It has been an exciting year for the Colorado cannabis market. In May, the state surpassed the $ 10 billion mark in cannabis sales since the legalization of adult cannabis. Many recreational dispensaries hope to further increase revenue by implementing the delivery, which was exclusive to the purchase of medicinal cannabis until January of this year.
But almost a year later legal recreational delivery, we have seen that the program has been slow to deploy.
Specifically, dispensaries do not use delivery workflows due to complex processes and unrelated systems, or they barely make enough deliveries to make the operation a viable business decision. Among those most affected by these inefficiencies are the people this legislation sought to help; social equity delivery carriers.
But why is there so much harm? We all know that consumers crave e-commerce options. States like California and Michigan have seen a massive influx of delivery orders over the past year. And Colorado is estimated to be the third largest cannabis market in the United States
It seems that several problems are delaying the potential of delivery to the state. From confusing local legal warnings to poor technology and high overhead, Colorado cannabis delivery has faced a tough battle from the start. In order to create a successful Colorado cannabis delivery system, we must first address and resolve these issues.
Colorado delivery in a nutshell
It is easier to understand this slow start by first recognizing what legislation the state has established and what it really takes to offer delivery in a dispensary.
First, each city must participate in the state program and create its own regulations. For example, Denver has exclusively allowed retailers to complete deliveries through a “Postmates” workflow.
This means that a third-party carrier with approved municipal and state permits must execute all deliveries for the retailer selling the product.
This is in contrast to a “Pizza Hut” delivery model, which allows retailers to use their own drivers and make home deliveries, as we see in Aurora and states like Michigan, Nevada and California. However, Aurora is unique in that it allows for both “Postmates” and “Pizza Hut” delivery workflows.
Note: Denver and Aurora cannabis retailers must comply with these regulations by 2024.
Social equity creates opportunities; Getting started is hard
Cannabis delivery companies face unsurpassed start-up costs. According to the MED rate rate, for state licenses alone, a third-party carrier would have to budget for about $ 12,000. This covers a state transportation license, a state shipping fee, and the owner’s MED badge fee.
Things like insurance, vehicles, drivers, gasoline, and software to run operations quickly pile up. To help cover your costs, delivery companies charge high fees and a retailer charge.
While the state expected a massive influx of delivery orders, we don’t see consumers adopting the ordering method. Buyers are simply not willing to spend $ 20 on shipping, and the selection may be minimal because there are currently few retailers offering delivery in Colorado.
Dispensaries waiting for the storm
While dispensaries like The eagle i Strawberry Fields Denver they have delivery programs, very few other Colorado dispensaries have them, even though they have legal permission. This could be because there is not much competitive advantage to offer delivery at this time.
But that is changing rapidly.
The acquisition of the Green Dragon dispensary by Eaze, a massive cannabis delivery market, has pushed Colorado dispensaries to the limit.
To remain competitive, delivery will be a must for Colorado dispensaries in the near future.
How to Fix Colorado Delivery Model
This is what must happen for the Colorado delivery model to be as successful as states like California or Michigan.
First, established companies or those with experience in the cannabis industry need to support the new social equity companies that are being set up.
This can be done through tutorials, funding, networking, donated software and more. Trade associations such as the Marijana Industrial Group (MIG) offers sponsorship programs and group meetings to educate people moving into the cannabis space.
The next hurdle is funding. It is almost impossible to start a business without money, but the harsh reality is that many new licensees do not have access to bank loans or major cash reserves, and operating in the cannabis space makes it more difficult to receive any kind of financing.
However, initiatives such as the Colorado Cannabis Business Office have $ 4 million in funding to help those who meet the requirements. More programs like this are needed at the state and local level to help offset the high start-up costs of operators.
Next, we need to address and resolve the issues involved in cannabis delivery in Colorado. Currently, delivery companies have to comply with Metrc, but use pencil and paper for things like Metrc manifestos and record keeping. Drivers must also digitally scan a customer ID.
Focusing unnecessary energy on the organization means that fewer deliveries per hour can occur, one of the main reasons why delivery costs are so high for consumers.
Technology companies are noticing and creating solutions for these businesses. CannaHauler, a delivery technology company, addresses the issues.
Its software allows operators to digitize their Metrc manifestos. This eliminates manual labor while meeting compliance needs.
The technology identifies the optimal routes for delivery drivers, reducing the costs of things like gasoline and vehicle maintenance. CannaHauler also allows drivers to verify the customer ID at the time of delivery of the product.
A better future for Colorado cannabis delivery
Colorado delivery operators need to increase the number of deliveries they can make per hour to reduce the fees associated with placing the order.
Once rates are lower, more dispensaries and customers will start adopting delivery.
All of this happens when cannabis delivery operators have the right tools and technology, access to funding for start-up costs, and the support of the Colorado government and veterans of the cannabis industry alike.
Expect to see a momentous shift in cannabis orders in 2022. Colorado paved the way with cannabis in 2014, and the state also has the potential to continue to lead by example with delivery workflows.