocates would hope.

“Going from completely Schedule 1 classification to medical, then adult-use retail alone was a big step,” argues Ben Curren, CEO of Green Bits, a point-of-sale provider operating in five states. “It’s going to be a while until the states allow the industry to build a true ecommerce model. “

Any services mentioned here are not recommendations so much as observations of directions in cannabis ecommerce. But, the potential ecommerce promises the cannabis industry is enormous.

Referring to the overall economy, CannabisCardPay claims:

  • Consumers spend 241 percent more on a credit card transaction vs. debit card transaction.
  • The number of credit card transactions increased by 4.2 billion at a 6.8 percent Compound Annual Growth (CAGR) over a three-year period.
  • Credit cards represent 32.2 percent of all card transactions, but 53.5 percent of the dollars spent.

The economic gain in such numbers moves advocates and activists to challenge the status quo and seek ways to remove the regulatory and banking barriers to the Internet sales and delivery of cannabis products. Still, given the sophistication of the aggressiveness of the technology and innovation that makes and shapes ecommerce, the principles and providers in the cannabis industry will push for mutually satisfactory commerce solutions.

Article by Andre Bourque Guest Writer at Entrepreneur magazine

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