The Client’s Background:
Origins is a multi-location cannabis store, founded in 2015, and spans 6 different states currently. They provide cannabis in a variety of forms including flower, concentrate, edible, and more, in addition to a merchandise line and coffee. Their mission is to create unique and individual experiences for customers in their shops.
Origins Competitive Advantages
Technology.... On top of that, they also curate a unique experience with the consumer and employee-facing technology they use. One of their other main goals is to take the bias out of the shipping experience. They use a variety of vendors for products and want to make the shopping experience as open and honest as possible.Credit card processingCustomer experienceWhen you walk into an Origins store, you will notice the unique layout immediately. The product is more shoppable because they make it more approachable, and make a noticeable effort to make the terminology understandable. Origins tries to take advantage of the “Canna-Curious” crowd, the fastest-growing customer type in the space. They bucket the cannabis strain into a ‘lifestyle’. For example, you can walk to the “Adventurous” section of the store if you want to be active after you consume the product. Other examples of lifestyle are self-discovery, party-goer, social, and more.
Origins Executive Team:
Origins has a group of 4 partners that have been serial entrepreneurs of 20+ years. Two of them come from the cannabis space and two do not. They felt this offered a fresh perspective bringing people in that are less familiar with the space and the goal was to speak to people that were curious about the product. In fact, over 50% of their customers are from the “Canna-curious” group.
The Client’s Problem:
After cash itself, credit cards are now the second most common form of payment in the United States. However, the challenge in this space is that because the product sold is not federally legal, credit cards cause an issue for retail owners looking to accept them. This stems from the fact that Visa and Mastercard are publicly traded companies, and as a result, are very hesitant to allow transactions for a product that is not federally approved. While this may change in the future, this is the current dilemma. One additional added layer of complexity for Origins is that they really value consistency across their brand. While there have been solutions that have come and gone on the market, they have mostly held out until they have been able to find one that they are happy with. They did not want to give their customers a solution, only to have to pull that back at a later time.
The Client’s Search:
There have been a few solutions that have come onto the market in the last few years when it comes to credit card processing. The main theme is that the following options have still been on the Visa and Mastercard rails, so they have a shelf life until being shut down. They follow the “Safe Banking Act”, which makes it very clear that until cannabis is federally legal, they will not allow these interactions through their system so they do not have to worry about the potential public backlash. Wallet ConceptThe first solution on the market was a concert similar to adding a credit card into the wallet on your iPhone. In a nutshell, you could purchase a voucher from the retail store and use them as ‘credits’ at the store. There was a few years stretch where multiple surfaced, but the majority were shut down by Visa/Mastercard quickly. Since this was the first solution, there was a rush to try this, but it did not last that long. Additionally, there was a big risk where some of the vendors were not paying out the retail locations. Ultimately, Origins stayed away from this option. Pin-DebitPin-debit comes into play when you have a debit card inserted via EMV/Chip into a reader. Again, Origins prefers to stay away from this as they try to focus on consistency in their brand across all locations. The issue is that this is still on the ‘rails’ of Visa and Mastercard and will inevitably get shut down for that reason. They do not see having this option as a short-term solution for their customers, and then taking it away, as a positive. ATMs/CashOrigins supplies ATMs in all of their stores for consumers. They add a $3 service fee for each transaction. This way, customers know what to expect when they walk into an Origins location.
Payline’s Solution:
Getting off of the Visa and MasterCard rails to avoid being shut down. With this solution, the transaction is in a peer-to-peer fashion, similar to Venmo, so you are sidestepping the previous issue. Adding to the revenue numbers by offering credit card acceptanceComplianceConsistency in the brand Increased return customers
Industry Insights/COVID-19 Impact:
21 states now offer cannabis in a legal fashion, continuing the rapid growth of the industry. Because of this, there are a lot of efforts to capitalize on the rush for the product. However, as Origins pointed out, this does not mean it is easy for a retail location to be profitable. With the emergence of COVID-19, margins have become razor-thin. Vendor prices have risen, shipping times have been elongated, and other factors continue to place importance on credit card processing within the cannabis space.
Why Origins Chose Payline:
First and foremost, this solves the consistent issue with Visa and Mastercard. As we saw with the wallet solution and pin-debit, that is inevitable if you stay on their rails. With this solution, that roadblock gets eliminated. Revenue possibilities. When customers can pay with credit as opposed to cash, it is inevitable they will spend more. They are also more likely to return to the store, as Origins has shown. Compliance is factored into the equation. With credit cards, security is key and this solution is compliant. The ability to have this be in every location solves the idea of consistency. Consistency in user experience, consistency across locations checkout experience, and everything in between. With this solution, customers have the ability to add funds that would roll over to a future purchase. Origins has found that this has led to a greater number of returning customers.
Obstacles During Implementation:
Training is the biggest key for cannabis locations to get set up with this solution. Origins got set up with Payline, which offers training lessons during onboarding. The main thing that is important is that the customer will need to create an account during their first transaction. This is done with a text straight to their phone.The business also has a choice if they want to include hardware in the checkout process or not. The staff would either key in the amount and send the text to the customer, or key it in and swipe the card through a piece of hardware.
Breaking Down the Added Revenue:
In the markets that this solution is offered, Origins has found that customers spend an average of 50% more per visit. As we know, consumers tend to view their personal credit as “funny money” since they do not necessarily need to pay for it now. When you give them the ability to go that route as opposed to physical cash pulled through an ATM, you can see how this increases sales. If a customer generally spends $35 per visit if they are paying with cash, then they will spend, on average, $70 with a Visa or Mastercard. It is not hard to see the numbers adding up once it is known that credit cards are accepted at your location. Scalability From Origins perspective, there is no telling how high the ceiling is for this solution. Since the main issue of getting away from Visa and Mastercard is solved in this case, it seems to be a matter of outreach as opposed to a future roadblock. As a note, AMEX is typically business-to-business interactions, so there is not as much thought in them coming into the question.
