The COVID lockdown changed people's lifestyles. For a while, it curtailed the overall movement of people, which led to the increased popularity of product deliveries. Cannabis businesses adapted to the situation by adding or increasing product delivery services. Now, the practice is here to stay.
Customers want the convenience of getting their favorite cannabis products delivered to their front door. So, when you have a high-quality product but don't offer shipping services, your customers are likely to look for an alternative item with a delivery option. For marijuana customers, pairing a good product with fast delivery translates to more purchases. Thus, cannabis and delivery services are a match made in heaven.
Existing dispensaries can incorporate the delivery module into their business operations in a bid to capture market shares and increase sales. But it may be challenging to know where to begin and how to launch your delivery service from the ground up.
Here are considerations when implementing delivery services as part of your dispensary operations.
Delivery Laws Differ From State to State
Delivering cannabis to your customers isn't the same as delivering other industry products. Cannabis delivery laws differ remarkably among states.
Here are a few examples of varying cannabis delivery laws across different states:
- Delivery of weed products for recreational use is illegal in Massachusetts.
- Both recreational and medicinal cannabis is legal in Arizona, but only the delivery of medical cannabis orders is allowed.
- In Boston, every cannabis drop-off done by a dispensary should be performed by at least two employees. The employees should put on body cameras during the delivery.
- In New York, a person can possess a maximum of three ounces of recreational cannabis. Thus, you will need to restrict the amount of cannabis your customers order at a time.
State and local regulations also affect your choice of delivery model. The two most popular marijuana delivery models include:
Pizza Delivery Style
Some states propose the use of this delivery setup, which works the same way as your typical pizza place. You have a central spot or dispensary where you receive, package, label, and ship the marijuana products. Deliveries are made one at a time, one customer order at a time. Your driver delivers the customer's order at the given address and then returns to the dispensary to grab the next product order.
Since the inventory is stored in a secure location, the pizza delivery style is safer against crime or theft. But traveling back and forth between your dispensary and customer locations makes this model inefficient.
Ice Cream Truck Delivery
Other states allow the use of the ice cream truck model. For example, the state of California allows your drivers to make several deliveries at once. They can also carry additional inventory in the trucks to act as mobile mini-storefronts. This means that they can receive and process last-minute customer orders within the truck.
The ice cream truck delivery model is more efficient compared to the pizza delivery model. But it comes with the risk of having a sizeable chunk of your inventory out on the road for several hours at a time.
And remember, cannabis is still classified as a Schedule 1 drug under federal law. So you can't make deliveries on federal land or across state lines. You need to learn the specific rules governing marijuana delivery in your state to stay in compliance. Also, talk to legal professionals that work in the cannabis sector in your state to help you legally navigate through the delivery process.
What's Your Delivery Radius?
The next step is deciding on your delivery boundary. You might think about covering larger distances to edge out competitors, but you must take into account other expenses that come with increased travel distances, such as:
- Extra drivers
Remember, local regulations may limit your delivery radius. But in some areas, dispensaries have the freedom to deliver marijuana products to customers farther away, so check out the rules first.
When contemplating the ideal delivery distance, check out other sectors in your region, including eateries and pizza shops, and evaluate their delivery range.
You should also look at the location of other neighboring dispensaries and their delivery status. Look at whether there's an opportunity to differentiate your business from the competition to attract more customers. After checking out both the state and local marijuana delivery laws, decide on the ideal delivery radius.
Hiring Delivery Drivers
Part of setting up an in-house delivery service involves hiring delivery drivers. A good starting point is conducting background checks and only hiring drivers with clean driving records. Remember, this will help with your insurance premiums.
Besides, customer-service skills are important. The delivery drivers are the face of your company because they’re the ones who deliver the products to the customer’s doorstep.
Well-drafted policies are paramount for informing drivers about what is expected of them. The policies should encompass aspects such as:
- How to carry out the deliveries
- How to achieve efficiency
- Safety and security protocols
- Handling cash transactions
- How to relate with customers
- Grounds for dismissal
Apart from the written policies, you should also consider creating training programs for your drivers. Periodic training can help polish their situational awareness so that they can make safe decisions.
Given that drivers carry around costly inventory in the ice cream truck delivery model, their safety is crucial. The delivery vehicles should be equipped with the necessary safety mechanisms. For example, each vehicle should have lockboxes and alarms to safeguard inventory and money.
Cannabis Delivery Insurance
Cannabis delivery services can potentially boost your profit margins, but they also come with potential related risks and problems, such as:
- Employee theft
- Car accidents
- Cargo theft
- Bodily injury to drivers
Dispensaries need to evaluate their insurance policies to get adequate coverage for their added delivery operations. Different cannabis delivery insurance policies cover different aspects of the cannabis delivery business. You should consider the following insurance coverage options:
- General liability insurance: This deals with third-party claims resulting from accidents during the delivery of cannabis products. These claims include bodily injury, treatment costs, property damage, and related attorney fees.
- Product liability insurance: This is essential if a cannabis product causes harm, disease, or undesired side effects. The policy also provides coverage for claims associated with product defects or malfunctions. You should disclose all the cannabis products in your catalog to the insurer.
- Business auto policy: This covers owned and leased vehicles from accidents during the delivery of products to customers. The policy may also cover the staff and the products during transit. Make sure you disclose to the insurer that your dispensary is transporting marijuana. You want to make sure the policy covers your delivery operations.
- Cargo insurance: This covers any damage, loss, or theft of your cannabis products once they leave your dispensary.
- Crime insurance: This provides coverage against theft by your employees during product delivery.
- Workers' compensation insurance: This applies to injuries sustained by employees in the line of duty. The cover caters to treatment expenses, lost wages, death benefits, and rehabilitation for injured staff.
Delivery Management System
Delivery management software helps deal with the logistical complexities of receiving, processing, and transporting customer orders. Effective software comes with the following features:
Your delivery vehicles should have GPS. For example, California law requires every vehicle delivering marijuana products to be fitted with GPS systems. With the GPS tracking system:
- You can get an automatic record of each trip for every car in your fleet.
- You can view all your cars at once in real time, with data refreshed every few seconds.
- You can track vehicle movement on your computer or smartphone.
Even in states that don't have such a law, GPS systems provide you with proof that your drivers didn't cross state lines.
You need to verify and record the age of each recipient customer. Age verification software uses the customer's government-issued ID upon delivery.
Customers receive automated SMS notifications when the delivery begins and when the product arrives at their destination.
Dispensaries can serve signatures for product deliveries through SMS. Meanwhile, the recipient can sign from the comfort of their home as proof of delivery.
The software factors in the location, time, capacity, and traffic to deliver the best possible route alternatives. Route changes or updates can be sent to delivery drivers in real time.
Deciding Between Delivery Fees or Minimum Order Amount?
Product deliveries involve plenty of operational costs. These include paying delivery drivers, gas, and insurance coverage, amongst other expenses. To recoup the delivery costs, you should charge a reasonable shipping fee. Remember, it's easier to reduce fees later if needed. Don't start too low, or else your customers will get used to cheap delivery, to the point that you will not be able to revise the fees upward later on.
Make sure that each delivery increases your profit margin. Even with a shipping fee, it does not make sense to send your driver several miles to deliver a $6 order. Thus, you should settle on your minimum delivery order amount. You can decide on a minimum order amount of $20 or $50, for example.
Alternatively, you can provide free delivery to your customers provided the order exceeds a specific amount. Let's say, free delivery for $100 minimum orders. This simple discount can significantly increase order amounts.
Free delivery cultivates customer loyalty while guaranteeing order sizes that cater to the delivery expenses. A customer who orders a $95 product and pays $20 in delivery fees will see the sense of spending $100 and enjoying free delivery to their address.
The minimum order structure also provides transparency. Customers dislike seeing extra fees during the checkout process, even if the dispensary has already indicated it has a delivery fee.
Contactless Cannabis Payment Solutions
Marijuana delivery services aim to provide customers with cannabis products on their doorsteps. So you need to think of a payment solution that customers can use while in the comfort of their homes.
Cash is not an option because it comes with its own share of security risks. Credit cards are also prohibited for cannabis companies because marijuana is still illegal under federal law.
The best solution is to allow your customers to pay for cannabis delivery services digitally. Consider a touchless, cashless payment solution, especially in the current environment where reducing physical contact with others is paramount.
There are tech solutions that allow dispensary owners to offer their customers the option to pay for cannabis goods right from their mobile devices. Typically, customers need to sign up and then pay digitally using their web-based app.
Others allow for bank-to-bank transfers and debit payments. These solutions eliminate the need for customers to visit an ATM or give out cash.
Let Your Customers Know About Your Delivery Service
Having a free delivery service won't lead to increased product orders if you don't inform your customers about it. As a dispensary owner, you should actively promote your delivery services to customers who visit your brick-and-mortar store. For example, you can give flyers out to those who enter your store. You can also promote your free delivery on your website and social media pages.
The Bottom Line
Delivery services make sense, especially if you have a smaller dispensary store or a less advantageous location, but there’s a lot to consider when going this route. While your customers will like cannabis delivery, you must adopt a cautious and data-driven strategy before rolling up your sleeves and opening this service.
First, check out your state and local regulations before launching your cannabis delivery services. Speak to a business attorney with a specialty in the marijuana industry. They will help you find the best way to launch a delivery service in your location.
You must also think about your infrastructure setup. These include delivery vehicles, drivers, insurance coverage, and gas expenses. Technology, such as fleet management and digital payment solutions, is also worth considering. All these contribute to an efficient delivery experience.
While cannabis delivery can boost your dispensary's revenue and customer loyalty, you must do it strategically.