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5 Risks of Not Owning Customer Relationship For Cannabis E-Commerce

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The latest chapter of the legal cannabis industry is transpiring online, as cannabis retailers are adapting to changing consumer behavior and offering eCommerce and delivery services. However, our industry is unlike traditional retail, and with stringent requirements like online age-gating measures, cannabis purchase limits, and data limitations, many dispensary owners are finding it challenging to navigate cannabis eCommerce, offer a great online consumer experience, and build a thriving relationship with their eCommerce customers.

Of course, there are multiple eCommerce solutions available on the market, but many of them, especially third-party cannabis marketplaces come at the cost of losing a direct relationship with the customer. As has been seen in other industries, big tech partners like Amazon and Doordash are only looking out for themselves. Although similar companies in the cannabis technology space can initially help you set up your online business quickly, eventually they will steal your patrons, and not owning the customer relationship will put your business at risk.

1. Customer Interactions Limited to Third-Party Platforms

In a recent featured post by Benzinga, Oliver Summers urges retailers to “avoid like the plague platforms and ‘partners’ that seek to own your customer relationships, like Amazon, Grubhub, or Dutchie.” He also says, “When dispensaries allow an aggregating platform to step in front of customer interactions, they lose access to both that data and the ability to represent their brand according to developed standards.”

When you use a third-party platform or marketplace to sell your products online, most customer interactions remain limited to their brand as people go through the whole purchase process on their website. Moreover, the third-party marketplace brand is more prominent than yours on their domain, so your customers will become loyal to the third party as they become more familiar with their look, feel, and experience. Hence, you risk losing their business in the long-term, if you don’t own the customer relationship directly through your own cannabis eCommerce website, which is better for your dispensary’s brand visibility.

2. Marketplace Gains Brand Value at Your Cost

Quoting Oliver Summers again, “Companies, like Dutchie and others, place all the financial risk on dispensaries by putting the dispensary’s name, license number, and brand image on the line and providing very little in return. The dispensaries take on the costs, legal fees, and sketchy processing costs and lose the important customer relationship they once owned.”

Hosting your cannabis eCommerce website on a third-party marketplace will always lead to a poorer dispensary brand experience because retailers have no control over it. Only the service you’re paying for will grain brand value. Think about consumers ordering clothes from Amazon or food delivery from Doordash- these companies have such a high brand value that people don’t even remember the names of the brands or restaurants whose products they purchase. Even when it comes to packaging, delivery packages are imprinted with Amazon, which only makes their brand more prominent and valuable. In the long run, customers will become loyal to the platform and not to your brand.

3. Your Dispensary Data Can Be Unethically Misused

Your brand’s value and customer relationship are also intricately tied to the consumer data you garner and are able to capitalize on. However, when you use a third-party marketplace platform for your eCommerce, you don’t own any customer data directly, and only the third party has access to it. When your customers buy cannabis from a third-party platform, their data can be sold to your competitors who may pay a higher commission to the marketplace platform. Or worse, such data can be used to bypass you and build a direct relationship with your customers. And even if in the future, you decide to separate yourself from this partner, they could still keep your customer data and direct the buyer elsewhere, as they own the customer relationship.

4. Compliance Violations and License Risks

When you don’t own your eCommerce platform or customer interaction, you are putting your dispensary business at various compliance risks, including online sales to minors and purchase limit violations. Depending on regulations in your state or province, you may inadvertently end up selling cannabis through a platform that is not approved by regulatory authorities. For example, in Alberta, the AGLC has mandated that cannabis retailers host their eCommerce store on their own company’s domain and not a third-party domain. Any violations could lead to the cancelation of your retail license, which is indirectly being hijacked by third-party marketplaces to grow their own online business.

5. You Lose the Ability to Innovate and Grow

Third-party online marketplace platforms have started offering “all-in-one” solutions for dispensaries, as they are bringing their own POS systems to the market. By stepping in front of customer interactions and capitalizing on consumer data, they are indirectly owning your customers and your dispensary business. And without any online SEO authority for your cannabis eCommerce, which only benefits the marketplace, you will not be able to acquire any new customers organically either. Once locked in with an all-in-one solution, your dispensary POS loses the ability to integrate with advanced tech solutions better aligned with your retail vision, and thus, you lose the ability to innovate or grow your business.

In another featured post by Cannabis Business Executives, Steve Gormley talks about Dutchie, which now provides a point of sale (POS), eCommerce and payment processing platform, “This growing behemoth steps entirely in front of consumer interactions at each point of the purchasing process to own the relationship and data produced from it, leaving retailers with a digital storefront that looks indiscernible from others and no ownership of their own valuable data.”

Own Your Cannabis E-Commerce and Customer Relationship

If you want to grow your cannabis retail business and succeed in the eCommerce space, avoid all-in-one tech platform providers and instead build out all your services in-house. If you do form a partnership, ensure that it’s mutually beneficial. With Cova POS and our seamless integration to best-in-class eCommerce partners, you can create and host your own customized cannabis eCommerce and delivery platforms while maintaining full ownership of consumer data and relationships. Start your cannabis eCommerce journey with Cova now.

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