The gears of automated delivery management were in motion long before the arrival of Uber and other sharing services. Tech behemoths like Amazon had already shattered the glass ceiling on next-day delivery, but their buffet of consumer products was missing many of the smaller markets.
Both a product of compliance and payment issues, large corporations like Amazon simply didn’t offer the delivery of products like marijuana. Only four years after Proposition 64 in California, the bespoke delivery market for cannabis products remains ripe for disruption, with the lack of a major player leaving a void.
The cannabis delivery market is fragmented. Not only that, but the diverse set of services face an uphill battle in compliance and payments — the financial infrastructure of the market is immature. Add in the notion that banks are hesitant to offer services to cannabis companies, and a serious problem emerges.
However, delivery management innovation is on the bleeding edge of payments and compliance innovation in the cannabis sector. Delivery management (e.g. Saas platforms) occupy a unique space where they interact with customers, dispensaries, and other startups — like smaller payments processors and app developers. This has given some of them a unique insight into how to fix the payments and compliance problems in the market, and it appears to be paying dividends so far.
A Unique Market Needs Unique Solutions
Contrary to large-scale centralized dispersion of products, such as with Amazon, the cannabis market is distinct for several reasons.
First, the products are primarily THC-infused or CBD-infused, meaning that they are subject to regulatory compliance measures regarding their distribution, such as age-limits concerning marijuana. Dispensaries are subject to regulatory oversight to ensure that they comply with state laws and don’t deviate from some of the strict frameworks for legalized cannabis.
One of the downsides of the stringent regulatory codes is that many financial entities (e.g., banks) feel that there is too much compliance risk in the cannabis market right now. Legal marijuana businesses, whether a local dispensary or distributor, are subsequently locked out of many financial avenues that other businesses are not precluded from.
The problem of underbanked cannabis companies is well-established and has created a legitimate issue in how payments are processed, and cash-flows are managed.
Second, the cannabis market is highly fragmented. There’s no central aggregator for e-commerce manufacturers and distributors like Amazon in the blossoming industry. Instead, the market is flush with a garden variety of dispensaries, growers, manufacturers, distributors, and highly fragmented technology solutions.
Because there is no large corporation operating with economies of scale (e.g., Amazon), cost-efficiencies, like data sharing, marketing, route optimization, marketing analytics, and other marginal business expenses are higher than a more established consumer market.
“As a team, we got our start in the cannabis space with our previous company Greenlight, the first order-ahead mobile app for Cannabis with built-in loyalty for dispensaries,” details Vanessa Gabriel of Drop Delivery. “Customers could order on-demand or schedule a pickup of their products and skip the line at their local dispensary.”
Published: July 22, 2020
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