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Will Online Sales Kill the Cannabis Dispensary?

April 24, 2017
Seattle, USA - February 2, 2016: An Amazon Fresh truck in front of the famous Pike Place Market late in the day.
Will legal cannabis soon be as easy as point, click, and wait by the door for the delivery guy?

Online shopping is a future that many in the adult-use industry are eager to embrace.

That’s a scenario being pushed in an intriguing new report by VolteFace, a UK drug policy think tank. Though focused mainly on the United Kingdom, where popular pressure is building for legalization, the report makes a fairly compelling case for the “virtualizing” of the global cannabis business—where all products are ordered online and delivered directly to the consumer, without the inefficiency or social risks of a bricks-and-mortar shop. Report author Mike Power, the UK journalist who wrote Drugs 2.0: The Web Revolution That’s Changing How the World Gets High, writes that it’s the only sensible future for mega markets like Canada and the United States.

Power writes: “A controlled and regulated online market is both essential and long overdue in order to protect users from the risks of the illicit market; to limit access to younger users; to offer safer products and increase consumer choice; to develop less harmful products and safer routes of administration; and to control marketing and advertising in any eventual legal context.”

A digital-only cannabis market, he adds, “would protect children, and limit their access to cannabis, but allows adults to make their own informed health choices.”

Already Working: Eaze, Tweed, and Others

It’s a compelling vision for the future of cannabis, to be sure. Beyond the element of convenience, such a digital-only marketplace does seem to address many of the concerns that regulators have, in everything from product safety to more efficient tax collection.

More to the point, it’s a future that much of the cannabis marketplace itself is also quite eager to embrace.

In California, for example, online delivery platforms like Eaze already offer tightly controlled app-based ordering and direct-to-your-door delivery for medical cannabis, and are anxious to expand the service to adult-use cannabis, which state voters approved last year. In the Eaze model, the company is simply a branded intermediary that coordinates deliveries from local dispensaries via a fleet of Uber-like drivers.

In Canada, meanwhile, players such as Tweed Mainstreet have created vast mail-order systems whose massive inventory and short delivery times are almost Amazonian in their efficiency and scope.

Constrained For Now, But Not For Long

True, these early movers in the virtualization space face constraints. Eaze, for example, is currently allowed to work only in California. Tweed is, of course, limited to Canada. But investors who have poured millions of dollars into these players clearly believe that the virtualization model can readily expand into other states and, eventually, to the continent as a whole.

'It's a matter of flipping a switch. We can expand tomorrow.'
Keith McCarty, former CEO of Eaze

“We can scale extremely fast,” Keith McCarty, then CEO of Eaze, explained to Cannainsider last year. That’s true in part because the company is itself largely virtual: its delivery network is built on top of the existing retail and wholesale networks that are already in place in a given market area. “For us it’s really just a matter of flipping on a switch,” McCarty said. “We can expand tomorrow.”

These app enabled delivery-dispensary partnerships may well be just the first stage in a much larger transformation of the cannabis end-user experience. Given how rapidly the other segments of the cannabis industry, most notably production, are being disrupted by business models centered on scale volumes and technology-driven cost reductions, it seems inevitable that the retail side will also be transformed. Just as bricks-and-mortar retailing has been decimated by an online model that offers low-cost two-day delivery, so, too, the huge network of dispensaries that has followed legalization and decriminalization may itself be but a stage in the cannabis industry’s accelerating evolution.

Amazon Cannabis Prime? Not So Fast.

Not that we’ll be seeing cannabis offered as part of Amazon Prime any time soon. No doubt much of the cannabis trade will eventually migrate from the physical market into the virtual one, particularly in product areas, such as low-cost edibles, that are more and more like commodities. But it’s far from clear how far this transformation will go, or how long it will take.

Virtualization is already a reality in Canada’s medical marijuana market, where patients click-through their purchases and receive medicine in the mail. But it’s a different story in the United States. Even before the election of Donald Trump, online entrepreneurs faced a market that was fragmented among cannabis-friendly and unfriendly states, and even among pro- and anti- local governments within states. That’s hardly the best environment for the emergence of an Amazon-esque cannabis company.

Since the appointment of Trump’s cannabis-loathing attorney general, Jeff Sessions, even first movers in the virtualization space seem to be reassessing their expansion plans. As Jim Patterson, Eaze’s new CEO, told The San Jose Mercury News last month, “I think what a lot of people are doing is waiting and seeing.”

More fundamentally, the virtualization model makes some assumptions about the existing cannabis retail segment that may not bear out entirely. The VolteFace report, for example, assumes that physical dispensaries are so problematic socially (magnets for “antisocial behavior…. public consumption and intoxication”)  that consumers will abandon them as soon as a virtual option is available. Yet given the way many new, higher-end dispensaries are emphasizing a rich consumer experience, with experts on hand to assist in selection, and spa-like ambience—it’s hardly clear that the bricks-and-mortar cannabis model is going extinct tomorrow.

To the contrary, just as independent bookstores have made a comeback from an assumed Amazon-led extinction—in part by offering a hands-on, in person experience that is simply unavailable online—there is every reason to believe that some form of the bricks-and-mortar cannabis experience will survive even in the age of the virtual high.

Paul Roberts's Bio Image

Paul Roberts

Paul Roberts writes about business, technology, and natural resources. His work has appeared in The Los Angeles Times, The Washington Post, The (UK) Guardian, National Geographic, Rolling Stone, Harper’s, and other national publications. His latest book, "The Impulse Society," was published in 2014. He lives in Washington state.

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  • Joseph Muhammad

    Have sit down restaurants gone out of business because you can order pizza online? Online ordering allows greater chance of those underage acquiring product not less. In addition, online you can only see a picture. You cannot visually examine nor smell the product. The medical dispensaries and recreational stores will not go out of business because of online vendors.

    • Charles-A Rovira

      Recreational pot is one thing, and certain locations can/should specialize in certain strains, like restaurants do (you don’t go to an Italian restaurant for Chinese food,) but when all I’m looking for is relief, I’d rather stick to FedEx coming from a trusted source..

  • Jim Lesser

    Their is an experiential component to shopping in a dispensary that can’t be replicated online. That being said many will opt for a convenient online solution that provides quality product at reasonable prices.

    • Charles-A Rovira

      Yes, but that experience is mostly disappointment when you get there and you can’t get what you want/need. I can only wish Amazon offered medicinal weed for sale because it would offer all of the variety and range of potency with none of the staleness.
      The illegal street pot dealer is an utterly lousy way to do business.
      The corner dispensary is only marginally better.

  • alacrity

    Having used all tiers of cannabis procurement over the years, it can be said there are benefits to each method. While a store-front dispensary is a great way to take advantage of a one-on-one consultation for your needs as well as being able to examine (for the most part- many dispensaries don’t allow it) the meds offered, there are the usual drawbacks like parking, security, lines, etc that can be negative. Delivery dispensaries are a fantastic option, and when done right- there is nothing better; The convenience, better pricing, unique strains and samples of other meds can bring a factor of joy to what used to be a quick exchange in a parking lot. When done half-assed, its awful- they make the entire industry look bad- issues like under-weighed items, sub-par quality, sketchy drivers or a driver who lacks change can ruin what should be a pleasant and convenient experience. Mail order sales have also taken root here in California- orders placed are typically delivered by courier in 1 business day, rather than by direct dispensary delivery- and the opportunity for farmers to sell direct at major discounts is a wonderful thing. Growers are now capitalizing on their own unique spins on strains and how they are distributed to better serve the consumer, creating something akin to the wineries lining the roads in wine countries all over our state- there are some strains that are not mass produced and do not make it into conventional dispensary distribution networks.

    Where the issue settles is that there is room for all when the marketplace is not glutted with too many providers. Where that line is has yet to be determined, and I’m hoping the balance will be found and maintained without collapsing into chaos.

    Bottom line: It’s still a helluva lot better than the days of old, when we didn’t know when, where or what was on the horizon.

  • AlternativeFool STATUS: CAPTUR

    I want to buy from real growers. Not corporate retailers. So, hook me up with a farmer in Humboldt, not some marketing company who attempts to grow their own.

    The stuff that comes in the mail has ALWAYS been better than what you find in a walk-in retailer. The dispensaries have made their intentions very clear. And the black market is thriving off those intentions.

  • BoomSiva

    The way I see it, both could exist in harmony. There will always be people who prefer to shop in a brick and mortar store, and others who would rather use a quick option in the comfort of their home or on the go. Also, there are virtual delivery services that are mom and pop shops. There is even a statewide, overnight delivery service called PHENIX that is so roots that they grow the buds they sell in the online shop. It honestly doesn’t get closer to source than that! I am curious to see what the future of this industry will look like with our new administration. Hoping for the best for all good and wholesome folks in the ganja world ❤️❤️❤️

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