Online cannabis retail: Is Ontario failing small businesses?

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The Alcohol and Gaming Commission of Ontario (AGCO) has recently announced that legal cannabis stores in the province will not be able to offer online retail services to their consumers[1]. In the Spring, the province is to see the first 25 retailers open their doors, and many more will likely follow suit once the province lifts its temporary cap on cannabis retail licenses. Ontario Cannabis Store (OCS) will remain the only option for Ontarians to legally purchase recreational cannabis online.

At Zeifmans, we have decades of experience assisting small businesses in reaching their long-term goals for growth and sustainability. And as experts in Canadian Cannabis business, we have an in-depth understanding of the legislative decisions and market trends that will influence the industry into the future. As we see it, there are four big reasons why hindering online sales of private Cannabis retailers will hurt small businesses:

1) Convenience
Studies have shown that the convenience[2] of online shopping is the single biggest reason that consumers choose to purchase online vs. in-store. E-commerce allows consumers to make a purchase from the comfort of their home or office, with the click of a button. OCS’s online functionality gives the government the advantage of convenience over private retailers.

2) Demographics
Millennials are the demographic with the largest proclivity for online shopping. In fact, 67%2 of millennials prefer to buy online. When we compare this with the early data available for cannabis consumption in Canada, we see that the millennial demographic (age 23 to 38 years old) fits right inside the demographic who purchased the most cannabis last year- individuals aged 25 to 44 purchase 40%[3] of the cannabis in our country. This means that many cannabis consumers are among the demographic most likely to opt for online sales.

3) Social Taboos
Though the legalization of recreational cannabis has arguably already helped to soften the social stigma surrounding the substance, this doesn’t mean that it has been erased entirely. Recent reports have shown that the majority of Canadians[4] still aren’t comfortable using Cannabis in public spaces, and most do not wish to tell their peers that they use it at all. For these consumers, purchasing Cannabis online is more discreet, making it an appealing option.

4) Geographic necessity
77 Ontario communities have opted out of Cannabis sales altogether. For these prohibitionist towns, consumers wishing to purchase Cannabis from a private retailer may now have to embark on a significant drive to visit a store. Depending on how far removed that community is geographically, it’s easy to see how purchasing online from OCS may be a more appealing option, or the only realistic option altogether.

Influence on the black market?
One of the main goals of legalizing recreational Cannabis was to curb the black market. In order to effectively do so, however, it’s critical to provide consumers with product options and purchase access choices that are equivalent or better to their previous black market habits.

When a consumer purchases Cannabis from OCS online, they can expect their order to arrive 3 – 5 days later. The inability for consumers to receive same day delivery or click and collect could theoretically make them want to turn to a black market source instead, who can often deliver an order in a couple of hours, especially those in prohibitionist towns who do not have a convenient legal retail option.

The Zeifmans difference
As members of the Nexia International Cannabis Team, Zeifmans is connected to a worldwide network of industry professionals with experience in the space. This cutting-edge knowledge enables us to assist our Cannabis clients in gaining a competitive advantage across Canada, and in emerging markets across the world. While Ontario’s Cannabis retail strategy continues to grow and develop, we can help your business to secure a foothold in the marketplace that lasts into the future.

To speak to one of our Cannabis professionals, contact us today.

[1] Financial Post, “Ontario Delivers Yet Another Cannabis Decision that Hurts Retailers and Helps Illegal Dealers”, https://business.financialpost.com/opinion/ontario-delivers-yet-another-cannabis-decision-that-hurts-retailers-and-helps-illegal-dealers

[2] Entrepreneur, “67 Fascinating Facts About Ecommerce vs. Brick and Mortar”, https://www.entrepreneur.com/article/306678

[3] Financial Post, “Boomers ‘Bringing Cannabis Use With Them’ as Stats Can Paints Picture of Shifting Demographics”, https://business.financialpost.com/commodities/agriculture/canadians-spent-c5-7-billion-on-cannabis-in-2017-statistics-canada

[4] Global News, “Weed is Legal in Canada- But a Majority of Pot Users Still Want to Keep it Hush Hush”, https://globalnews.ca/news/4549941/weed-legal-canada-stigma/