Rachel Notley’s Alberta NDP government recently announced their plans for the sale of marijuana when it becomes legal on Canada Day. Retail sales in the province will be provided by private operators. However, online sales will be provided by a government-run entity.
Notley has attempted to appease people on both sides of the aisle with her suggested sales options. Albertans are at heart free marketers so a free market option for the majority of sales truly helps avoid an inevitable move to private retailers after the 2019 election. However, by creating government control over online sales she does play to the fallacy of a large revenue windfall associated with marijuana legalization.
Tortured Logic for Online Sales
The Globe ran a story on an Edmonton resident, Candice Beyer, who appeared to be an ideal customer for legal online marijuana sales:
“I’ve never liked the idea of buying it off of random people [on the street] that I don’t really know or trust,” she said. Ms. Beyer is exactly the type of customer that governments hope to bring out of the black market once recreational cannabis is legalized next year.”
The Globe is correct that current marijuana sales often require pot smokers to purchase from unsavory characters. That is the nature of any illegal transaction. However, the Globe’s conclusion doesn’t flow from Ms Beyer’s current reasoning for purchasing online. The Globe states:
“However, online sales might be as lucrative – or more so – as people already accustomed to shopping online look for a way to get the drug easily and, for the most part, anonymously.”
Ms Beyer currently buys pot online because she doesn’t like buying from ‘random people’ that she doesn’t ‘really know or trust’. Legal retail sales deal with Beyer’s concerns. The ability to walk into a legal marijuana shop means that Beyer will no longer need to buy off of ‘random people’. When sales become legal the need for ‘trust’ in the retailer evaporates
Cost and Convenience Become an Issue
When marijuana sales become legal the two key decision factors for potheads will be cost and convenience. These two important factors are interdependent when considering the viability of online sales. Alberta will have private operators provide marijuana sales at brick and mortar outlets. Retail sales of alcohol in Alberta are incredibly convenient. There is an incredible number of outlets for the purchase of alcohol throughout the province.
The convenience of a large number of pot shops would be more important than home delivery. Home delivery would require less effort to purchase but would be more inconvenient than retail sales. Marijuana is often an impulse purchase and someone who really wants to smoke a joint may not want to wait for delivery. Overnight shipping could minimize the delivery time. However, overnight shipping would undoubtedly raise the cost associated with online sales.
There will be a market for online marijuana sales. However, it does not appeal intuitively that marijuana will be more lucrative than real life purchases. If somebody feels like smoking a joint the feeling is relatively immediate. It makes sense that someone with a craving to get high will want to pick up some weed, they might then stop by a convenience store for some munchies, and head home to get stoned. Somebody with the urge to get high isn’t going to want to wait a few days, or longer, to get their ganja.
There will likely be a small market for online marijuana sales. Those who live in remote areas, or rarely leave the house, are among the potential market for online marijuana sales. However, any belief that online marijuana sales could be more lucrative than brick and mortar purchases is out of touch with the realities of the market.