HIGHLIGHTS
- Namaste shifts business model to sell LPs’ pot for them online, rather than compete with own cannabis sales
- Latest move turns Namaste into LP middleman, rather than competitor
- Namaste aims to improve customer service by authorizing staff to fix issues
In the wake of a management overhaul and cease-trade order, Namaste Technologies Inc. has changed the way it sells pot in an effort to build investor confidence and improve gross margins.
Instead of buying wholesale cannabis from licensed producers (LPs) to sell for Namaste online, the Vancouver-headquartered company now aims to be the e-commerce platform where Canadian growers can sell their own product via a fee-based system. Previously, Namaste was seen as a competitor to LPs.
The company, which operates globally, is now focusing on growing in Canada.
“We are building in Canada a modular business proposition. It’s an offering that we can then replicate in other countries,” said Meni Morim, interim CEO for Namaste.
“The growth engine is going to be from cannabis. These products are gaining more traction around the world. We’re perfecting the model in Canada. We’re looking at every aspect of the business to make it streamlined.”
Earlier this week, True Leaf Brands Inc. – which sells hemp-based supplements for pets – said it signed a supply and purchase agreement with Namaste for its products to be sold on CannMart.com, a medicinal cannabis e-commerce platform in Canada.
“We’re your partner, not your competitor,” said Mr. Morim, reiterating what the company now says to LPs.
“We no longer want to buy the product from them. We are now shifting our model significantly in the way we work with LPs.”
Namaste’s direction now is to take care of the e-commerce side of LPs’ business and facilitate their sales by handling customer prescriptions, optimizing product details online and shipping arrangements.
“So far the response for LPs has been incredibly positive,” Mr. Morim said, though he declined to provide details on which and how many companies Namaste has approached with their new fee-based platform.
The number of LPs using Namaste’s fee-based program, which was described as being similar to how Amazon sells products for other companies, is not yet publicly available.
“The change in model from wholesale to consignment has been quite recent. There’s been a lot of fear and doubt about Namaste since February,” Mr. Morim said.
Namaste submitted its first-quarter 2019 report on May 31, an extended deadline granted after the board terminated CEO and director Sean Dollinger following an internal investigation that found he allegedly breached his fiduciary duty to the company and improperly enriched himself. Additionally, the company’s auditor PricewaterhouseCoopers resigned in March.
Mr. Morim said the release of that financial report, which showed Namaste’s revenue fell and its net loss more than tripled, reduced uncertainty around the company.
Improving profit margins is a “huge part of our strategy overall,” Mr. Morim said, adding the company aims to have one global purchasing team. “Less people, better margins.”
As an e-commerce platform, Namaste aims to nurture repeat purchases – the “holy grail” in e-commerce – rather than compete with other sites via reduced pricing, which Mr. Morim said is “a very short sighted strategy.”
Other areas of change for the company are improving customer service by authorizing staff to correct customers’ issues rather than await approval to do so, while Namaste cut its marketing team in Ireland and hired a new manager in Canada to rebuild this department. It was unclear, however, when and if a new team will be hired.
“We’re not looking to go on a crazy hiring spree but rather hire the right people and give them the right tools,” he said.