The world of cannabis retail is constantly changing. The future is uncertain and now more than ever, we have no idea what tomorrow or next month may bring.
While it may feel stressful and overwhelming, what we do know is that change and uncertainty often bring opportunity and new ways of operating. This happens in every industry — where either you adapt or your business doesn’t survive.
The cannabis industry specifically has seen nothing but growth and change in recent years as legalization proliferates.
One key addition to the sector, especially in response to COVID-19, is delivery. Offering new ways for customers to purchase and receive products not only provides a great customer experience, but it also has the potential to increase revenue and reach new customers.
In this post, we’ll discuss the current state of cannabis delivery, then outline five best practices for implementing or expanding delivery capabilities at your dispensary.
The state of cannabis delivery
Oregon paved the way in 2017 when it became the first state to allow legal cannabis delivery to customers. California made history in January 2019, becoming the first state to legalize delivery across all municipalities, even in areas that have banned marijuana-related business.
Many other legal states, including Colorado, Michigan, Nevada, and Illinois, are working to catch up. Colorado hopes to add adult-use (recreational) delivery by 2021 and just passed laws to allow for delivery of medical use this year.
Whether your state is already using delivery to reach new customers or is still working to pass the proper legislation, we expect it to be an industry standard in the near future.
And once delivery is a wide-spread option, cannabis businesses need to make smart choices about how to roll it out.
5 tips for implementing cannabis delivery
If you are thinking about starting delivery, consider these five best practices to help you run a successful delivery operation that positively impacts your bottom line and keeps your consumers coming back for more.
1. Develop a strategy for incremental sales growth
Determining your delivery strategy doesn’t have to be daunting, but it must be strategic.
Start by gathering historical data of your sales, both in-store and online, to gauge whether or not delivery will be a sound business strategy for your dispensary.
The goal is to generate more revenue from delivery orders, while also maintaining in-store transactions, so you have to understand how your ticket price and cost of delivery impact revenue.
At the end of the day you have two priorities: serving your consumers and growing your business. If you do your due diligence, there’s no reason to sacrifice one over the other when implementing your marijuana delivery model.
And make sure you have an understanding of your cannabis consumer demographics: do you mostly serve adult-use customers or medical marijuana card holders? Is your customer base young, older, or a mix? Having an understanding of your current customers will help you design effective delivery communication and procedures.
2. Set firm boundaries on your delivery radius
Once you’re ready to offer weed delivery to your customers and you’ve identified a strategy to make it profitable, you have to determine where you will draw the line on delivery.
You might be tempted to go as far and as wide as possible to beat out the competition, but consider the other costs you will incur as travel distance increases, such as additional delivery staff, insurance, gas, and other expenses.
If you’re struggling to figure out the right number, look at other industries in your area and assess their delivery range. Pizza shops and liquor stores are two common delivery businesses to look at when setting your range.
Then look at a map. Is there a boundary that naturally makes sense based on physical geography of your region? Also consider focusing on areas with population density.
Once you’ve set boundaries, be strict about complying with them. And make sure you understand your local and state laws around cannabis delivery, especially how you handle routes through towns that don’t allow cannabis sales, seamless checkout, and verifying drivers license/ID.
3. Choose the right weed delivery partners
One of the biggest learnings we can take from the food service industry is how to streamline the delivery process. Many restaurants have been operating delivery programs for quite some time now.
Most of these companies outsource the physical delivery to third-party fleet services like DoorDash or Grubhub because building and managing your own delivery fleet is expensive and time-consuming. It requires additional headcount, the right technology, and a sound strategy. The tradeoff to working with a third-party fleet service is that it’s harder to turn a profit, factoring in additional delivery and service fees.
For budding cannabis delivery programs, partnering with established marijuana delivery platforms will likely make the most sense at this scale. But make sure your existing technology integrates with these services.
Having a cannabis POS with API integrations to popular cannabis delivery services like Dutchie can help you manage delivery, stay in compliance, automate taxes, and provide a positive customer experience.
4. Configure your store layout and inventory accordingly
If you’re changing your business model to include delivery, your in-store layout might need to change too. Perhaps you should create a dedicated line (or lines) for pick up customers and separate terminals for processing delivery transactions to keep things flowing for in-store consumers and eliminate confusion for budtenders.
If your dispensary design follows the bank model, you could have one terminal — and it’s associated inventory — dedicated solely to order ahead or delivery orders. This would provide the most clarity to inventory management.
Then, consider what other in-store configurations, staffing, or technology automation will boost both efficiency and accuracy so you can fill orders fast and meet the projected delivery timeframe.
5. Select the right delivery model for your business
In cannabis, there are typically two different delivery models: the ice cream truck model and the pizza delivery model. You will likely need to pick your model based on local and state cannabis regulations and tax laws.
In the ice cream truck model, a delivery driver carries a small selection of cannabis products in their vehicle. This allows the driver to fulfill several orders before returning to the dispensary, thus maximizing time and mileage.
The pizza delivery model is where a driver comes back to the dispensary to receive every order, then delivers just that order. The driver will return to the dispensary after every delivery to initiate the next cannabis delivery order.
Some states only allow a certain amount of product to be carried in vehicles, which will limit your delivery reach as well as your profits, and determine which model is best. The more consolidated trips a driver can make, the more efficient and time effective you can be. Remember, a higher volume is where you’ll start seeing that return on investment.
Also make sure you decipher regulations about your delivery drivers and their vehicles, such as who can deliver products, what vehicle can be used, whether you can include branding on the delivery vehicle, insurance required, and what kind of GPS tracking is necessary.
Delivery isn’t the right choice for everyone. Your consumers may be itching for marijuana delivery in your market, but take a cautious and data-driven approach before diving right into a delivery service.
Be sure to assess all these best practices and take an honest look at your staffing, store layout, and business objectives before making any decisions. You need to have the proper infrastructure and technology in place first or else you run the risk of falling out of compliance and losing customers because of a poor delivery experience.
Delivery of marijuana products could be a great way to increase dispensary revenue, but it comes at a cost. To see that return on investment, you have to do it thoughtfully.
To learn how Flowhub can help you enable legal marijuana delivery at your dispensary, contact us today.