Uber Eats’ entry to cannabis market worries small retailers

A thriving market with razor-thin margins has smaller and independent cannabis merchants struggling to compete against larger chains

Photo of an individual cutting cannabis leafs
A rapidly growing cannabis industry presents challenges. (OBSERVER FILE PHOTO) Photo courtesy @Crystalweed/Unsplash

An official partnership between Uber Eats and Tokyo Smoke was announced Nov. 22, letting customers purchase from the large-scale cannabis retailer through the Uber Eats app.

Though some locally owned and operated cannabis shops in Toronto are concerned about how the partnership will affect smaller businesses, many are hopeful it will combat the stigmas surrounding the cannabis market.

Jeff Pang, founder and CEO of Green Merchant, a small Toronto cannabis chain with six locations, believes smaller retailers are left in the dark due to the inability to advertise like larger businesses. Many shops expect to operate at a loss for up to two years after opening because of operating costs and razor-thin margins.

“It makes me feel a little bit alarmed about the imbalance that’s happening right now between the small owners and the bigger companies,” Pang said.

Photo of Jeff Pang and his staff at one his Green Merchant Cannabis locations.
Owner Jeff Pang, right, stands alongside team members at Green Merchant in Liberty Village, Toronto. Photo courtesy Jeff Pang.

Currently, customers using this new feature on the Uber Eats app can order for pick up after confirming their legal age and provide valid ID upon arrival at any Tokyo Smoke location. There have been no announcements about adding additional retailers to the Uber Eats app.

Uber announced this partnership shortly after the launch of Uber One. This new program allows customers to get all of Uber’s services inside a $10 membership with exclusive perks and discounts.

Because companies like Tokyo Smoke have a larger bankroll, they can deploy strategies and tactics to gain news coverage, according to Pang. This continually makes it difficult for smaller retailers to compete with the bigger chains.

Seeking to help the cannabis retail community, Pang founded GrassFleet, a cannabis delivery website focused on supporting smaller retailers like Green Merchant.

“What my company is doing is we are actually finding smaller retailers to join us to cut costs and try to compete with the bigger guys in some ways,” Pang said. “No small retailer is able to find a cost-effective way to ensure delivery right now.”

GrassFleet will begin operating out of six Green Merchant locations, with plans to add nine additional retailers before the Dec. 23 launch date. Pang seeks to create a system that will allow smaller chains to deliver cannabis products to their consumers safely and cost-effectively.

Most cannabis retailers carry the same inventory because they can only purchase from the Ontario Cannabis Retail Corporation under provincial law.

Pang believes that due to Ontario cannabis retailers stocking almost identical inventories, the product is no longer cannabis but the quality of service that customers can expect while shopping. He says the priority for smaller retailers is creating a returning client base rather than being profitable.

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Uber has been gradually expanding into different fields in an attempt to create an all-in-one service for its users. Last year, they finalized the USD $1.1 billion purchase of Drizly, an alcohol delivery startup.

Maxime Jacques, founder of Whappy Cannabis, believes the partnership between Uber and Tokyo Smoke could “make or break” independent cannabis chains.

Jacques believes that if the partnership impacts the cannabis industry as it did the restaurant industry, it won’t benefit small businesses. If the result leaves independent chains reliant on these platforms because of the fear of “not existing,” it would leave him with a less favourable opinion.

Photo og Whapy Cannabis shop located on Warden and Lawrence in Toronto.
Whappy Cannabis in Scarborough at Lawrence and Warden avenues. Photo courtesy Maxime Jacques.

“However, this could help the industry’s stigma,” Jacques said. “It could bring it mainstream and showcase to people that it’s a legitimate business and potentially get more sales to stores and away from the black market.”

Despite the rapidly growing number of cannabis shops, according to Statistics Canada, legal cannabis costs 55 per cent more than black-market cannabis, a comparison of CAD $10.30 per gram to $5.73 per gram.

A national cannabis survey by the federal government in 2019 estimated that about 42 per cent of all cannabis sales in Canada originate from the black market.

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Posted: Dec 13 2021 9:58 am
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