Legal cannabis delivery gaining ground among NYC dispensaries

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When Long Island City dispensary NYCBUD launched delivery sales in February, owner Jonpaul Pezzo thought his shop would be inundated with delivery calls right away – but the actual trajectory has been different.

“It was really nothing for the first week and a half, which was stressful because we didn’t know what to do for staffing,” Pezzo said. “But we’ve noticed that it’s slowly ramping up.”

Right now, deliveries make up about 5% of NYCBUD’s sales, which Pezzo said is lower than he and partners expected. Even so, as they become more familiar with which customer demographics lean toward licensed delivery services and adjust operations with demand, Pezzo believes deliveries will eventually be a key – and growing – part of the store’s revenue.

“Where do I see it going? I envision delivery to be the main part of the business.”

Long before cannabis legalization seemed like a serious prospect, informal delivery services served as a primary retail method for the underground weed market. As many of the increasing number of licensed dispensaries coming online are also operating delivery services, entrepreneurs are working out the kinks, and figuring out in real time how important deliveries will be to their bottom lines.

Home delivery for licensed cannabis retailers appears to be on a growth trajectory, according to data gathered by Onfleet, a tech company that makes cannabis delivery management software.

Much like with apps like DoorDash and Uber Eats, the COVID 19 pandemic seems to have increased customers’ comfort with ordering weed online, according to Onfleet.

“Dispensary operators quickly adjusted their business models [in 2020], with 79% rolling out curbside pickup and delivery service,” Onfleet reported. “By December 2020, cannabis deliveries had increased 300% since the start of the pandemic.”

NYCBUD’s delivery range is basically a five-mile radius around the shop, with deliveries primarily going to Queens and parts of Brooklyn’s Greenpoint neighborhood, Pezzo said. Of the shop’s 25 employees, five are delivery drivers who use bicycles and electric scooters to make their stops.

The store usually receives just a few delivery orders each day, so employees also do budtending or fulfillment when they’re not delivering, Pezzo said.

“You don’t know if one day you’re going to get a rain storm and everybody who would normally come into the store would just flip the script to delivery, so it’s a delicate balancing act,” Pezzo said.

But the store is starting to see regular delivery customers who tend to be older and more comfortable buying from a licensed store rather than unlicensed stores, or underground delivery services that operate on encrypted apps like Telegram, he said.

Although New York’s legacy operators long ago cornered the delivery market, Pezzo sees an opportunity to expand his delivery customer base. The residential buildings in his area are mostly occupied by New York transplants – rather than native New Yorkers – many of whom don’t have connections with legacy dealers and are spooked about buying illegally.

In Manhattan’s Chelsea neighborhood, VERDI Cannabis is also figuring out how to expand its delivery customers, owner Ellis Soodak said. The store offers no-fee delivery to anywhere in Manhattan and has one delivery worker who uses a bike. VERDI is looking to hire a second delivery worker.

Sales at VERDI’s brick-and-mortar store make up the vast majority of the business’ revenue, Soodak said, but they’re doing a few deliveries per day now. Some customers are new consumers who don’t want to buy from illicit shops, and others are people who want to buy legally, but don’t want to be seen in a dispensary.

Some of VERDI’s delivery customers are people who also buy from legacy delivery services, and Soodak believes VERDI can win the loyalty of those customers.

“If you’re contacting a Telegram number, they’re like, ‘I’m going to be there from 5 to 7 p.m. – and you’re ordering at noon – I only have these three strains right now, and it’s $50 per eighth,’” Soodak said. “We’re delivering $35 eighths with 500 different SKUs on our menu, all safe, tested products.”

However, Soodak and Pezzo both said complicated payment systems can be alienating to customers, especially older people. New York’s delivery regulations don’t allow for cash sales, and most credit card companies don’t allow customers to pay for weed with them.

This means they have to enter bank account information into an online portal, which, Pezzo said, is too confusing for some, while others have misgivings about entering such information into an online platform.

Outcompeting with better service is an important part of VERDI’s delivery model, Soodak said. VERDI’s delivery driver is well-versed in cannabis, and knows the stores’ menu as well as any budtender on staff. Rather than operating like pizza delivery drivers, Soodak said, VERDI’s delivery workers are more like door-to-door salespeople who can tell customers all about the products they’re buying.

Soodak hopes VERDI will eventually do about five deliveries per day, which would add about $150,000 to the store’s annual revenue.

Happy Days dispensary on Long Island is rolling out a delivery service in the next couple of weeks, said Paul Lepore, co-owner of the Farmingdale store.

The store, which is doing about $425,000 in sales per week at its brick-and-mortar shop – according to Lepore – will start off with a relatively small delivery range, and will expand over time to cover most of Nassau and Suffolk counties.

Lepore wants Happy Days to eventually have 10 vehicles with about 15 staffers dedicated to deliveries. Over time, Lepore believes deliveries will account for an increasing share of all legal retail sales – especially when he looks at trends in the non-cannabis world.

“You see stores closing all over the place, you see more online banking … people are not going to physical brick-and-mortar locations across a wide variety of industries,” Lepore said. “I definitely think it’s a necessity and I definitely think it’s heading in that direction.”