A slowly emerging market allows selling cannabis online in some places. The mere option does not mean people marketing and selling marijuana for medicinal or recreational purposes can look forward to obstacle-free operations, though.
Here are six of the top challenges of marketing cannabis online.
1. Major eCommerce brands are staying out of the cannabis industry
Even in locations that have not legalized marijuana, purchasing cannabidiol, also known as CBD, may be an option.
It does not have the same ability to get people high as other components of marijuana, such as tetrahydrocannabinol, more popularly known as THC. The tricky part is that some states and countries legalized CBD but banned THC — or at least products containing more than 0.3 percent.
It’s not always possible to confirm the amount of THC in a CBD product. That uncertainty has made brands, including Amazon and PayPal, steer clear of cannabis products for now.
That means that cannabis companies that make their products available online must look for tailor-made options. Some exist to fill the need, but the unwillingness of major eCommerce brands to associate with cannabis companies poses an undoubtable restriction.
2. The inability to advertise cannabis through social media ads
Marketers use social media ads to reach out to their customers. They know how many of them view social media as their go-to place when they’re ready to buy things. Social media users often depend on posts from people they know or influencers they respect to guide their purchasing decisions. However, social media companies have cracked down on social media advertising for cannabis products.
In addition to barring marijuana ads, Facebook does not allow advertising related to CBD or ingestible hemp. Most of the other leading social media brands have similar policies, thereby prohibiting companies from selling cannabis products through social media. Some have grown their brands in different ways, such as by partnering with influencers or creating organic content that achieves a far reach.
However, there’s no sign of social media platforms relenting regarding their advertising policies. That poses obstacles for companies accustomed to advertising through more conventional methods.
3. Increasing demand coupled with distribution constraints
As cannabis becomes legal in more places and the Internet becomes another place to buy it, some retailers have had trouble keeping up with demand. And, that problem is not likely to ease significantly anytime soon. In 2018, the cannabis industry’s worth exceeded $7 billion, with forecasts expecting it to rise to $65 billion in five years.
Fortunately, some of the same technologies that parties in other industries use to keep track of inventory and sales apply to the cannabis industry, too. For example, tracking order requests through a smartphone could help retailers stay on top of demand wherever they are and know which products sell the fastest.
Another obstacle to distribution is that you cannot send marijuana through the mail in the United States. Online retailers that want to stay above board get around that by arranging for door-to-door deliveries of what customers order. But, that extra step could cause even more slowdowns as a growing number of people desire cannabis products.
4. The need to meet strict regulations
Merchants who sell CBD products online still have to adhere to applicable laws. For example, their products must go through testing to ensure they don’t contain more than the permitted amount of THC. Moreover, merchants that want to get into the online cannabis market cannot necessarily sell all the products they anticipate will be the hottest sellers. For example, most ingestibles remain federally illegal in the U.S.
Platforms exist to help online cannabis sellers meet regulations. But, some parties may not want to go through the process of getting their products tested to verify how much THC they contain, for example. Moreover, the testing process is not perfect, and it may take longer than some sellers prefer.
In California, 2018 was a tough year for cannabis testing labs. The people working in those facilities had to rapidly adapt to regulatory changes and some encountered friction regarding the necessary regulations. Some of the labs asserted that the expectations the regulators have are not realistic and are too hard to satisfy.
It’s up to online sellers to decide if the requirements are worthwhile. Doing that requires assessing whether future profits would make it viable to jump through those legal hoops. But reaching that conclusion is not easy.
5. Legitimate companies still compete with illicit dealers
Something that marijuana retailers have had to come to terms with recently is that many of their would-be customers would rather buy the drug on the street for cheaper. At the end of 2018, a California-based cannabis retailer called MedMen had more than a dozen stores in the state. Even so, cash flow problems substantially hindered it, and they continue to threaten its future.
During the latter half of last year, MedMen lost $131 million — the equivalent of more than $2 for every dollar of marijuana sold. Although the continuation of people buying from street dealers instead is not the sole reason for the company’s woes, it seems to have played a substantial part. In California, the costs to become a regulated distributor are high. And, the legalization of marijuana has not caused the dramatic drop in the street trade that some expected.
Similarly, recently released national statistics for Canada show that cannabis users still rely on illegal sources. More specifically, 42 percent said they buy from those parties at least some of the time.
6. The difficulties of verifying customer identities online
In some places around the world, selling cannabis online remains restricted. Alberta, Canada, is one of them. Only a government agency called Alberta Gaming, Liquor and Cannabis (AGLC) can handle sales through the Internet for now.
But, private-sector sales are apparently on the horizon. A University of Calgary professor named Thomas Keenan has already raised the alarm about how difficult it may be to check identification through the Internet and feel confident in the accuracy.
Currently, if a person wants to buy cannabis through the AGLC, they have to prove their age and get their order shipped to an Alberta address. They don’t even have to live at the destination but could pick up the goods the next time they pass through Alberta, for example. Alberta residents upload their name, date of birth and address to verify their age. People outside of Alberta upload images of a government-issued ID instead.
And, therein lies the trouble. Keenan worries that people could alter their uploaded images after merely learning a bit about readily available photo-editing software. Plus, he’s unsure of whether the systems in place for confirming a person’s documents would be robust enough to detect such tampering.
The risk of people altering their documents during an online purchase may pose an additional liability to online cannabis merchants. Would they want the blowback that would almost certainly result if authorities discovered a trend of underage purchases?
Not a straightforward process
The six obstacles mentioned here highlight why online cannabis marketing is not simple. That’s not to say people should avoid the prospect altogether, but they must be ready to encounter challenges.