Shopify is planning its strategy on dominating the booming cannabis industry. Shopify is a Canadian e-commerce giant boosting a market capital of over $15 billion
Booming cannabis industry. Earlier this year, the company signed an agreement with Ontario to power a multipurpose online store with marijuana sales. This deal has made Shopify become a major player in the cannabis e-commerce sector.
Similar to the sale of liquor in the province of Ontario, cannabis will only be sold through provincially-run Ontario Cannabis Store (OCS) outlets instead of privately-owned dispensaries, giving the provincial government — and its associates in the private sector — a monopoly over millions of potential customers.
A public company such as Shopify will experience less risk when offering services to the cannabis industry in Canada, which has already legalized the use of marijuana at the federal level. On the other hand, the federal government of the US has a negative attitude towards cannabis.
According to Loren Padelford, who is a VP and GM at Shopify responsible for promoting the company’s cannabis retail strategy, one of the biggest things is how fast this market is going to develop. He also said that retail is generally in this massive transformation, and they believe that as this becomes legal and goes out to the market it’s going to change dynamically.
Cannabis is a very big opportunity. According to a report from CIBC, the Canadian legal marijuana industry will be a $6.5 billion industry by 2020, bypassing the sales of liquor and the private sector will account for $1 billion of this sales.
Shopify is planning to start its massive market in Ontario and the province has a population of 13.6 million people and includes Toronto which is the largest city and financial center in Canada. The province of Ontario has a GDP of over $830 billion.
The OCS is set to install many brick-and-mortar stores, and also permit the online sale of cannabis, which is the focal point of the entire retail industry.
Padelford said that it’s a natural fit since the cannabis industry is set to become a massive retailer. This deals with offering a retail technology platform.
The software of Shopify will also be utilized to show product information and also manage deals in physical OCS stores.
According to Padelford, Shopify’s interest in the cannabis industry started a few years ago when they associated with leading Canadian cannabis producers, or LP’s, to help distribute medical marijuana. When the federal government began an amendment to legalize recreational cannabis nationwide, it became an opportunity for Shopify.
When the government of Ontario began seeking partners in the private sector to help establish cannabis sales, they immediately realized Shopify’s retail experience and the strength of the Shopify software platform. The government of Ontario was in need of a technological platform and an associate who could scale at a fast rate.
However Padelford didn’t mention if Shopify is setting its sights on the US market, but he mentioned that the company is communicating with partners worldwide.
Padelford believes that Shopify should solely focus on the Canadian market.