While San Jose businesses struggled and shuttered during the COVID-19 pandemic, one industry had its best year yet: cannabis. And local retailers say delivery services had a lot to do with it.
According to San Jose Police Department Division Manager Wendy Sollazzi, tax revenue from cannabis sales is expected to provide the city with $17 million for fiscal year 2020-21—the most profitable year since Prop. 64 legalized recreational retail shops in 2016.
That’s in line with the California cannabis market as a whole, which hit its highest yearly sales numbers since recreational sales began in 2018—and new accessibility services were a driving force. According to the MJBizDaily, the psychoactive plant raked in more than $4.4 billion in the state throughout 2020, up 57% from 2019.
Cannabis retailers in the city said pandemic restrictions that kept customers away turned into unique opportunities for stores to market online orders, delivery and curbside pickup.
Regular store consumers already familiar with the product transitioned to at-home delivery, while those toking cannabis for the first time could now consult with retail staff virtually, said Dennis O’Malley, chief operating officer of The Parent Company, which operates the San Jose-based cannabis retailer Caliva.
“Online orders for delivery, or somebody placing an order and going into the store for a pickup, that rose 51% during the pandemic,” O’Malley said.
Referencing ride-share services like Uber and Lyft, Airfield Supply Company spokesperson Chris Lane said the business applied key elements like convenience and expanded order options for its customer base to continue growing amid a global pandemic.
“We had three (delivery cars) right before COVID-19, jumped to four on the day of the shutdown just by coincidence—and now we’re up to 12,” he said. “Eight of them are full-time Teslas.”
At the San Jose-based cannabis retailer, Lane said online orders, curbside pickup and delivery sales quadrupled following Santa Clara County’s shelter-in-place orders on March 16, 2020.
The tax rate for sales and delivery among the 16 registered retail locations in San Jose remains at 10%. In terms of delivery, the state saw an increase of 17%—with 12 of the 16 cannabis businesses in the city open for delivery, according to the San Jose Police Department.
Santa Clara County paused recreational cannabis sales on April 1, 2020, deeming that only cannabis for medical purposes was essential. But there was one exception for recreational users—delivery orders.
The pause was lifted on May 22, but customers stuck with the new routine of online orders and delivery, especially curbside pickup.
O’Malley said Caliva was the first cannabis retail location in the nation to offer curbside pickup when the pandemic made customers hesitant to walk into the store.
“We were the first ones to reach out to the state Bureau of Cannabis Control and say, ‘Hey can we do this curbside pickup?’ And they were very accommodating,” he said. “And so we established that extremely quickly and we found our consumers appreciated the convenience and safety of delivery and curbside pickup.”
Mike Bitar, co-owner of San Jose cannabis retailer White Fire, said while delivery increased for them during the pandemic, curbside pickup orders went through the roof.
“Pre-pandemic we were only seeing single-digit percentages compared to our total sales, but now we’re seeing up to 40%,” he said. “Customers order ahead, pull into one of 10 stalls at our facility, and we have cameras outside that see them coming so we have someone out to get them their product. They’re in and out in three minutes.”
Like The Parent Company, Bitar needed approval before launching curbside pickup. The service, along with delivery and online ordering, continues to comprise a substantial portion of overall sales even as other businesses transition back to pre-pandemic operations.
“It was a dramatic change in terms of consumer behavior through the pandemic, and we don’t see (those services) swinging back to pre-pandemic percentages,” Lane said.
Contact Vicente Vera at [email protected] or follow him @vicentejvera on Twitter.