Canadian Cannabis Producers Look to Stay on Top of E-Commerce Trend

Matthew Carr By Matthew Carr
Emerging Trends Strategist

Market Trends
This is individual research and does not constitute investment advice.

I laugh at the world we live in. It’s so bizarre sometimes, I can’t help it.

The other night, my wife and I were reminiscing about when we first got cable television. We remember our first computers and the first time we logged on to the World Wide Web.

My wife held up her phone. “Kids these days will never know that these can do infinitely more than our desktops ever could.”

I laughed because both of us are dangerously close to being classified as “millennials.” Also because during a commercial break, she placed an order on Amazon.

This is the world we live in.

From time to time, we say to each other, “Hey, I’m going to the store. You need me to pick you up anything?”

But more often it’s, “Hey, I’m placing an Amazon order… Need anything?”

And some random item pops into my head, whether it’s drycleaner bags, staples, flip-flops… whatever.

By the next day, it’s delivered to my door.

And some day – probably sooner than we all think – it won’t be a driver that I wave to and thank.

It’ll be a drone dropping off boxes of random goodies in front of my house before floating away into the sky.

Flying High Online

Over the last several years, I’ve shown investors how to profit by targeting the rise of e-commerce and online retail.

Brick-and-mortar (BAMs) stores have struggled to keep up with the rapid transition to online and mobile. Malls around the country are being sunk by rising vacancies and falling foot traffic.

But one of the world’s newest global retail industries is embracing the changes brought by the digital age.

And one government’s recent deal with a major e-commerce player is likely just the first of many to follow.

The Great White North Leading the Way for a Digital, Green Future

In Canada, the legal cannabis industry is moving ahead at full steam. It’s buoyed by support at the federal level for not just medical but also recreational marijuana use.

In fact, in a few short months, recreational weed sales will be legal nationwide in Canada.

And the government of Ontario is tapping into the e-commerce market by signing a deal with Shopify (Nasdaq: SHOP).

The e-commerce retailer will provide its online and mobile platform software to the Ontario Cannabis Retail Corporation – a subsidiary of the board that regulates liquor in the province.

For weed and e-commerce companies, this is an important step forward. Legal cannabis customers will easily be able to place digital orders.

But for those folks who were excited to check out Canadian BAM weed shops: Don’t worry. They aren’t dead before they launch. Shopify’s software will be used on iPads at physical locations to process transactions, track inventories, and perform other accounting and human resources functions.

Shares of Shopify have already had a great performance in 2018…

Source: Barchart.com

Year to date, shares of Shopify have gained more than 40% and are outperforming the Dow Jones Industrial Average, Nasdaq and S&P 500 by a wide margin.

Over the next two quarters, Shopify’s revenue is expected to jump more than 50% year over year. For 2018, total revenue is projected to surge more than 48% to almost $1 billion.

But the partnership in Ontario could be the start of a whole new market for Shopify and e-commerce companies.

Plus, pot and online and mobile ordering are just the continuation of a business model that’s been effective for decades. Everyone knows weed delivery services have been successful for years – even though it’s an illicit substance.

Medical marijuana orders and delivery services have picked up in the handful of U.S. states that allow dispensaries to operate.

There’s an ever-growing number of marijuana apps, plus pot-focused cryptocurrencies are constantly launching as the adoption of blockchain technology continues to rise.

Old-School Business Model Meets New-School Tech

In the U.S., the legality of cannabis is fragmented. At the moment, eight states and the District of Columbia allow recreational use, and 29 states allow medical use.

But it’s still considered a Schedule I drug at the federal level.

That creates several problems for retailers.

Up until recently, U.S. dispensaries were all-cash businesses. Banks often don’t want to touch the money.

Some dispensaries have started taking credit cards.

In Canada, without the federal restrictions, the transaction process doesn’t have barricades like these. And a few cannabis producers already sell their medical products through web portals.

Over the next few years, Canada’s legal weed market could bring in as much as $22.6 billion per year.

There are no hard numbers at the moment of what Canada’s online weed sales could be. But the potential could be far greater than that of BAMs – for both medicinal and recreational use.

Here at Energy & Resources Digest, we always try to keep energy and resource investors informed of the latest innovations in tech. And to me, e-commerce technology is another way to get in on the cannabis action. It’s a no-brainer at this point.

Good investing,

Matthew