Our Experience Launching A Direct-To-Consumer Flower Brand

By Max Goldstein, co-founder and partner at OpenNest Labs.

A few weeks ago, Union Electric became one of the first cannabis brands in the state of California to offer direct-to-consumer (DTC) delivery with next-day drop-off across major metro areas.

We executed our DTC launch in partnership with Flower Co., a members-only e-commerce platform that recently started white-labeling their fulfillment and delivery services. The partnership enables Union Electric to:

1) offer competitive prices on top-shelf greenhouse flower, while capturing a significantly larger portion of the retail price; and

2) establish relationships directly with customers by capturing orders on our website, enabling long-term enterprise value and defensibility of the company.

Flower Co. is the first service provider to allow brands to take orders from statewide customers and in turn fulfill those orders. Until this service offering, the regulated cannabis industry has forced non-vertically integrated brands to operate through a myriad of cultivation, manufacturing, distribution and dispensary operators, each taking a significant cut of the retail price and playing gatekeeper between brand and customer. While some cannabis brands have established customer loyalty and recognition this way, it’s challenging to grow the lifetime value of a customer when a budtender or delivery service holds the key to the customer relationship.

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As Goldstein explains, “At Union Electric, we believe simplifying the supply chain and connecting customers to the origin of the products is key to a healthy and successful cannabis industry. By partnering with Flower Co, we have an opportunity to manifest our vision while reducing prices for the customer.”

There are several benefits to the model we’ve adopted with Flower Co. When a brand is able to drive sales on their website, they’ll have greater attribution of marketing dollars, execute more effective campaigns, and find an acceleration of mainstream visibility. Strong cannabis brands with loyal customers will also enable a more customer-centric industry, which will have a positive impact further down the supply chain. Complete transparency into inventory levels, product freshness, customer feedback, experience and consumption habits refine SOPs with the brand’s core customer in mind. In the case of Union Electric, we’ll be incentivizing our customers to provide product reviews, which will be aggregated and shared with our network of farms so they can always stay in touch with the latest consumer trends. For the first time, these farms can also get consistent feedback from statewide consumers. Our customers also get visibility into the origins of our flower and the stories behind the cultivation farms. Ultimately, by launching our own digital storefront, we can realize our vision for the California flower market and catalyze endless opportunities for product innovation and customer satisfaction.

To other brands considering a DTC launch, it’s important to build a strategy with product differentiation that doesn’t undermine a healthy dispensary channel, if it’s working. At Union Electric, we sell 1/8ths of small buds wholesale to dispensaries, allowing customers in our delivery zones to be introduced to our products at a very affordable price point. Selling the same SKUs at the same price as products sold in dispensaries doesn’t create any value for your customer and it’s a missed opportunity to reward an avid fan of your brand.

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Another consideration is the technology stack you choose to power your storefront. It’s not necessary to build everything from scratch, but it is important to find the right service provider. Some third-party service providers and plugins are more cannabis-friendly than others, particularly open source technology like Wordpress and Woocommerce. Depending on whether you are a licensed brand or not, payment processing will have various challenges but cash-on-delivery is always available with a licensed delivery partner like Flower Co.

Now that our digital storefront is live, we’re testing a number of different digital marketing channels and we're excited to share what we learn with the Benzinga community along the way.

Max is a co-founder and partner in OpenNest Labs, a Los Angeles based venture studio driving cannabis adoption as a force for positive change. Max also serves as the CEO of OpenNest’s first flower brand, Union Electric. He began his career at Google marketing local and social products and has spent the last five years operating and investing in emerging industries.

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