- Cannabis is legal in 16 states, Washington, D.C., and several international markets.
- Using a credit card to purchase cannabis is difficult, and many dispensaries operate as cash-only businesses.
- Made-to-measure technology is poised to drive growth in the cannabis industry.
In less than two decades, cannabis has emerged from the shadows to become a major industry, achieving legalized status in 16 states and Washington, D.C., as well as in several international markets — a notable tipping point for the entire market. This growth not only brings economic opportunities but also its own unique set of challenges. A complex regulatory landscape and marketing restrictions present several obstacles. However, the industry's most potent driving force continues to overcome these growing pains: made-to-measure technology that makes commercial enterprise possible.
Unlike traditional retailers, the cannabis industry is subject to a complex collection of state-by-state mandates and a never-ending shift of local laws. U.S. cannabis retailers cannot just sell. They must verify the buyer's identity and medical card where applicable, calculate local taxes, track every individual purchase and send to regulatory bodies to validate and enforce possession limits. Being compliant is only half the battle — albeit a necessary one.
Canna-tech capabilities are growing
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To truly grow businesses and the industry, retailers need to take more than their regulatory reporting online. The industry has started to see the value in technology related to most aspects of the business, from inventory management and point-of-sale and delivery to CRM and marketing automation. However, the operative word is started. The legal cannabis industry is still immature, and sales and marketing technology remains a relatively new concept. Luckily, canna-tech capabilities and adoption are growing quickly — and maturing the industry along with it.
As a federally controlled substance, transacting online or using a credit card to purchase cannabis is difficult, and why many dispensaries operate as cash-only businesses. Thankfully, technology has allowed workarounds making it possible for customers to browse and order online but pay in-person, to the tune of $9 billion in sales a year. POS systems need to accommodate this online-offline differentiation unique to the cannabis industry. Without these tools, dispensaries would miss a large portion of their orders which are placed online and have minimal means by which to collect revenue.
Collecting payments can seem simple compared to managing inventory, which is a tall order for cannabis products. The technology used in more established, less regulated sectors doesn't meet dispensary needs. A restaurant might have 30 menu items, but a dispensary can have 300 or more likely, 3,000, which requires vast data attribution in terms of strain type, serving size, ingredients, etc.
For example, edibles can carry more than 134 different attributes. This is tricky in an industry that lacks a normalized data collection process. Dispensaries must also handle shifting inventory levels and maintain stock accuracy across all their menu offerings. This is one of the main reasons why we introduced WM Store at Weedmaps to streamline the order experience for customers and retailers. Just a few years ago, this technology didn't exist, and business owners were effectively flying blind when it came to managing inventory and facilitating customer experiences.
Real-time analytics for prices and customer needs
Build a dispensary, and they will come. But to succeed, cannabis retailers need to expand their customer base and secure repeat business. Standard marketing technology cannot accommodate dispensaries due to stringent marketing restrictions on cannabis. Better custom-cannabis-made marketing automation and CRM systems allow business owners to precisely target marketing campaigns to customers based on their preferences. For example, they can send out a new product notification only to customers who have bought similar products in the past. Real-time analytics on sales data enables pricing optimization and uncovers customer insights quickly and accurately. Fulfillment and delivery apps can reach a far wider audience, and provide customers more convenience in ordering and receiving products.
Over the past twenty years, the cannabis industry has come a long way. However, the industry is only just learning to walk. As more states legalize adult use, the technology to market and discover cannabis retailers and brands must be agile enough to adapt and scale and meet consumers and businesses where they are in the process. The prospect of federal legalization, while alluring, will only make the entire industry more complex and taxing on business owners and consumers. The role of technology — adaptable technology — will continue to play an ever-increasing role in the industry's success.
Justin Dean is the Chief Technology Officer at Weedmaps and a member of CNBC's Technology Executive Council.