New Federal laws will allow THC to be shipped across a state line and create national cannabis brands
The dominant theme of Cannabis 1.0 as I call it was state licenses, and who had licenses to sell marijuana in what state. This created the term “MSO”, or Multi-State-Operator for the industry as those with deep pockets or financial funding could invest in creating the same business over and over in each state. Due to the status of cannabis and THC under Federal law, if a brand or company wanted to sell THC-based products in a state, they must set up their entire business, from seed to sale, in every state they wanted to sell marijuana in. That means instead of one factory or warehouse in one state shipping products to 49 other states like most businesses, you had to set up a new factory or warehouse in every state and only sell and delivery within those state lines. Since cannabis is a plant that means setting up a grow or cultivation facility in every state, a processing plant in every state, a packaging process in every state, and finally, a retail license to sell weed in every state. Basically, you had to replicate your business 50 times over if you wanted to sell in all 50 states, which you could not do anyway since only 39 states have some form or medical or recreational cannabis program.
Tommy Chong cannot ship his Chong’s Choice products in the mail to dispensaries on Massachusetts and Florida.
Snoop Dogg’s Leaf’s brand cannot be shipped across a state line so no shipping 1500 chocolate bars to a dispensary in Illinois, sorry.
Throw in the IRS tax codes for cannabis where you cannot write off many expenses, lack of access to banking services, and heavy testing and regulations for such things as marketing and advertising, and cannabis became an awfully expensive endeavor that only the rich or well-funded could undertake.
What is Cannabis 2.0?
Cannabis 2.0 is just around the corner as the US begins some form of Federal decriminalization or legalization of cannabis and THC. Depending on which version of the MORE ACT or Safe Banking Act makes it through Congress, there are massive changes coming to the marijuana industry in the next 24 months, changes that will make the old “state-by-state MSO model” look ancient. Here are the following things to prepare for if you want to win the Cannabis 2.0 is game.
First, stop thinking about cannabis as a state-by-state land grab, those days are over. At some point the Federal government will introduce a plan that honors state licenses as a first step in shipping and selling cannabis, and those state licenses will have the ability to ship products, most likely to other legal marijuana states. The argument will no longer be which MSO owns Florida, Illinois, or Massachusetts, since all state licenses in good standing will be treated under Federal law. Geographic boundaries will fall by the waist side and 2-day shipping with FED EX or UPS will rule the day.
Second, cannabis will become a Shopify game, just like all other retail online. Will that happen day #1 with Federal changes? No, but the future is a battle over eyeballs and traffic as most online shopping carts for cannabis products will look the same. You will have flower section, concentrates, edibles, vape cartridges, and then ancillary items. At that point, once you have your website and shopping cart, the question will be how do I get the most traffic to my site and how do I convert those eyeballs to customers and sales orders.
Third, do not try to recreate the wheel on internet consumer buying and behavior patterns. Sites like Amazon spend billions studying what consumers want, how they want to buy it, how they want to bundle it, how quick they want it, what colors and fonts create the most sales, etc. When in doubt, check what how the Amazon app or a good Shopify store handles a question about X, Y, or Z, and do that. If Amazon has taught us anything about online shopping it is consumers live 2 click shopping from an app and 2 day or less delivery times. In fact, they will pay you over a $100 a year for those features and that also includes “free shipping”. While nothing is free in life, they know that adding the shipping and packaging costs to the sale price and marketing the product has “free shipping” is what consumer want to hear and see, so that is how it is done. Do not try to outthink Bezos and his army of engineers, do what he does, they A/B tested or split-tested all of those features over a billion times.
Fourth, let people do what they do best. Yes, a slight rip off of a Steve Jobs line, but there are thousands of webmasters and marketers that are good at one thing, driving traffic to offer and websites that make them money. Affiliate offers and getting paid commission on sales and signs ups is a trillion-dollar industry online, even Amazon pays out affiliate commissions to people that add the Amazon shopping widget to their websites or send people to Amazon links to buy stuff. Did you know you can sign up at Amazon as an affiliate, add their links and pictures of products to your site, and if someone buys from your tracking link, you get paid a commission? While Amazon pays out paltry sums, other sites and offers pay decent money. Did you order a newspaper online or sign up a monthly subscription website? You probably made someone a few bucks when you clicked the link that brought you there and signed up. Once you click a link that has a tracking code, a cookie is installed in your web browser so that if you go back and buy something later, whether it is Merrill shoes or a dating site, the person’s link you clicked on to get to the site gets paid!
Where is this going? Now think of thousands of webmasters online sending traffic to your cannabis Shopify store and getting a commission on every sale they send you, just like your weed was a teeth-whitening offer or back massage gun. Let webmasters and traffic gurus do what they do best, you just create the best tracking and highest converting webpages for them to send traffic too. The more money they see in commission, the more money you both make.
Marijuana is eventually going to a be a shopping cart battle and getting people to your shopping cart will determine the winners and losers.
A massive shift in Federal law is coming for cannabis and they will require a massive shift in mindset for anyone looking to create value and make big profits in the Cannabis 2.0 industry. Brick and mortar will survive in the same way stand alone liquor stores are still around but ask anyone with a history in the retail liquor industry what happened to stand-alone retail stores with supermarkets, gas stations, Costco’s, and online liquor sales sites created Alcohol 2.0.
The game is about to change, make your investments with an eye to the future, not the past.