Evolutions in Retail

As cannabis retail evolves, businesses have adopted a variety of delivery methods, styles and business models

David Fuegy has to follow all the same rules as any state-licensed cannabis retailer in Oregon.

He has to receive permits from the city and state, track all products from seed to sale, meet basic security requirements, maintain a digital video record of his facility, abide by setback laws, pay applicable taxes and check IDs of customers.

But Fuegy doesn’t actually have a store. His state-licensed retail business, Rip City Delivery, provides cannabis on-demand to consumers in Southwest Portland. Customers order products online or over the phone and within 45 minutes, Fuegy shows up at their door, a bag of cannabis in hand.

“The world is their oyster,” he says. “They can cook, clean, play video games, take a nap — whatever they want while they wait.”

In a world of ever-increasing convenience, cannabis delivery options are quickly gaining popularity and being compared to mainstream tech services like Amazon, Uber Eats or Grubhub. But in many ways, it’s a modern version of the old-fashioned way of buying pot.

Rip City Delivery carries some of Oregon’s most popular brands, including Gron Edibles. Photo courtesy of Rip City Delivery.

Inside Rip City

In 2017, the city of Portland created a “retail courier license,” allowing businesses with a retail license from the Oregon Liquor Control Commission to deliver recreational cannabis products directly to consumers.

While some businesses use delivery to complement their brick-and-mortar operations, others, like Rip City Delivery, are delivery-only.

Fuegy started Rip City in August 2017. He’s the owner and sole employee, so he meets every customer face to face, as well as maintaining the Rip City website, working on compliance issues with the state and interacting with vendors.

“It’s a lot for one guy to do, so the day-to-day keeps me busy,” he says.

He currently only services Southwest Portland in order to keep delivery times to 45 minutes or less, but the company will be hiring a second delivery driver to cover Northwest Portland in early 2019. Fuegy uses his own vehicle for deliveries. He had to get a commercial car insurance policy and a lock-box in the vehicle, but the “modifications weren’t too strenuous,” he says. However, regulations prohibit Rip City Delivery from operating like a mobile dispensary; Fuegy can’t carry products in his vehicle until they’ve been entered into the Metrc system after somebody has placed an order. It’s one regulation he’d love to see change because if he’s out on a delivery and another order comes in, he has to return to his headquarters to pick up the second purchase before heading back out on the road.

On average, the company makes four to six deliveries a day, roughly double the number from a year ago, with an average ticket of $81.

In terms of inventory, Rip City operates like any other retailer: Fuegy carries everything from flower and pre-rolls to edibles and concentrates.

“I definitely match all the categories that brick-and-mortar shops have, but where I have about 100 items, you can go down the street and they’ll have 300 items to choose from,” he says.

Customers are not allowed in the “store” — basically a 300-square-foot garage space Fuegy rents that has a safe, the required network video recording system and some office supplies.

Rip City accepts payment by cash, personal check or through the CanPay debit app. Fuegy says it’s vital to offer cashless payment options because “if you have to leave your house to get cash, it kills the convenience of delivery.”

Mynt has two dispensaries in Reno, Nevada, but only offers delivery out of its downtown location. Photo courtesy of Mynt.

Third-party services

There are also a variety of companies that facilitate delivery from the dispensary to the consumer, including Blackbird, Eaze and Stemless.

Mynt, a cannabis retailer with two stores in Reno, Nevada, primarily uses Blackbird for its deliveries, a service only offered at the company’s downtown location. Mynt chief operations officer Stacy Castillo says Blackbird can do 50 to 70 deliveries a week, depending on the weather.

“They truly have figured out the logistics and the compliance piece, which is first and foremost one of the most important things for us,” she says. “To be able to have confidence in a company and put that in their hands has been really beneficial for us.”

Mynt also works with Weedmaps and a pair of in-house drivers for some deliveries, and it has been testing its own in-house program, “for no other reason than just the natural progression of growth for us,” Castillo says.

Overall, Castillo says the drawbacks are relatively minimal, but there are a few compliance hurdles and additional costs, such as higher insurance rates (all drivers have to be older than 30 for feasible rates).“We’re willing to do all of those things because we see how important it is to our customers, and we see the volume that it can bring in,” she says, “and I only see it growing.”

Stemless founder and CEO Koushi Sunder says retailers must figure out whether they can handle the logistics of deliveries. For example, do they have a dedicated vehicle? Do they have enough bandwidth in their staff?

“Once that is out of the way, the focus turns into how they’re staffing their stores,” Sunder says. “We have best practices and advice, but there is that learning curve and there’s no getting around that.”

Stemless originally started as an online ordering platform with an optional delivery function, but within the past year has expanded into more services for cannabis retailers, including marketing, loyalty programs and bank-to-bank transfer mechanisms that allow cashless payment options. The company’s services are now available in four states: California, Oregon, Massachusetts and Washington.

As with all things cannabis, each state — and many individual municipalities — have vastly different rules for deliveries. California, Oregon and Nevada specifically allow cannabis delivery services, with each market having their own nuances.

The vast majority of states where marijuana is legal for medicinal or recreational use prohibit deliveries, but as acceptance of cannabis becomes more widespread, and perceived dangers of legalization are largely proven to be unfounded, more state programs are likely to ease restrictions.

One notable evolution in California is that the final draft regulations allow deliveries throughout the state, even in municipalities where retail sales are banned.

Sunder draws a parallel between delivery services and social consumption laws that would allow cafes or public venues to allow on-site marijuana use. Alaska, Colorado and Nevada took the lead on the subject, and now Oregon, which once viewed social consumption as taboo, is debating the issue.

“Whether it happens or not, that’s up in the air, but it’s important that people are talking about it,” she says. “The more you talk about it, the more familiar you are with it and the more open you are to changes. The more people are familiar with cannabis, the more relaxation of laws.”

August 2018 Oregon Leaf
Women’s Issue
Stemless Owner and CEO Koushi Sunder
Photo by Daniel Berman

The Customer

The most common reason people choose delivery over shopping at a brick-and-mortar store is simple: convenience.

“My goal with the short delivery times was for people to make the connection that I could get there faster as a delivery services than they could go to the store and get the products themselves,” Fuegy says.

“Being able to order it and remain in the comfort of your own home is amazing,” Castillo adds.

However, there are many other reasons people choose delivery.

“Maybe it is a physical restriction or a timing restriction; maybe somebody is a caregiver for a child or another adult, or they don’t have the time to go when retailers are empty,” Sunder says. “There are many different groups of people that really benefit from delivery services.”

Fuegy and Castillo both say they have plenty of customers who are medical patients, so delivery is the best way for them to get the products they need. Fuegy also says there are a few people, just because of their profession, who don’t want to be seen in a cannabis shop.

The widespread acceptance of on-demand services like Uber and Grubhub and online retailers like Amazon have helped normalize delivery of non-cannabis products, so shoppers are now more willing to branch out into other categories.

“I think delivery works especially well with cannabis because there’s nothing that needs to be prepared like pizza,” Fuegy says. “It won’t get cold on the way. Your fries won’t get soggy on the way. It will be in the same state as it was when it left the store 45 minutes ago.”

In California, particularly in cities like San Francisco, where traffic is horrendous and fewer people have cars, “you see a larger population that is used to getting delivery — everything from dry cleaning to groceries to take-out,” Sunder says. “This really fits into their ecosystem and their lifestyle. As Portland becomes more densely populated, you might see an uptick there.”

Blackbird is one of the leading delivery service providers in the cannabis space. Photo courtesy of Blackbird.

‘I didn’t know this was an option.’

One of the biggest challenges for cannabis delivery services is letting potential customers know that delivery is an option.

Fuegy says many first-time customers of Rip City Delivery say they didn’t know it was possible to have marijuana products delivered straight to their door.

To get the word out, Fuegy relies heavily on digital marketing and word-of-mouth; delivery-only retailers don’t have the benefit of signage and a physical location to attract customers. But digital marketing is a challenge for anyone in the cannabis space, complicated by the fact that Facebook, Google and Instagram do not allow cannabis-related advertising.

“We’ve managed to get a few Instagram ads up, but you have to be creative and you have to know their rules,” Fuegy says.

Mynt also uses social media to promote the delivery option, especially on snowy days, but the company has to be careful to avoid being shut down like many cannabis brands have experienced. Blackbird has also done pop-ups at Mynt, in which representatives explain the service to shoppers and sign them up on the spot.

“It’s all very organic, but it does work,” Castillo says.

Another challenge as a delivery service is that people cannot see the flower before they buy it.

“That’s a really big deal,” Fuegy says. “It would be like purchasing produce at the grocery store without looking at it.”

One of the ways he combats that challenge is to make sure he always has “fantastic flower that I know nobody would have a problem with.” He also focuses on carrying well-respected brands and offers a money-back guarantee, although nobody’s ever returned their purchase upon delivery, he says.

Fuegy says his prices are competitive with nearby shops, but because he doesn’t move the volume of other retailers, he has to buy smaller quantities and may miss out on bulk discounts.

“Luckily, there are so many farms in Oregon competing with each other that it’s not prohibitive for me to say I need a half-pound or a quarter-pound,” he says.

But it’s not just farms that are competing for their share of the market. Rip City Delivery is one of almost 200 cannabis retailers operating within Portland. Yet, he believes the future is bright for cannabis delivery services as more and more customers discover — and come to expect — that level of convenience.

“I think there will be a point of convergence where cannabis retail looks a lot like any other retail,” Fuegy says. “If you want it delivered, you can have it delivered. If you want to go to the store and check out all the products, you can do that too.”

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