The North American ecommerce market for marijuana products is gaining momentum as Canada legalized the sale of recreational marijuana across the country in October 2018 and more states in the U.S. legalize the sale of both medical and recreational marijuana. However, a number of obstacles will impede online sales of cannabis products at least for the next few years.
Impediments to Online Sales
Sending marijuana through the mail is illegal in the United States, even for medical purposes. The prohibition applies to the United States Postal Service as well as FedEx and UPS.
In contrast, medical marijuana has been sold online in Canada and delivered by Canada Post since 2013. Late last year the Canadian government legalized the purchase of up to 30 grams of recreational marijuana. Most of these sales are occurring online, as retail stores have been slow to open. The provinces must enact their own rules so there may be differences in regulations among them.
In addition to the flower that is usually smoked, recreational marijuana includes edibles and CBD, or cannabidiol, a non-psychoactive compound found in the hemp plant. CBD oil and cream are used as a treatment for many medical conditions, and CBD sales are widespread in the United States.
CBD is now being added to beauty products and THC, the psychoactive ingredient in marijuana that causes the feeling of being high, is being added to beverages. CBD beer is also on the market.
While the sale of CBD and edibles has not been legalized in Canada, about a dozen Canadian websites are openly selling these goods. The Canadian government is supposed to consider legalization later this year.
Shipping marijuana from Canada to the United States is illegal, regardless of whether a state has legalized medical or recreational marijuana purchases. Some Canadian sites have opened American subsidiaries that operate in states that have legalized marijuana sales. It is likely that they want to get in on the CBD and edibles market.
According to Arcview Market Research and its partner BDS Analytics, total worldwide spending on legal marijuana will reach $57 billion by 2027. The largest market will be North America, growing from $9.2 billion in 2017 to $47.3 billion in 2027. The recreational market will be the largest segment in North America, contributing 67 percent of the amount, with medical cannabis making up the remainder.
In contrast, in Europe medical cannabis will dominate and it will become the largest medical marijuana market in the world.
The District of Columbia and 10 states — Alaska, California, Colorado, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, and Washington — have adopted laws legalizing marijuana for recreational and medical use. Twenty-one states have legalized medical marijuana only.
Nevertheless, at the federal level it is still a crime to possess, buy, or sell marijuana. Marijuana cannot be transported across state lines, even if the states in question have medical or recreational marijuana programs. However, states that have programs provide sellers certain legal protections.
Federal law prohibits FDIC-insured institutions from making loans to or accepting deposits from a marijuana company. Marijuana businesses typically have to work with private, state-chartered banks. One such bank — GRN Funds, located in Bellevue Washington — handles over $500 million in deposits from CBD companies on the West Coast. Canadian marijuana firms enjoy a competitive advantage because they have access to the international banking system and can legally transfer funds into banks in the United States in states where marijuana programs exist.
Since the marijuana flower cannot be shipped through the mail in the U.S., online sales consist mostly of CBD products. Several American websites do not sell online but instead either link to medical marijuana or marketing and advertising opportunities for dispensaries.
Following are a few American and Canadian sites that offer services and products.
- Green Growth Brands in Columbus, Ohio, is a publicly traded company. It hosts a variety of brands on its site, and the CBD products can be ordered online and shipped to 35 states.
- Leafly provides links to dispensaries around the country and serves as a marketing and advertising resource for brands that wish to introduce their products to customers.
- CBD for Life is an American company that sells online a variety of CBD products including lotions, bath products, tinctures, and shampoos.
- Quick Greens is a Canadian company that sells both edibles and marijuana flowers online.
Several software platforms have sprung up to serve dispensaries and their customers. Among them are:
- Weed Hero is an Oregon-based company that offers both free software that allows customers to place orders directly from a dispensary website. Some dispensaries offer delivery while others require customer pickup.
- Green Marimba is a Boulder, Colorado-based company that hosts dispensary websites that include automated compliance reporting and tools for managing vendors, inventory, and customer relationships.
- Shopify entered the marijuana market when recreational marijuana became legal in Canada. Some Canadian provinces have chosen Shopify to run their ecommerce websites. Shopify has also signed up marijuana companies.