It’s Best to Be Direct When It Comes to Wholesale Cannabis
B2B ecommerce is on the rise and according to the vast majority of industry indicators, and will continue to increase in the coming years. Why? Giving wholesale buyers an easy way to purchase your products at their convenience – from any device at any time – is becoming key to a company’s success. There are two main models by which to do this, Direct platforms or Marketplace platforms.
Marketplace platforms are exactly what they sound like – online shoppable listings of categories and products from a variety of brands competing next to each other. Some mainstream B2B examples would be Alibaba and Amazon Business. Examples from the wholesale cannabis industry include BudTrader and LeafLink.
Direct B2B platforms, in contrast, let brands create an ecommerce portal dedicated to only their products. This allows for easy purchasing for customers without exposing themselves to direct competition. Mainstream examples include Shopify and WooCommerce. At the moment, Apex Trading is the only example in the wholesale cannabis space.
Here’s a bit more detail on the differences between each of these two methods for selling your wholesale.
Wholesale Cannabis Marketplaces – Highly Visible, Highly Competitive
A lot of folks in our industry, especially the smaller ones, feel that using a wholesale cannabis marketplace will lead to more visibility for their brand and ultimately more sales. In some cases, this can be true. However, the downside is that marketplace competition often favors larger brands because of their name recognition.
What’s a small brand to do? Try lowering prices? One of the challenges with lowering prices in the wholesale cannabis industry, or any other for that matter, is that price is currently our primary indicator of quality. And, when you lower prices, you’re cutting into your margin, giving you less to spend on advertising or growing your business. Devaluing your product by competing on price is not a great strategy, but is often a necessary evil on wholesale marketplaces.
What’s more, marketplace sales often demand cultivators and extractors to have complex fulfillment and customer services processes in place to manage the volume of orders coming in. Challenges arise from one-off purchases, rejected orders, shipping delays, inaccurate inventory, and more.
New customer acquisition is likely the main allure of a B2B cannabis marketplace. Finding customers who frequently order as well as sell and represent your products well at retail is huge for your operation. But face it, customers willing to give you a try on a cannabis marketplace are taking a chance on you and your brand and, will likely, place a smaller orders. It’s a relationship quite different from that of your core customers. And, new customers picked up from a B2B marketplace are going to require a lot of hand-holding and a disproportionate level of support and investment in relation in contrast to the volume of sales they generate before they reach a level anywhere near your current customers.
Building your brand on a wholesale cannabis marketplace feels like a win. But, is the brand equity going to you or more so to the marketplace itself? It’s their website, their logo at every turn. When the marketplace provides fulfillment, it’s their customer service. When you buy on Amazon, who are you thinking about more, the brand of the product or of Amazon?
Direct Cannabis Platforms: Full Service from the Provider; Full Brand, Pricing and Relationship Control for You
Having your own wholesale ecommerce storefront or portal is just what your brand needs to show your customers what you’re all about. You can highlight the value of your products to your customers. At the same time, you’ll be providing them with the information they need without having to inconvenience them or your own back office with calls, texts and emails. This creates a seamless experience of order and reorder on their own time.
It’s as if your brand is both the front-man and lead guitar player owning the entire stage. You’re not forced to compromise price or positioning in the face of the competition’s offerings. You can price your products at their true value and compete on your service.
A direct wholesale cannabis platform hosts your portal, inventory, order processing, and can help support fulfillment, but you get to control the brand experience. What products they see, available inventory, pricing tiers, images, your brand story, payments and service – you’re in charge and those customers fall in love with you, not the marketplace.
Personalization starts from the moment they click into your brand’s custom storefront. They interact with your product and your product only with pricing, discounts and product sets tailored specifically for them. Plus, they can view their order history to find their favorite products.
Relationship is the name of the game in the wholesale cannabis industry and while marketplaces have oversold the idea of customer acquisition, they’ll be hard pressed to give you a fraction of the relationship fostering you’ll find with a direct platform. Your customers have been invited directly by you to view your offering with pricing and products designed to be most advantageous to the state of the relationship at that moment. Executed properly by your sales team, this will help to increase order volume, average order value and ultimately the lifetime value of your customers.
We recognize that there are certainly pros and cons to both the direct and marketplace models. To quickly summarize, marketplaces can deliver more exposure to more potential buyers. However, you risk eroding your margins to compete, loss of brand equity and losing control of the relationship. And, while the direct approach gives you control of pricing, brand and relationship, it doesn’t allow you as much access to new buyers in most applications. However, we should mention that the Apex Trading model does offer some solid acquisition exposure in a direct environment. To learn please feel free to reach out directly to us at info@apextrading.com. Or, schedule a demo here.