(This developing story was last updated at 4:38 p.m. ET Thursday.)
Ontario plans to permanently enable cannabis stores to offer delivery and curbside-pickup services, the Canadian province announced Thursday, a move that likely would provide a major boost for many of the province’s pandemic-hit, adult-use marijuana retailers.
Stores in Canada’s largest cannabis market were first temporarily granted the ability to offer delivery in April 2020 after the pandemic forced the province to shut down most retailers to curb the spread of COVID-19.
Since then, the province subsequently extended the temporary provision.
“In response to the federal government’s legalization of cannabis, the Ontario government is proposing to permanently enable cannabis retail stores to offer popular delivery and curbside pick-up services,” the province said in a news release.
“This would also enable retailers to continue supporting physical distancing and general public health directives.”
The move still requires legislative approval.
Omar Khan, senior vice president at High Tide, one of the largest cannabis retailers in Canada, said the proposal is welcomed by Ontario’s legal cannabis retailers, many of whom are still recovering from pandemic-related shutdowns.
“When the pandemic hit Ontario, licensed cannabis retailers were forced to shut their doors to in-store foot traffic, and illicit-market operators tried to fill the void,” he said.
“Today’s proposed legislation, if passed, will permanently give legal cannabis retailers an important tool when it comes to driving down illicit market sales.”
Ontario’s cannabis store landscape has soared in the past 18 months.
When Ontario first allowed privately owned stores to offer delivery in 2020, roughly 54 stores had been authorized to open.
By last month, Ontario reached 1,000 operating cannabis stores and has since surpassed that mark.
Not for everyone
Chris Jones, founder and president of Cannabis Xpress, said the legislative move will prompt some stores to start offering delivery, but it is not a service all retailers should build into their business models.
“I do think a lot more people are going to get into delivery now, because it’s here to stay (pending legislative approval), and it de-risked it a little bit, knowing that they are not going to waste money on that type of investment,” he said.
“I think people were hesitant to start doing delivery, just because it was temporary. … For us to invest in the technology to do delivery, hire drivers, buying cars, it didn’t make sense to put in that investment until we knew it was here to stay.
However, Jones is not planning to offer delivery from his seven current small, convenience-style locations.
He said the stores “just aren’t optimized” for delivery.
“It’s a retail store,” he said.
“I may actually look at opening locations that are delivery only. So it would be a licensed retail store, and just do delivery out of there and partner with an app that has the technology to facilitate delivery.”
Jones believes some companies could start centralized delivery operations, rather than delivering from each store.
“I think there could be people coming in to do delivery depots, which would be an interesting shift,” he said.
‘It’s about creating loyalty’
Krista Raymer, co-founder of Toronto-based cannabis retail consultancy Vetrina Group, said offering a delivery service is part of how retailers can create loyal customers.
“Usually, any type of delivery in retail, specifically if there are no delivery fees, is about creating a customer experience and trying to win over the long-term customer,” she said in a phone interview.
“Do we get a profitable one-time transaction? Probably not, but it’s more about the lifetime spend of the customer and how likely they are to repurchase with you specifically.
“So it’s about creating loyalty more than necessarily creating a profitable service right now.”
Raymer said the pending legislative change is yet another test for retailers to remain agile.
“They had to have agility to get it up and running to offer it as a service,” she said, “and now it’s going to be about what changes need to be made to our business structurally or operationally to accommodate this, if it’s a service we want to offer.”
Raymer said delivery can open channels to reaching new customers.
“You could be delivering into a region you’re not operating in as a way to test the market. It opens up other options to reach new customers,” she said.
“From a (store) density perspective, being able to deliver outside of your region, if you’re in a really dense location, could be an avenue out, but it would take a lot of operational strengths, strategy and planning.”
Matt Lamers can be reached at matt.lamers@mjbizdaily.com.
