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The Hidden Costs of “Free POS” and Third-Party Cannabis Marketplaces


You’ve probably read about “Free dispensary POS and E-commerce” offers or seen ads somewhere on the web and wondered how these cannabis technology companies are making money. If it sounds too good to be true, it probably is. Recently, some third-party cannabis aggregator companies that started as an online menu, marketplace, or pseudo-e-commerce platforms are now offering all-in-one cannabis retail tech solutions at unbelievable prices or for free. But have you read the fine print? Have you wondered how third-party cannabis marketplaces are using your dispensary data? In this blog post, you will learn about the hidden costs of a free cannabis POS solution and the underlying intentions of the companies making such offers.

1. Cheap Cannabis Software Solutions to Lock You In

There may be some benefits to using cannabis ecosystem platforms from a single provider, but convenience comes at a cost. As some software providers lure you with so-called seamless integrations, they don’t talk about the details in the contract. For example, the fine-print could include a 5 years-contract that locks you in with them- and they could raise prices from zero to whatever they want to. They may also charge you an exorbitant amount of money for training your retail staff or providing technical support when you need it the most. However, you’d have no choice but to pay them to ensure the smooth running of your operations-nothing is worse than your POS system crashing during busy times like 420, Green Wednesday, and holiday weekends.

When you enter into a contract and are “locked-in” with an all-in-one software solution, you limit your ability to move to a different provider and give your provider the power to tack on added fees. These hidden fees are either packed into your billing statement or automatically registered. These costs add up over the long term and eat into your profits. Thus, you inadvertently end up paying more money for a free POS system than you may have originally anticipated.

2. Inferior Products Will Stifle Innovation and Growth

A free cannabis POS may be an alluring solution to get your new store started or save money short term. But once you are locked in with the company, you’re dependent on their platform, at the mercy of price increases, and limited in your ability to integrate with advanced tech solutions better aligned with your retail vision. After binding you in a long-term contract, your provider will have no incentive to upgrade their product to keep up with times- or you may have to pay extra for certain features to streamline your dispensary operations. As the rest of your competition advances with a better POS provider and seamless integrations with the best-in-class cannabis tech ecosystem solutions, you will be stuck with a shitty POS and lose your ability to innovate and grow your business.

Even with your online cannabis business, if the company offers you an outdated iframe menu E-commerce platform, you will be stuck in medieval times and have no flexibility to differentiate your cannabis brand online. Without advanced native E-commerce, which allows for better crawling and indexing of names of flowers, your dispensary website or products won’t be visible on Google. Unproven tech, sub-par features, and compliance issues will be just the beginning of your worries. This is a play by third-party aggregators to harvest your customer data.

3. They’ll Use Your Dispensary Data to Build Their Business

You must understand the difference between an E-commerce platform and a third-party marketplace. An e-commerce platform is a software application that lets you manage your website, operations, marketing, and sales in one location on the web. While third-party marketplaces are existing platforms that allow cannabis retailers to place their products for sale using the third party’s website or application. When your customers buy cannabis from a third-party platform, their personal information will be used by these companies to influence buying behavior. They will use this data to build a direct relationship with the customer, keep their own brand in focus, and eventually bypass you to sell directly to them.

Although you are the rightful owner of your customer data, with third-party marketplaces disguised as E-commerce platforms, you have no access to that data. Eventually, your cannabis technology provider will build its own business with all the reports and analytics generated from that data, and your store will likely just become a warehouse processing online orders for faceless consumers. This toxic trend is emerging in the restaurant industry, where many delivery apps have established their ghost kitchens to compete directly with restaurants.

4. High Payment Processing Fees and Commissions

If the POS software is free, the company is most likely generating revenue through higher transaction processing fees, as such fees are usually the main generators of revenue. And if you only use their marketplace platform for selling your cannabis products online, they will be in a stronger position to charge higher commission fees as you become more dependant on them. With possibly high delivery fees included, you and your customers pay a significant amount to a middle aggregator that only facilitates the sale. Now only if you had your own website and E-commerce platform integrated into your cannabis POS system, you and your patrons would be way happier. 

5. Marketplace Brand Will Earn Royalty & Loyalty

Undoubtedly, they are already charging you a high royalty fee for displaying your products on their marketplace and for your continued membership. But as you pay these unnecessary commissions and fees for better online visibility, you are only building brand recognition and SEO authority for the third-party marketplace, which will eventually earn brand loyalty from your customers with its consistent brand experience. Without any control over your POS integrations, online E-commerce, or customer data, you risk everything- because your software provider will own the customer relationship and manipulate the market to become your competitor and the dominant brand.

Don’t Fall For All-in-One Cannabis Retail Tech Solutions

It’s important to understand exactly what you are purchasing when it comes to a POS System- after all, it is the backbone of your cannabis retail operations. Once you know the hidden costs of the “free” POS system, you will realize that a more robust POS system- that offers you more reliability, better functionality, and comes with better training and support- is around the same price as the supposedly “free” option.

At Cova, we want to put the right tech tools in the hands of retailers to create the experience they want to so that they can own the customer relationship and feel empowered to grow their business independently. We are transparent about our costs and keep our clients at the heart of our business. With our advanced cannabis POS system and seamless integrations for E-commerce, loyalty programs, staff management, etc., with the best cannabis ecosystem partners, your cannabis retail store will always stay ahead of the competition. Connect with us to learn more.


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