Cannabis Retail Is Evolving At Rapid Speed – How Can Your Tech Stack Give Your Business A Competitive Edge?

By Daniel Muller, Founder & CEO of AeroPay and Kyle Sherman, Founder & CEO of Flowhub 

The swift rise of cannabis e-commerce over the past year has played a pivotal role in cannabis retail growth, which exceeded $24 billion in 2021. Increased access to legal cannabis, coupled with rising demand for modern retail services like on-demand delivery, curbside pickup and buy online, pick up in-store (BOPIS), has incentivized more dispensaries to adapt their business models to accommodate evolving consumer preferences. 

In 2022, a retailer’s ability to stay competitive in its respective market will largely be determined by its tech stack. Streamlined and customer-friendly dispensaries require services spanning point-of-sales (POS), e-commerce, delivery, payment processing, payroll, and marketing platforms. 

With all of these factors at play, retailers must first decide if they should adopt an open or closed architecture model. In an open system, businesses can add third-party services and features to their existing tech stack to stay ahead of industry fluctuations and, more importantly, remain operationally nimble. Conversely, closed systems are one-stop-shop platforms that offer a variety of proprietary features but can only be modified by the company that owns the software.

When regulations and consumer behaviors are constantly evolving, it is crucial for dispensaries to tailor each part of their tech stack to respond appropriately. Cannabis retail is on the cusp of becoming a truly mainstream sector, and dispensaries must prioritize open systems to efficiently serve consumers at scale in the future. 

Open architecture paves the way for freedom and flexibility

Cannabis sales are now legal in some capacity in 37 states. In markets like Oregon, California and Nevada, it has reached a point of saturation, requiring dispensaries to differentiate themselves through convenient, consistent, and compliant consumer experiences that appeal to distinct audiences. This competitive advantage ultimately starts with the store’s technology infrastructure.

Closed source software may seem like a convenient solution, but these platforms come with long-term opportunity costs. In an ideal world, dispensaries can seamlessly manage their day-to-day operations on a single platform. However, from a practical standpoint, this end-to-end solution can hamper productivity and make retailers pay for unnecessary services. 

Imagine a common scenario where a dispensary has outgrown a single part of its closed system. In this case, the company’s online ordering platform no longer supports a new delivery service that would give the retailer a first-mover advantage. Since the dispensary cannot simply switch out its current e-commerce platform, it now has to invest even more time and capital into reconfiguring its tech ecosystem to power this brand-defining breakthrough.

If the dispensary opted for an open system from the outset, it would have the autonomy to shop around and seamlessly integrate tech features that directly supported its goals at each stage of growth. In the future, staying ahead of cannabis and conventional CPG competitors requires dispensaries to have the freedom to utilize ancillary platforms with a demonstrated track record of seamlessly integrating and working with other specialized providers. 

Preparing your tech stack for a federally legal future

Cannabis retailers often stay two to three steps ahead of current business SOPs to prepare their operations for federal legalization proactively. The plant’s status as a Schedule I substance has relegated an estimated 70% of U.S. dispensaries to run cash-only operations, which is directly at odds with society becoming increasingly cashless. Once cannabis becomes a fully legal CPG product, consumers will gravitate towards dispensaries that offer digital or contactless payments. 

Fortunately, there are already integrated and compliant payment solutions intentionally developed for plant-touching businesses. As the industry matures, dispensaries must include cannabis-friendly digital payment services in their tech stacks to lay the foundation for truly frictionless retail experiences. 

These streamlined user experiences are made possible through API integrations, which not only allows for seamless integration and reconciliation but also enables other service providers to cross-check each other for any compliance, security or operational oversight. Open architecture platforms are especially diligent about adhering to local and federal regulations and often turn down prospective clients that are not properly licensed or engaging in potentially fraudulent practices. 

Leveraging credible and sophisticated open systems will also incentivize mainstream companies to provide the necessary resources to professionalize the wider industry once cannabis is federally legal. Open architecture creates more entry points for global payment processors and technology partners to help industry stakeholders streamline operations, scale their businesses and optimize customer experiences. 

Cannabis cannot be siloed from the global business community forever. Embracing an open system not only allows retailers to quickly adapt to new regulatory landscapes but also positions the entire industry to efficiently work with established business partners down the line.  

Differentiation is at the core of retail success

Soon, cannabis retail operations will require increasingly tailored digital services as more states legalize adult-use sales and younger consumers engage with the industry. Millennial and Gen Z consumers, who make up the majority of legal cannabis sales, are now driving considerable demand for online and delivery orders. Forward-thinking dispensaries strategically positioning themselves for the next retail boom should first ensure that their tech stacks directly cater to their target consumer demographics and long-term growth goals. 

Nimbleness is fundamental to sustainable growth in cannabis, and there isn’t a one-size-fits-all retail solution in an industry this nuanced and regulated. Dispensaries that accept this sooner rather than later and utilize customized tech stacks will have the necessary tools to overcome future industry headwinds.