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Middlemen Brokering Cannabis Products and Services

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Written by Alex Mirzaian

With any newly created industry, there are, at first, just a few core fans. Not everyone jumps on board until there is some sort of adoption. For example, cryptocurrencies are a fairly new craze. For the first seven years, no one really knew about them. But cryptocurrency slowly achieved notoriety over the next few years. Once people realized they can make money off it, interest in cryptocurrency enlarged. It still hasn’t reached mass adoption, but it is well on its way.

Money is the biggest motivator for an industry to get bigger. Cannabis is going through its own movement since so many people are starting to use it, but it has been a long time in the making. The plant’s illegality drove up demand. With the supply going down, however, cannabis became a hot commodity. It wasn’t until 1996 when California decided to legalize medical cannabis that people decided they can make legal money, and a lot of it.

Making Money from Cannabis

Legal money in the cannabis industry is growing. Not only is the market cap getting bigger, which means there are more people using it, but there are more methods available for using different types of cannabis-derived products. For example, vaporizers for wax and oil have recently been the leading type of vaporizer to buy because many come pre-loaded with oil. The result of consumer interest in vaping cannabis not only created a larger market for vaporizers but also for the extraction processes needed to create vaporizable products.

Products

The main way to make money off cannabis is to either grow the plant or sell THC, CBD or terpenes by owning a dispensary. Although growing the plant many no command the profits before, it is still producing some profit.

Drop-shipping Cannabis and CBD

Drop-shipping is a business model that has recently augmented due to the internet. Drop-shipping is the idea of profiting off the difference of a product that another company sends out for you. You sell a specific product and take the money for it. You pay another company to ship that product out to your customer. You pocket the difference in price that was paid. This means that you don’t have to store products.

Drop-shipping cannabis is becoming huge in Canada since the Canadian Post Office allows you to ship cannabis throughout the country. In the USA, cannabidiol (CBD) is a hot item to sell. Many companies are selling CBD products and many work by the same business model. One of the biggest drawbacks to drop-shipping is the lack of compliance, permits and responsibilities. You are not a dispensary at that point so you don’t need extra permits or licenses you wouldn’t get. The biggest drawback to drop-shipping is that the profits are much less than selling CBD directly.

Ancillary Products

During the 1849 California Gold Rush, who got rich? The gold diggers? You’d be surprised to find out it was the ones selling the picks and axes. Not everyone struck gold, but everyone needed the products necessary to start digging and mining. The stores selling the diggers the tools were the ones with steady cashflow. This is the same idea when it comes to the cannabis industry. If you focus on selling ancillary items used in conjunction with cannabis products like water pipes, papers, lighters, glass, you will increase your total revenue per customer.

Compliance and Safety

As legalization efforts increase, more agencies will draft regulations and testing requirements for health hazards. When you walk into a dispensary, everything containing cannabinoids gets tested to better ensure consumer safety. Some items will be more potent than others. Some people are looking for specific delta-9-tetrahydrocannabinol (THC):CBD ratios while others are looking for a higher THC content.

Analytical labs also test for any residual pesticides that might be contaminating the biomass. Pesticides are used to keep insects away and other sprays can be used to stop the plant from rotting or getting some sort of virus. Pesticides can stay on the plant long after it is washed. Pesticides can even get through the extraction process and concentrate in extracts.

Labs also test for heavy metals. Vape hardware is made from many parts and different atomizers may contain more heavy metals than others. Heating up your atomizer can kick down certain heavy metals which are then inhaled. The heat slowly erodes different metals like lead which can seep into your liquid. [1]

Drop-shippers, however, don’t have to test products since they will be selling the final products that they have been given, products that have already been evaluated for their chemistry and safety.

Services

Besides selling products, there are also services you can run. Marketing and consultation are big services, of course, but so are delivery services. Delivery services are mobile dispensaries that sell through an app. Once purchased, cannabis products are then delivered to the buyers. All you need is a valid ID or passport if you’re visiting the country. It is super convenient, but you do have to pay a little bit more for the service being provided for you.

We are living in a convenient time where everything can be brought to you, such as food from Postmate or Doordash. Other services can save you time by driving you somewhere, like Uber. Now you can have cannabis delivered to your door. Drop-shipping can be done with services too. All you need is a platform to advertise your business like Leafly or Weedmaps.

Reference

  1. Williams, M. et al. “Elements Including Metals in the Atomizer and Aerosol of Disposable Electronic Cigarettes and Electronic Hookahs,” PLoS ONE, Vol.12 No. 4, 2017, pp. e0175430. [journal impact factor = 2.776; cited by 27 (ResearchGate)]

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Alex Mirzaian

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