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The road to recreational marijuana use in Canada has been long and arduous, taking almost decades. However, the legal Canadian cannabis industry is thriving despite the pandemic, with statistics showing cannabis sales reached CA$ 313 million in May 2021.
Weed delivery service availability plays an essential role in growing and sustaining the legal cannabis industry. As such, cannabis delivery is a crucial consideration when evaluating distribution as an element in cannabis economics.
While consumers merely regard cannabis delivery as after-sale service, plenty goes into delivering the services. So, find out more on the economics of cannabis delivery below.
1. License Acquisition
The economics behind a product or industry typically alludes to production, processing, packaging, distribution, and sales costs contributing to its overall price or value. Marijuana delivery as a service is a sellable product, and the first step in realizing this product is acquiring the appropriate license.
While licensing regulations vary across different provinces, currently, there is no exclusive license for weed delivery in Canada. All licensed weed delivery services operate on a cannabis dispensary license, hence the phrase online weed dispensaries.
Initial license acquisition requirements, including conducting background checks and a valid health permit, may cost approximately CA$10000 depending on your jurisdiction. Also, one must provide a good security cover for liability protection.
Stringent licensing processes are in place to preserve product integrity and ensure public safety. Besides the initial licensing cost, annual renewal fees also apply.
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2. Setting Up An E-commerce Platform
Weed delivery services pivot on e-commerce platforms to give consumers reasonable access to weed and other cannabis products. Setting up and managing an intuitive, user-friendly e-commerce platform requires specialized skills including, web design, digital marketing, graphic design, and photography. Besides the technical skills, monitoring inventory, incorporating payment systems, and processing payment also requires training.
Digital marketing is crucial for any online business, including weed delivery services, because selling online requires investing in search engine optimization (SEO). SEO refers to the search engine’s algorithm that ranks websites by relevance when search engine users type search queries. E-commerce content like “About us” sections, product categories, product descriptions, meta-tags, alt tags, backlinks, internal links, mentions, engagement, and blogs help improve SEO.
However, note that SEO is a continuous process and usually takes time and consistency to achieve desirable results, especially for new websites. Also, the algorithm changes regularly to suit emerging user preferences, so the business must continually revisit its online marketing strategy and keep up with SEO tools.
Third, most online platforms prohibit paid advertising for weed and cannabis products to protect underage children. Consequently, the delivery service may need to engage influencers to generate organic traffic to their e-commerce platforms. So, while weed delivery services may seem to have low operational costs, drawing eyeballs in a crowded online space costs a pretty sum.
3. Storage Facilities And Packaging Materials
Cannabis is a delicate product requiring special handling, so standard shelf storage in a typical warehouse won’t cut it. Furthermore, one of the general requirements for acquiring a cannabis dispensary license is submitting a list of premises where you will conduct your business.
Weed dispensary regulations also set minimum cannabis security storage requirements at designated premises. The storage facility security requirements are pretty flexible; however, the dispensary should update its security while expanding operations. For instance, weed delivery services that increased delivery coverage during the pandemic should upgrade their storage security to facilitate the increased product volume.
The cannabis regulations also stipulate the appropriate packaging material delivery services must use while packaging orders. Weed packaging must be opaque or translucent, childproof, offer strong contaminant protection, be odorless, and feature a tamper-evident deal for security purposes.
Given the unique requirements above, licensed weed delivery services invest in custom storage facilities, surveillance cameras, and special packaging material. While the security requirements increase operational costs, they help build consumer trust in the legal cannabis industry while helping counter the illicit cannabis industry.
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The cannabis regulations in some jurisdictions allow weed dispensaries to outsource courier services to facilitate doorstep deliveries, while others prohibit third-party involvement. Either way, the weed delivery service provider must show that all parties involved in the doorstep delivery logistical plan follow the business’ standard operational procedures. When submitting a license application, each cannabis dispensary must outline its standard operating procedures as part of its business plan.
Delivery services that outsource courier services award the winning tender to courier services that train their drivers on unique cannabis delivery requirements. For instance, delivery people cannot leave cannabis packages at the door or leave an order with a secondary party, so customers must present IDs.
On the other hand, delivery services in provinces that prohibit third parties from fulfilling deliveries must make new hires and train them accordingly. Besides offering training, they must also map out delivery routes, decide the best transportation modes, and calculate reasonable delivery charges.
5. Tracking Systems
Cannabis tracking is a regulatory requirement intended to protect weed consumers and businesses from losses to the illicit cannabis industry. The tracking system also helps regulatory authorities monitor the legal cannabis market and prevent legal weed diversion into the illegal market. Cannabis delivery services must invest in an order-tracking system to generate the bi-annual inventory report required by provincial regulatory authorities.
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Weed delivery sub-market economics are intricate with the dynamic cannabis industry legal requirements designed to protect public health and safety. However, a review of the submarket’s industry validates weed delivery services’ monetary value. Learn more about a weed dispensary on SweetTnTMagazine.