Cannabis is no longer simply a brick and mortar retail operation. With a market that’s expected to reach $166 billion by 2025, cannabis retailers now have the option to expand their sales strategy to online marketplaces. Cannabis e-commerce is exploding and as new cannatech-driven solutions emerge, it’s making it easier for retailers to engage with a much bigger audience pool.
With the advent of online menu listings, and online ordering and delivery services, as a cannabis retailer you are now more searchable and accessible to customers, but at what cost to your business?
One potential downside to relying on a cannabis e-commerce platform to drive more business is that it can be quite expensive to list your products on these services. For example, Weedmaps, a popular online menu and delivery platform, charges dispensaries to pay for most listings.
While this certainly drives exposure, it could potentially eat into your profits and begs the question of whether or not it’s a savvy business decision to list your dispensary on third-party sites or if it’s more effective to focus on organic traffic through organic search engine optimization (SEO) and website marketing.
In this article we’re going to evaluate whether or not using a service like Weedmaps is worth the return on investment (ROI).
Betting all your Weedmaps e-commerce chips
Coined the Yelp or Angie’s List of cannabis, Weedmaps came in and took the industry by storm in 2008. This made it incredibly easy for cannabis consumers to search for local dispensaries, brands and products in their area and then either place an order for in-store pick up or delivery. You would think that the convenience factor would make it a no brainer for dispensaries to list their business on this platform.
But much like traditional e-commerce platforms, the way Weedmaps makes money is by selling online display advertising and priority listing packages to cannabis businesses. It’s insanely competitive, which naturally continues to drive up the listing prices.
It’s estimated that dispensaries will pay up to $30,000 a month for popular markets (like California) and up to $100,000 a month for national multi-state operators. In smaller markets, cannabis retailers can expect to pay anywhere from $1,000 to $3,000 per month for basic packages — but that won’t get you anywhere near the top listings. (P.S. this data is 3 years old and anecdotally, we know many current cannabis brands paying higher prices for lower listings).
Because these cannabis e-commerce platforms have become so popular with consumers, it puts the pressure on retailers to have a presence here if they want to stay ahead of their competition. With over 10 million active monthly users, Weedmaps seems like the place to be for new customer acquisition and revenue growth.
But if you’re a small mom-and-pop shop can you really afford $30K a year for a middle-of-the-road listing when you could be focusing on an organic search strategy that will cost you far less? It might depend on where your customers are shopping.
Are consumers really buying more on Weedmaps?
We wanted to know if consumers were really spending more time and money on Weedmaps compared to other channels like organic search and direct store traffic.
Data from Happy Cabbage Analytics found that of customers acquired in 2020, 12% re-ordered through Weedmaps sometimes, 16% re-ordered exclusively through Weedmaps and 12% re-ordered, but not through Weedmaps. One of the more notable findings was the fact that 60% of customers only placed one order on Weedmaps. We can hypothesize that perhaps some of these customers decided to order directly from the retailer or were simply passing through as tourists.
Interestingly, customers ended up spending about the same amount per order (around $100) regardless of where the order was placed. But customers acquired outside of Weedmaps tended to be stickier. They averaged 4.3 orders per customer when purchasing direct vs 2.7 orders per customer when using Weedmaps.
However, the customer reorder rate was the same (40%) for those acquired through Weedmaps vs other channels.
At first glance, Weedmaps customers appear to be good customers but their reliability and loyalty are questionable. While you might acquire many new customers, the data show that only about 40% of them are likely to reorder and may not ever become long-term, repeat customers of your brand.
Is an organic SEO strategy better than Weedmaps?
Given the fact that listing your dispensary on a service like Weedmaps or Leafly has become incredibly expensive, you have to ask yourself if an organic SEO strategy might be more impactful for your cannabis operation.
Google is free after all, and it’s still one of the best ways to drive new traffic to your website. The upside to organic SEO in addition to the no-cost perk is the fact that you get full creative control over your website, brand voice and marketing tactics. You are no longer at the behest of another platform to drive customers to your business.
If your goal is to acquire customers for life, this might be the strategy for you because as the Happy Cabbage Data revealed, customers acquired from Weedmaps just aren’t as loyal.
And you might be surprised just how successful organic search can be for your budding business. According to data from Range Marketing, San Francisco-based dispensary, Barbary Coast was able to drive 4 million new visitors to their website — for free. That’s quite a big number.
But what’s more important is the fact that engagement and volume were up 80% for Barbary Coast as a result of their organic search efforts.
While this traffic can be considered “top of the funnel,” meaning customers may still be in the “initial interest” phase of the customer journey, the fact that they found your brand via organic search terms, went to your site and spent time browsing your products is not something to ignore.
If you want more compelling data that ties organic search directly to revenue growth, Grass Roots Rx was able to increase their monthly revenue by over 314% in the first three months after launching a targeted SEO strategy.
Building your cannabis home base
Your website is your home base. It’s where you create a personalized customer experience and it affords you the opportunity to engage with them in ways not possible through third-party directories. You can educate, entertain and reward.
In fact, customer loyalty programs and SMS marketing have become popular ways to interact directly with the customer and to remind them how valued they are.
And they reap more rewards when they shop directly. The same data from Happy Cabbage showed that the average discount rate for Weedmaps customers is 8% whereas it was 15% for non-Weedmaps purchasers.
When people are loyal to a brand, they tend to buy more and generate more word-of-mouth referral traffic to your business. According to a study from Harvard Business, increasing your customer retention by just 5% through customer loyalty programs can boost revenue by 25-95%.
Diversifying your cannabis e-commerce strategy
When deciding what the right cannabis e-commerce strategy is for your business it all comes down to a cost-benefit analysis. Do the costs outweigh the benefits reaped?
For some cannabis retailers, Weedmaps is the right approach.
But we’re here to tell you that if a dispensary listing like Weedmaps is eating into your profits, you have options. And you might actually see better success by diversifying your e-commerce strategy instead of placing all of your buds in one basket.
If you need help determining the right e-commerce strategy for your business, or are interested in learning more about which cannabis e-commerce, SEO/website marketing or custom loyalty partners might be right for your business, let MJstack help!
Our free cannatech consulting service can help point you in the right direction when it comes to identifying the right tech partners to drive revenue growth, and customer acquisition and retention.
Request a free consultation and the MJstack team will help pair you with the right cannatech vendors, today.
