Cannabis and E-Commerce - Branding Bud Live Episode 52
THE SUMMARY
Listen in as we navigate the complex landscape where the cannabis industry intersects with the challenges of online commerce, navigating the maze of legal regulations that pose hurdles in marketing cannabis products in the digital space. Join Branding Bud Live cohosts David Paleschuck and Adriana Hemans with our CLIO award-winning guest, Patrick Toste, Co-Founder of HIGHOPES, for an insightful conversation titled “Cannabis And E-Commerce.”
THE CO-HOSTS
David Paleschuck, Adriana Hemans
THE SPECIAL GUEST
Patrick Toste, Co-Founder of HIGHOPES
THE TRANSCRIPT
DAVID PALESCHUCK
Welcome to Branding Bud Live, the live stream that’s 100% THC and 0% WTF. Every week we bring business people together to talk about the business of cannabis. I’m David Paleschuck, founder of Branding Bud Consulting Group and author of the first book on cannabis branding, “Branding Bud: The Commercialization of Cannabis.” I’m joined by my co-host and BCF “best cannabis friend,” Adriana Hemans, the Director of Marketing at Green Meadows. Hi Adriana!
ADRIANA HEMANS
Hi David. Thank you for that intro. I’m so excited to co-host the show with you. We’re bringing amazing guests from across the cannabis ecosystem to share their perspectives. My favorite thing about Branding Bud Live is that we focus on building community - and we encourage audience participation. It’s not just about us talking, it’s about all of us building something together. So feel free to drop your questions and/or opinions in the chat, and we’ll share them too.
DAVID PALESCHUCK
I’m super excited - and grateful - today for a number of reasons. They are:
#1. We just launched two online courses on cannabis branding and brand development and have received such great feedback, that we’re going to keep offering up more courses! Please check them out and more at cannabis’s best-kept secret www.brandingbud.com/edu. We’ll throw up a direct link shortly.
#2. Last but not least, our guest today is Patrick Toste Co-Founder of Highopes, a cannabis specific creative agency and we’ll be chatting about “Cannabis And E-Commerce.”
Some of the questions we’ll be discussing are:
How has the e-commerce landscape evolved within the cannabis industry in recent years?
How do you see technology shaping the future of cannabis e-commerce?
What trends will dominate the landscape of cannabis e-commerce in the near future?
I’m super excited about all the things that are going on!
ADRIANA HEMANS
Me too!
DAVID PALESCHUCK
That said, let’s welcome Patrick.
Hi there!
PATRICK TOSTE:
David, Adriana, good to see you both again. David, it seems my last name is really sticking with you. Looking forward to future conversations as they roll out.
DAVID PALESCHUCK:
It certainly is. The fact that I initially mispronounced it as 'toast,' well, what's not to love about a last name like that? As toasty as Adriana said, toasty with the mosty …
PATRICK TOSTE:
Especially this time of year, we need to stay warm and toasty.
DAVID PALESCHUCK:
Absolutely.
ADRIANA HEMANS:
Shoutout to Ronnie and Susan joining us in the comments. Susan's anticipation for this topic resonates with me. Let's dive in, Patrick. Tell us about your agency. What's your primary focus?
PATRICK TOSTE:
Certainly, I'm a co-founder, along with my partners Mina and Thomas. Thomas was supposed to join us today, but like many this time of year, he's battling illness, so I'm stepping in for him. We established Highopes about seven years ago, originating from the cannabis space. We bring over a decade of combined cannabis experience, which drives our agency's exclusive focus on cannabis branding and marketing. While we value all creative agencies, we've committed ourselves to this industry. Initially, we focused on branding, packaging, and web design, but as clients continued to rely on us for their sustained success, we expanded our services to encompass marketing. However, we don't simply onboard every marketing service available. We engage with our clients, understand their needs, and optimize services accordingly. Presently, our focus has shifted more towards marketing while continuing to prioritize branding—the cornerstone of our agency's identity.
DAVID PALESCHUCK:
Patrick, I'd like to highlight something noteworthy about your agency—High Hopes winning a Clio award recently. It's a significant accomplishment given Clio's 50-60-year history in branding and marketing. Can you share a bit about that recognition?
PATRICK TOSTE:
Certainly, the Clio Cannabis awards hold immense respect due to their origins and their credibility in this space. This year marked our second and third wins, following last year's recognition for website design. This time, our awards focused on branding for a Missouri-based brand and an innovative propagation lab in Oklahoma. It's gratifying to receive recognition not only for digital work but also for brand building. We aim to continue excelling in both aspects.
ADRIANA HEMANS:
That's impressive, Patrick. How has the cannabis e-commerce landscape evolved in recent years?
PATRICK TOSTE:
Reflecting on our beginnings in Seattle's legacy market, e-commerce was virtually nonexistent in cannabis. Over time, iframe solutions like Duchie and others emerged, offering basic menu integration into retailer websites. However, the industry is now transitioning to open API solutions, enabling retailers to create unique, SEO-optimized menus with better conversion opportunities. Loyalty programs are also gaining traction, evolving beyond discounts to provide retailers with valuable data for operational optimization. COVID expedited online transactions, driving cannabis e-commerce closer to traditional retail experiences, but there's still much potential for improved online shopping experiences in the industry.
DAVID PALESCHUCK:
Fascinating insights, Patrick. Considering cannabis e-commerce's growth, why do you think the industry shows significantly higher online orders compared to traditional retail sectors?
PATRICK TOSTE:
COVID likely sparked a surge in online transactions, introducing many to cannabis in the comfort of their homes. Cannabis, being primarily in-person purchases, now offers a growing opportunity for e-commerce. By creating familiar and user-friendly online shopping experiences akin to conventional retail sites, the industry can bridge the gap between online and in-store purchases.
ADRIANA HEMANS:
That's interesting. The shift to online shopping experiences seems pivotal. Do you foresee other concepts or technologies from different industries infiltrating cannabis e-commerce?
PATRICK TOSTE:
Absolutely, cannabis e-commerce is aligning more with traditional online shopping experiences. Our aim is to develop sites that mirror conventional retail platforms, ensuring user-friendliness and breaking stereotypes surrounding cannabis purchasing. This similarity encourages higher conversion rates and helps the industry resonate more with diverse consumers.
ADRIANA HEMANS
Yeah. Speaking of stats, let's jump into our audience participation. I see Jeremy's comment from a few minutes ago here for the cannabis e-commerce. Alright, Jeremy, get ready. This question is for you. According to the NCIA, which is the National Cannabis Industry Association, which is not one of the five "must-have" features for your cannabis e-commerce website? Must-have is in quotation marks for anyone listening. A) Data ownership for building relationships, B) a mobile and SEO-friendly website, C) age gating and compliance features, and D) the ability to upsell and cross-sell. We're guessing which one is not one of the five must-haves, according to the NCIA.
DAVID PALESCHUCK
Right. And according to my script, now is when I'm supposed to say, "Audience, it's your chance to shine."
ADRIANA HEMANS
Like you would forget that.
DAVID PALESCHUCK
I just said I love saying that every week.
PATRICK TOSTE
No, I was just mentioning, I'm glad you called Jeremy out in the chat here. He's actually someone I know in this space and recently got to know well. There's a huge plethora of information coming out on the e-commerce side from him and SEO and such. So anybody also listening in, if you're looking for an extra dose of what we're talking about today, you know, I'll humbly throw him out there.
ADRIANA HEMANS
Nice. Love it. Right. Oh, he's guessing "A" with the comment, only because people don't understand the implications. And Choice "A" is data ownership for building relationships.
DAVID PALESCHUCK
Yeah. Well, I know that we were having some LinkedIn connectivity issues earlier. So should we—normally we have more folks chiming in in terms of guessing. But oh, here we are. I guess for "D" from Tara. And "D" is the ability to upsell and cross-sell.
PATRICK TOSTE
I was also shouting out Tara. We're actually on the marketing and advertising committee with the NCIA together. So happy to see she's chiming in and throwing her hat in the ring here.
ADRIANA HEMANS
Oh, so she would know. She would know our stuff. Yeah.
PATRICK TOSTE
We got some experts thrown in there, that's for sure.
DAVID PALESCHUCK
And she's on the inside because this is according to the NCIA. Yeah. Well, why don't we jump to the answer?
ADRIANA HEMANS
Sure. Let's do it. Tara, nice job. You got it right. It's the ability to upsell and cross-sell. It's definitely a nice-to-have but not necessarily a must-have. That's right.
DAVID PALESCHUCK
Adriana, for those folks that are listening in and can't see the slide that's up. Now you just want to read all of the five must-haves.
ADRIANA HEMANS
The five must-haves are: independent e-commerce platform, data ownership for building relationships, mobile and SEO-friendly website, age gating and compliance, and integration with POS and cannabis ecosystem.
DAVID PALESCHUCK
There you go. You need a point of sale. Right? Yeah. And again, we thank the NCIA for their data that comes out the NCIA blog. So thank you. Thank you, Tara. Cool. Well, I'm curious, you know, are there any regional differences in consumer behavior, the impact cannabis e-commerce strategies do? You know, the thing that first comes to mind are, you know, in our industry, there are mature markets, like you said earlier, you know, at the top of the show, you know, Washington state is now 12 years in, Colorado is now 12 years in, but the East Coast is still just getting into it. Are there any strategies or tactics that differ relative to the maturity of the market?
PATRICK TOSTE
Yeah, definitely David. And with an agency with a website, you know, II calm, or the branding work we're doing, you know, we always look to date as much as possible in this space. So it's something we live and breathe over here at High Hopes. And with that, where you're right, we're able to see some of those regional differences. I mean, for me, immediately, not only on the brand, again, the website side as well, that comes to mind is just, you know, first off, different product type consumption. We see, you know, while we all know flower is still the leader, you know, every market does have flower as the top purchase category. Once you kind of get beyond that, that's where we start seeing really significant differences. For example, California, number two product overwhelmingly vaporizers out of all markets. California purchases being the most vaporizers. And when you compare that to, they are the biggest market in the States, you can say, wow, there's a massive opportunity for vaporizers in California. But you might want to go look over in Massachusetts, like you mentioned, with some of those East Coast markets. Massachusetts is actually the number one consumer of edibles. So comparing the number of edibles consumed in Massachusetts compared to other markets, Massachusetts holds a higher percentage. So that way, when we're talking cannabis e-commerce as a retailer, you can think about, you know, and again, I'll focus on the retailer here for a moment is you can think about, hey, what products should I be prioritizing, as far as showcasing on my site or highlighting? Well, now I know that in our area, edibles are really popular, let me focus on those. So make sure not only online but in-store, I stock a wide variety of edible products because I know consumers in my market prefer those types of products. So that's kind of me, you can say, an easy one because the data is really clear. From there, we start to kind of get into a little bit more, I would just say kind of expertise, assumptions. And what I mean by that is, you know, we see, you were mentioning David, you know, legacy versus newer markets, we actually see a different customer education level. So if you have to think about it, and customers in, you know, Washington, Colorado, even California, which has had, I think, I would say, is the most educated market because of before legalization, what it stood for in the cannabis space. So those customers are going to be more educated, they're going to understand the nuances of their products a little bit more. But what I think is the most interesting point here is while in East Coast markets in these newer markets, we have more, you could say, novice or new consumers or just immature consumers in a way, they're actually getting smarter faster, is what we're noticing. So they might come into the market not really knowing a lot.
PATRICK TOSTE
Yeah, and I mean, first of all, one little thing I always like to share with our clients in these newer East Coast markets when I'm talking to them about what we do, I always joke around. I'm sure you can relate, as I say, "Ready to do to do, I'm from the future." Every market is a little different. Like we said, we see a lot of similar situations happening from California to Massachusetts. So unfortunately, I talked to clients two, three years ago about exactly what's happening in Massachusetts right now, and I'm having those exact conversations in New Jersey as well. So it's a gift and a curse, you could say. But yeah, getting back to your question, kind of like I was mentioning with David before, there are definitely a lot of different strategies when we're thinking brand versus retail because of a lack of DTC (Direct to Consumer) opportunities. And something I didn't touch on a bit earlier that, you know, I can use to expand on that is also marketing strategies, which again, as I mentioned earlier on, is something as an agency we're getting more involved with because we don't only want to give our clients a really beautiful car, the brand we build for them, but we want to make sure they know how to drive it correctly. And we'll even do some driving for them out of the gate. So we're getting more into that side. And there is a big difference too when we're thinking strategies, because again, if you're a retailer, you're doing digital marketing, driving to your e-commerce site, you know, it's all, you know, usually revenue-based campaigns. You're trying to increase orders, you know, especially around seasonal opportunities like Black Friday, which we know is big, or Green Wednesday for the upcoming Christmas Eve. Like you can use digital marketing to kind of immediately drive revenue for that site. So it's a pretty straightforward game. And what I love about those tactics is they're very trackable and traceable, compared to retail that might be spending all their money on billboards, bus stop ads, and things like that. You don't really know what those are doing for the business. That's what I love with digital marketing. You can really track and analyze it. Whereas a brand happens, and this is what really excites me with the services that we're offering now as an agency, is for a brand, there's still a lot of value in digital marketing. The only difference is you're not essentially getting an ROI on it because there is no B2C (Business to Consumer) opportunity. You're just going to drive someone to a store that carries your product. We like to call those a co-brand campaign. So if Patrick owns a brand, and David owns a store, and he loves our products, as you know, we do really well in his store, we do a lot of volume, he pays us on time, we might want to go ahead and try to get more products to that store. That way, I now have leverage. So for me, that's what I kind of tell brands when we're thinking different strategies. As a retailer, it's a little bit more direct, but as a brand, it is kind of indirect because if you're helping market your product in stores, you're not really seeing that revenue. You're creating your revenue is going to come in a month when they order twice as much product from you now, this time, or they call you up two weeks earlier and say, "Hey, David calls Patrick, Hey, Patrick, from that campaign you're running with me, we're all out. I need more," and then Patrick can go, "Well Hey, David, since you need more, Would you also like to pick up these new skews we just launched?" And now you have leverage. So that's what I get really excited about, the strategic differences also on the marketing side.
DAVID PALESCHUCK
Patrick, that's really key. I mean, that's a nugget of gold, you know? In terms of, you know, traceability, trackability, immediacy, whereas the other, you're one step removed as a brand. So how does a brand leverage that, you know, and understand that, and that's key. I mean, I just think you really hit on something that probably most brand owners don't focus on where they realize, way after the fact after they've gone through a number of cycles, and they realize like, "oh, wow, I could leverage this better than I am, or we could do better than we're doing." So I thank you for that. And I'm sure if there are any brand owners out there, I'm sure their gears are turning in their head as well. Excuse me. In light of time, why don't we jump to our next audience participation? Let's do it. And you know, often what we'd like to do, Adriana, and I always talk about bridging the gap between cannabis and the real world. So this is a question, it's a true or false question. It has to do with the real world, not just cannabis, but we often like to bridge that gap. So this is a true or false question. 80% of shoppers compare prices and reviews online before purchasing from a store? And 75% Never scroll past the first page of search results. Is that true or false? And audience, it's your chance to shine. Those numbers seem pretty high. But I'm, I'm curious. So I'm curious to hear what folks in the audience think and then we'll get to the answer.
PATRICK TOSTE
That's what I was at David. I was like, Alright, I know these at a high level are true, but it's the percentages that I'm like, ooh, are these too high? Too low? That's where I think the challenge really lies.
ADRIANA HEMANS
Yeah. Cool. You out. But you're going have to take a gamble and see Oh, Jeremy is guessing true. Eddie's guessing true. They believe in those high numbers as high figures. 80% and 75%. Yeah. And
PATRICK TOSTE
Adriana, David, if I could chime in, you know, this is, again, what I love about e-commerce. It's an ecosystem. It's not just your website, like I talked about earlier. It's like loyalty programs that hook into and work together. It's almost like a web, you know, of things that come together. And as we see here, reviews, I think that's something also a big opportunity in the space that we're trying to push our clients to do, especially at the retail level, garner more reviews. Not only for what we see on screen here, but it helps with your SEO efforts. But also, I think it's something that brands should really kind of work towards as well, you know, getting those reviews and being able to share that on your site. Because as we see here, it's obvious something important for customers. So I love how this even still works within that ecosystem of e-commerce.
ADRIANA HEMANS
Yeah, we have Mina in the house, she's guessing false. And Quinton is guessing true? We have three guesses for true and one yes for false. All right.
DAVID PALESCHUCK
Well, let's jump to the answer. And the answer is, drumroll, please.
PATRICK TOSTE
The answer is no surprise.
DAVID PALESCHUCK
80% of shoppers compare prices and reviews online before purchasing from a store. And 75% of people never scroll past the first page of search results, which is really quite intriguing. But that says a lot about, you know, the need to find information fast and maybe even just cursory information about our corporate overlord Google.
PATRICK TOSTE
Yeah, Adriana, we always joke over here, the best place to hide a dead body is on page two of Google.
DAVID PALESCHUCK
That's funny. Well, you know, as we sort of wind down the show, Patrick, what advice would you give, you know, to entrepreneurs looking to venture into cannabis e-commerce? You know, is there anything type of line that you would just drop some bombs on them and in a good way and let us know?
PATRICK TOSTE
Yeah, I mean, I think anybody coming to cannabis businesses, specifically e-commerce, you've got to start out with preparation, make sure at a very high level you have a system of accountability internally, task tracking, making sure you're staying on track. Again, I think that across every business type in this space. Taking advantage of affordable data before making decisions. We understand sometimes they can be a financial burden, but there's lots of free data out there through Headset, BDS, like us, anything you can do to kind of learn about who understands your market, setting realistic expectations, and then even kind of reach out to key players in your market. Do some reverse interviewing and, you know, see what they're learning, what they're experiencing. And then on the execution side, once you start getting into it, and this is more on when you're actually executing your e-comm, of course, you want to make sure you're following compliance and regulations. And this, you know, is again in any industry type. And then for me, what I always think about too is like longevity and scale. And this is a little bit more specific with this boom in hemp that I know we've mentioned a couple of times on today's show of all right, it's a great opportunity for e-commerce. You can sell and ship cannabis products, you can start building nationwide awareness. But for me, the big question mark is, is there longevity and scale there? Is there enough customers where you can continue to grow your business? But also is the government going to change their mind and a year or so what's going to happen to the Farm Bill, you could very well just now no longer have an e-commerce cannabis site. So I think that's also something for entrepreneurs to really focus on the e-comm landscape. And then, you know, just, you know, this is a little bit of a humble plug. But you know, if you're not sure, hire experts in these areas. You know, that's what, you know, we really pride ourselves on here at High Hopes, you know, we feel like we're experts in these arenas, especially e-comm, and it's a very evolving, quickly evolving space, just like this industry. So if you don't know, you know, hire experts out there to do.
ADRIANA HEMANS
No need to be humble, though.
DAVID PALESCHUCK
That’s our show for today. As always, that was the fastest 45 minutes of my week! We’ll be back next Thursday, December 21st chatting about the year in review and predictions for 2024. It’s going to be good!
We’ve recently released two online courses that have received rave reviews. “The 14 Cannabis Brand Archetypes” and “Creating A Meaningful Cannabis Brand” can be found on our site at www.brandingbud.com/edu - and you find the link right now in the chat. Remember to use our exclusive 25% discount code BBEDU25 for our LinkedIn listeners.
Again, we’d like to thank our sponsor, High Hopes – a boutique agency with over 10 years in the cannabis space specializing in branding, packaging, SEO & marketing. Be sure to check them out at www.highopes.co.
ADRIANA HEMANS
Hit that button to register so you don’t miss it. If you miss us in the meantime, you can re-watch today’s episode, or any of our previous episodes, on our LinkedIn page, Branding Bud Live, or on our YouTube channel. Please give us a follow on LinkedIn to stay on top of everything Branding Bud Live.
DAVID PALESCHUCK
And you can listen to our podcast on most podcast platforms including Apple, Google, Amazon, and Spotify. And of course, don’t forget to check out cannabis’s best-kept secret at www.brandingbud.com
Thank you everybody!
ADRIANA HEMANS
Thank you. Bye!
Please check us out there if you've missed any of our previous episodes.
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