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Fee Sensitivity in the Cannabis Industry

Cannabis
March 2, 2023
Olivia Bobrofsky

Customer loyalty is a key ingredient for business success, but it’s easier said than done. Having a strategy to grow your business while keeping customers happy is crucial. Unfortunately, with the capital-intensive nature of the cannabis industry, some retailers have tried to offset operating costs by passing off certain transaction fees to customers that choose cashless payment options at checkout. How much difference can a few dollars make to customers already accustomed to paying high cannabis taxes? Well, a recent survey of U.S. shoppers showed that 49% reported abandoned online purchases in the past due to additional costs added during checkout.

Limiting unnecessary fees plays a vital role in customer happiness. The trend of passing fees onto consumers is an incorrect precedent that’s been set by the prominence of Cashless ATMs in cannabis retail. After warnings from VISA and other major financial institutions, Cashless ATMs were shut down nationwide in December of last year. So what’s next? Dispensaries should consider absorbing the incremental cost of third-party transaction fees when offering ACH bank transfers at checkout. In the long run, it’s a small price to pay for customer satisfaction and long-term loyalty. 

Consumer preferences have been strongly influenced by cashless and digital payment options, but some dispensaries are still stuck relying on cash. There are a growing number of eCommerce platforms serving the cannabis industry, but close to 70% of cannabis businesses still rely entirely on cash. However, the setbacks associated with operating a cash-only business are threefold. Direct costs like labor, transportation, bank fees and cash handling errors are all hard costs of cash that are buried as expense line items. There are also indirect costs like lost sales due to having limited cash available for spend or limited spending due to a lack of cash on-hand. Cash also comes with intangible setbacks like increased risk of theft, slower speeds at check out, and added stress for business owners and consumers.

So how can integrated cannabis eCommerce enhance the in-store experience for shoppers while helping businesses build customer loyalty and increase sales?

Embedded eCommerce Pricing   

One suggested strategy for earning more through a cannabis eCommerce channel is to slightly adjust the pricing — emphasis on slightly. A small change is likely to go unnoticed by patients and customers and will help offset the fees associated with offering convenient shopping options like online ordering and prepayment. For example, offering an in-store price of $55 for 3.5g of flower and an online price of $56.50 is an effective way to counterbalance processing fees without adding additional costs at checkout.  

Surcharges Have Strict Regulations and Are Illegal in Several States

Not only are surcharges and convenience fees a deterrent for consumers, but in some states it's illegal for merchants to add fees to transactions for nontraditional payment methods. States that prophet credit card surcharges and convenience fees include California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. This is another reason why Cashless ATM checkout is seen as controversial and blurring the lines of legality.  

The Aeropay Effect with Integrated eCommerce 

One way to decrease cash dependency is by offering integrated online prepayment with Aeropay. Aeropay’s payment platform can be easily integrated with your store’s existing eCommerce cannabis checkout process. Tracking your dispensary’s finances via the merchant portal makes everything simple. At any time, merchants are able to access real-time reporting totals and data sums for accurate bookkeeping or restocking product information. Aeropay offers an open architecture integration system, with the ability to pair with many vendors. Premier cannabis eCommerce platforms such as Dispense, Mosaic, FlyHi, IHeartJane and others are all partners with Aeropay.       

Partnering with Aeropay gives your business access to cutting edge tools that guarantee customer acquisition, retention and overall happiness. Enabling online prepayments with Aeropay has shown to drive higher basket sizes and increase a dispensary’s rate of online orders. Aeropay helps keep customers loyal while simplifying the checkout process for customers and staff alike. Here’s what the stats reveal about working with Aeropay:

  • - Dispensaries saw a 25% increase in average cart size
  • - Dispensaries experienced a 30% increase in completed online orders
  • - Dispensaries reported a 37% increase in returning online customers  

Sign up for Aeropay and offer seamless digital payments without additional fees. Passing fees on to customers is very likely to cap the size of orders and deter the adoption of payment methods that generate more revenue. The additional revenue produced from creating and sustaining a loyal consumer base far outweighs processing fees. Adding additional fees at checkout is an inconvenience for customers, and it’s also a practice that is detrimental to the overall image of dispensaries. With Aeropay, dispensaries can use cannabis eCommerce to stop relying on cash, stop passing fees on to customers, and operate like any other modern retailer.

Author

Olivia Bobrofsky

Enterprise Sales & Account Manager
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