Ontario Hits a Homerun by Choosing Shopify to Manage Online Cannabis Sales

A new deal is proving that the Ontario government thinks very highly of local technology.

The Ontario government has announced a deal to use Shopify’s e-commerce platform to help conduct both their online and in-store sales of soon-to-be-legalized cannabis. The Ontario Cannabis Retail Corporation (OCRC), a subsidiary of the Liquor Control Board of Ontario (LCBO), will utilize the Ottawa-based Shopify’s platform to facilitate online as well as brick and mortar sales.

“Our top priority is fulfilling the province’s framework for the safe and sensible retailing of recreational cannabis for when it is legalized by the federal government,” said George Soleas, president and CEO of the LCBO.

Shopify is one of the largest tech companies in Canada and thousands have set up shops through the company’s easy-to-use e-commerce platform. Aside from being the main online purchasing portal, Shopify will also exist in physical stores to help process transactions on iPads and act as digital screens that will display product and health information. Shopify was selected as a partner in late 2017, according to reports.

The OCRC has pledged to make sure Ontario residents will have access to the exact same information—including dosage, social responsibility and more—both in-store and online. Choosing a retailer like Shopify who has experience with both online and physical retailers will allow Ontario to easily fulfill this promise.

Matt Gray is the founder and CEO of HERB, a Toronto-based media company that has become the defacto go to in all things cannabis culture. HERB boasts more than five million unique visitors a month and reports on cannabis news, as well as keeping tabs on information regarding strains and new products. They recently raised a $4.1 million funding round.

“The government of Ontario has shown a desire to effectively gather feedback from all stakeholders in the industry—licensed producers, patients, consumers, ancillary businesses, and more,” said Gray. “I believe this is a sign that the government is committed to a world-class rollout of cannabis in Ontario and there is no better partner than Shopify. Shopify and the LCBO will be able to provide Ontarians with a safe and reliable shopping experience that new customers will expect.”

“This is a home run for Shopify, the government, and consumers,” added Gray. “These are exciting times in the cannabis industry and this is a landmark partnership that is great for Canadians.

The Shopify platform will also be used to do what it does best for their existing e-commerce retailers, but tailored towards cannabis—that means managing inventory, dealing with accounting, looking after human resource operations and more.

“We look forward to combining our expertise as a socially responsible retailer with Shopify’s world-class commerce solutions to deliver the safe, informed and reliable shopping experience that our new customers will expect,” said Soleas.

The expected launch of federal cannabis sales will begin in July 2018 and 40 stores are expected to be open at the beginning in Ontario. That number will grow to 150 by 2020 if everything goes according to the Ontario government’s plan. Shopify and Ontario will essentially control a monopoly on cannabis sales in Ontario as the product will only be available through government-run stores. Some other provinces are allowing for private sales, though it’s not likely that will be the case in Ontario for a while.

Late last year the federal government decided that legalized cannabis will cost around $10 a gram and Ottawa will give the provinces 75 per cent of tax revenues to help set up the new purchasing regime.

Cannabis is an extremely lucrative market and Shopify, Ontario and Canada as a whole stand to make incredible profits from legalization. In late 2016, Deloitte pegged the Canadian cannabis industry to be worth $22.6 billion a year. That number spans retail, services, labs, production, cannabis tourism and everything else under the hazy sun.

When it comes to Ontario, the Parliamentary Budget Officer projected annual retail sales of around $2.1 to $2.3 billion. These figures are all estimates though, as it can be extremely hard to measure without having real figures to back it up.

One way to do so may be to look at states in the U.S. that have legalized cannabis. Through the first eight months of 2017, Colorado reached $1 billion USD in sales. The state has 5.5 million residents, whereas Ontario has 13.5 million. Again, it is hard to extrapolate that data, but all signs point to Ontario and Shopify selling well over $2 billion worth of cannabis in their first year of business.