Thanks to COVID-19 and the resulting lockdowns, food delivery companies from DoorDash, GrubHub, Uber Eats and their cannabis counterparts such as Eaze, and x and y have experienced tremendous growth. A simple look at delivery technology companies such as Onfleet, a San Francisco-based delivery management software company, raised $14 million in a Series A round last year in order to keep up with the pandemic growth. Khaled Naim, CEO and co-founder of Onfleet told Forbes, "Cannabis delivery has exploded this year," said Naim. "We used to manage thousands of cannabis deliveries, not its ten of thousands."
Fast forward to today, we are seeing a new trend start to emerge in delivering consumers cannabis products.We are seeing a trend towards direct-to-consumer (DTC) which was a natural by-product of last year's lockdowns where cannabis brands want to leverage their consumer loyalty and minimize their exposure to cannabis dispensaries that do not offer home delivery. Here are what cannabis brands need to consider as they explore DTC options.
As the world grapples with the many effects of the COVID-19 pandemic, and the new Delta variants, one trend that is here to stay is the increase in direct-to-consumer (DTC) among brands. It’s not just big retail stores expanding online, smaller cannabis brands are also exploring DTC as an aspect of weed marketing and augmenting or by-passing the traditional distribution/retail store model.
DTC helps brands develop a direct relationship with customers. But for cannabis brands especially, it’s essential to understand the legal limits and challenges that can arise.
How DTC Trends Have Evolved from the COVID-19 Pandemic
DTC consumer marketing was already on the rise when the pandemic hit. The subsequent lockdowns and social distancing measures merely expanded it.
According to research firm Mckinsey, in 2019 e-commerce was forecast to reach 24 percent of market penetration by 2024 in the U.S. But by July 2020, e-commerce made up 33 percent of total retail sales.
Take Puma, for example. Online sales at the sportswear clothing brand rose by 60.9 percent in the third quarter of 2020. Part of this rise was driven by its DTC efforts, which include both e-commerce and brick-and-mortar retail stores.
Other companies were already considering diving into DTC when the pandemic hit. Beverage company A.B. InBev was thinking about opening an online store. When the pandemic began, they saw it as an opportunity to expand their DTC, selling beer directly to customers in Belgium.
Weed Marketing: Cannabis Companies Are Moving into DTC
Cannabis companies are also seeing the value of DTC.
While retailers are traditionally one of the best ways to sell to customers, the increased cost and inability to control the sales channel are just a few reasons that more cannabis firms are putting their products directly in front of customers.
California-based Kiva Confections contracted with a licensed delivery to deliver orders placed on Kiva’s website. Grass Door delivers cannabis to customers in 40 minutes or less throughout the L.A. and Orange Country area.
Union Electric was one of the first cannabis companies to offer DTC delivery in California, with a partnership with Flower Co. This not only allowed the brand to provide competitive prices and increase margins but also enabled it to establish relationships with its customer base.
Meanwhile, a DTC delivery service for cannabis brands called Ginger launched in June. The e-commerce API is integrated directly on company websites. And so far, no one has turned the company down, founder Roie Edery told MJBizDaily.
TRIP is another company combining retail with D2C. The UK-based company sells in exclusive stores across the U.S. and U.K., including SoHo House. But they also sell their CBD drinks directly to consumers on their website.
Considerations for Cannabis Brands Going DTC
For cannabis brands that want to go DTC, there are some specific things to keep in mind.
First, there are legal considerations. Because cannabis is not legal on a federal level, brands need to be careful about where and how they advertise. Plus not all states allow delivery. It’s best to get expert advice from a lawyer to make sure you understand what’s allowed.
Marketing is a thorny issue. While most DTC brands use social media and Google ads to attract new clients, it’s not that easy for cannabis companies. Google and Facebook outright ban cannabis advertising.
That means cannabis companies need to get creative about how they advertise online and connect with customers. That means making sure your branding is consistent and being transparent with customers about your products. You have to work harder to build trust.
Cannabis brands going DTC should consider an omnichannel strategy. That means providing customers a seamless sales experience, whether they shop online, in a mom-and-pop store, or on their phone.
With an omnichannel marketing strategy, you can engage directly with customers, providing critical feedback on your products including branding and pricing. This input is priceless and can help you expand your brand and give customers the products and services they want.
DTC is Rising. Will Cannabis Brands Embrace the Change?
As more customers shop directly with brands, cannabis companies are poised to embrace DTC as a part of weed marketing. With the right strategy and branding, DTC can give cannabis brands bigger margins and better insight into customer trends.
While there are more legal limits, applying the right DTC strategy will only help cannabis brands grow.
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