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E-commerce helped Michigan retail cannabis flourish during pandemic

BY Sunday, March 27, 2022 06:02pm

Michigan’s retail recreational cannabis market launched just four months before the COVID-19 pandemic swept the state and forced widespread shutdowns and limited in-person shopping.

However, cannabis operators reacted quickly by shifting to an e-commerce model that has allowed retail sales to flourish and uplift Michigan’s market into a multi-billion-dollar industry. 

The sector’s digital transformation was unique among other small and mid-size businesses, said Rob McCarty, CEO of The Image Shoppe Ltd., a Grand Rapids-based digital marketing agency that worked extensively with 3Fifteen Cannabis.

“I’ve been through two decades of things in the U.S. from 9/11 to the recession (and) through COVID, and I’ve seen a lot of business change,” McCarty said. “But that switch that the cannabis industry did … was the fastest change I’ve seen happen.” 

Michigan’s first recreational cannabis dispensary opened in December 2019, four months before the COVID-19 pandemic forced brick and mortar businesses to include digital services. Michigan voters legalized recreational marijuana use in 2018, and the industry has since soared to repeatedly break sales records. 

As of Jan. 31, Michigan had 449 licensed recreational cannabis retailers, according to a recent report from the state’s Marijuana Regulatory Agency. Michigan’s adult-use cannabis establishments generated more than $124 million in sales in January 2022 alone, according to the report. 

New consumer landscape

McCarty believes the pandemic has likely made the cannabis industry more digitally convenient for consumers. 

“It would have been a lot slower if we hadn’t gone through this, for sure. I honestly don’t know that we’d be there. I think we’d still be primarily retail facing,” McCarty said, referring to in-person sales. 

A majority of retail sales for Grand Rapids-based Pharmhouse Wellness Co. are completed via online pre-order and curbside pickup, said owner Casey Kornoelje. The retailer, which opened for medical cannabis sales in March 2020 and expanded to recreational sales in December 2020, also offers delivery. 

However, e-commerce wasn’t originally part of Kornoelje’s plan.

“We were forced to pivot and to provide those services in the face of a pandemic and an airborne virus that is very dangerous to both our clientele and our team members,” Kornoelje said. “So really, we were adapting with the times and adapting with the changes that came from COVID-19.” 

Between March 16 and April 24, 2020, sales for dispensaries with pre-order options were 22-percent more on average than dispensaries without this option, according to data from FlowHub, a cannabis software company serving more than a thousand dispensaries in 13 states, including Michigan. Dispensaries allowing pre-orders also saw 8-percent more transactions, according to the same data. 

In response to COVID-19, 79 percent of cannabis companies offered curbside pickup, 64 percent offered delivery and 43 percent increased their focus on digital marketing and e-commerce, according to a 2020 survey of 39 cannabis companies by Vangst, a talent resource for more than 1,000 cannabis companies across the U.S. 

The cannabis industry, like others, also is relying more on digital advertising to reach consumers. Digital marketing demand was trending upward before the pandemic, and “COVID just exploded that forward,” McCarty said. 

Amid navigating pandemic-related challenges, retailers also must adhere to state guidelines involving cannabis marketing, McCarty added.

Marijuana products can’t be advertised via television, radio, website or print publications unless there is evidence that 70 percent of the audience is expected to be age 21 or older, per the Marijuana Regulatory Agency. Medical cannabis advertisements are under the same restrictions, but the audience must be age 17 or older. 

Meanwhile, the pandemic also strained the in-person cannabis retail experience, which often includes smelling the flower or interacting with staff, said Trent McCurren, co-owner of The WellFlower, which has retail stores in Manistee and Ypsilanti. While businesses had to adapt to the new sales experience, customers did as well, he said. 

For a new consumer, navigating cannabis products online can be overwhelming, McCurren said. Online orders have increased for The WellFlower, but since the industry is new, more consumers come in to learn or find a new experience, McCurren said. 

In 2020, East Lansing-based Anderson Economic Group found that one in five Michigan residents used cannabis — a 75-percent increase since 2010. The group estimates Michigan’s cannabis industry reached $3.1 billion in value in 2020, with $1 billion in sales coming from regulated retailers. 

As Michigan’s cannabis industry matures and its consumers become more sophisticated, customers may not need to come inside the store and shop around, Kornoelje said. 

“Being able to access something digitally or online for an experienced consumer is, to me, a really big benefit,” Kornoelje said. “They already know what they want. They’ve already had it before. And why waste the time going through the traditional retail shopping experience when you can streamline that process and do it online?” 

Read 2102 times Last modified on Monday, 28 March 2022 10:19
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