Cyberattack Leaves Ontario Cannabis Store Unable to Fill Orders

Ontario’s only wholesaler and online retailer of legal cannabis is unable to process orders or make deliveries to weed shops and consumers after one of its technology partners was hit by a cyberattack. The Ontario Cannabis Store announced the shutdown on Monday following the August 5 cyberattack on the parent company of its third-party distribution center, Domain Logistics.

Domain Logistics did not immediately respond to requests from reporters for more information on the cyberattack. The Ontario Cannabis Store (OCS) said it is working with Domain Logistics and independent cyber-security experts to determine the extent of the breach, adding that there is no evidence that its computer systems were targeted or that customer data has been compromised.

“However, out of an abundance of caution to protect OCS and its customers, the decision was made to shut down Domain Logistics’ operations until a full forensic investigation could be completed,” the OCS said in a statement.

Cyberattack Shuts Down Ontario’s Only Cannabis Wholesaler

The OCS is Ontario’s only online retailer of regulated cannabis and the sole wholesaler for the province’s more than 1,300 licensed cannabis shops. The outage of the OCS online sales platform is a critical challenge for the retailers, who rely on the wholesaler to keep their shops stocked with licensed cannabis products. Elisa Keay of K’s Pot Shop in Toronto noted that retailers have no other supplier to turn to for merchandise for their store shelves.

“When you’re my only wholesaler and you’ve got a firm grasp on who can get delivery and when we can get delivery, it leaves us zero options,” Keay said. “We’re totally at their mercy.”

A letter to cannabis retailers from the OCS obtained by The Canadian Press said “as a goodwill gesture,” the OCS will waive retailer delivery fees until Sept. 30 and a $500 processing fee for one emergency order per store between Sept. 1 and March 31, 2023.” But many cannabis shop owners believe the fee waivers are not adequate compensation for the losses they are experiencing during the outage.

Keay said that if stores do not have the products consumers are looking for, they are likely to shop elsewhere. In Ontario’s crowded cannabis market, losing customers to rival licensed retailers or the illicit market is not sustainable.

“There’s no sort of compensation that can fix damaging someone’s business,” said Keay, adding that the outage is causing serious disruption to the business’s supply chain logistics. “I don’t like to order massive quantities of any one thing because I rotate a lot of things through, so when I get disrupted, it means that the shelves are going to be bare,” said Keay.

Cameron Brown, vice president of The Retail Cannabis Council of Ontario, said that the pause in deliveries caused by the Domain Logistics cyberattack could lead to a “significant shortage of cannabis in Ontario” if it continues through the week.

“The next worry for a lot of retailers is when their next inventory shipment is going to come … to get through not only this week but another big weekend in August—one of the busiest times so far in cannabis,” said Brown.

Without fresh product deliveries, Keay is afraid that low inventory levels will soon impact the shop’s ability to satisfy its patrons.

“It means that some customers are going to come in, shake their head, upset they’re not getting what they want and they’re going to go somewhere else because they don’t want to hear that it’s not my fault … and there was a cyberattack,” Keay said.

High Tide Inc., a Canadian cannabis corporation with an international reach, is reallocating inventory in some of its lower-volume Canna Cabana retail shops to busier stores because of the uncertainty surrounding cannabis product deliveries, according to an email to reporters from Omar Khan, the company’s vice-president of corporate and public affairs.

But Sean Kady, co-owner of Toronto cannabis retailer Cosmic Charlies, said that moving product from store to store is not an option for retailers with only one location. Additionally, independent shops frequently do not keep large quantities of product on hand, preferring instead to place smaller orders for their merchandise.

“They’re on a more tight, fixed budget, so from week to week, we can only spend so much and if you’re not getting that product that you need, what are you supposed to do and how are you supposed to pay the rent?” he said.

Kady said that his store was nearly “overstocked” on Tuesday, but added that he has heard of business owners who are “freaking out and pulling their hair out” because of their already shrinking supply of cannabis products.