How to Start a CBD Business: The Ultimate Guide to Getting a Green Light
Nearly four thousand years ago a Chinese Emperor Shen Nung, also known as the Father of Traditional Chinese Medicine, wrote in his The Great Herbal book that hemp can have theoretical powers for gout issues, rheumatism and absentmindedness among a variety of other ailments.
Fast-forward to present digital-ridden days: you can now purchase a growing lineup of CBD goods both online and in-person, at convenience stores and in luxury celebrity-owned boutiques, all across the US and abroad too.
But, despite a long history of usage and current popularity, CBD and the hemp plant it’s derived from remain largely misunderstood.
So What is CBD?
Cannabidiol, or CBD for short, is a ‘wallflower’ cousin of the more reactive delta-8-tetrahydrocannabinol (THC). These two compounds are found in the Cannabis plant, along with some 100 other types of cannabinoids.
Unlike marijuana, CBD is obtained from industrial hemp — an MJ plant variety that must contain less than 0.3% of THC on a dry weight basis to be cultivated under a USDA-approved license. Meaning that it does not cause the feeling of ‘high’, but instead is said to carry a number of wellness and therapeutic benefits.
CBD Industry by the Numbers
Partially due to the advertised health benefits, partially because of the close affiliation with the cannabis plant, consumer interest around CBD products has been on a steady rise since 2016.
2018, specifically, was named as the “breakout year” for CBD by EAZE, a San Francisco-based cannabis delivery platform.
In 2018, the number of US CBD consumers doubled, from 2.6% to 4.8% with *drumroll*…Baby Boomers leading the pack.
EAZE data suggests that female Boomers were among the most likely CBD users, opting for these products to deal with anxiety, sleep issues and pain relief.
A survey by Consumer Review further states more than a quarter of people in the U.S. say they’ve tried CBD at least once in the past two years.
That makes sense as CBD oil is now infused in loads of products across the board, especially in the wellness, food, beverage and beauty industries. From tinctures and topicals to gummies and even lattes, consumers now have a bevy of CBD products to explore.
So what makes them tick the most? According to Brightfield Group, regular CBD users prefer to use vaping products, followed by the use of high-CBD flower :
Growing interest? Checked. Overall consumer awareness? Rising! What about market growth prospects? Well, these seem to be solid too.
By 2025, the retail market for CBD products in the US is expected to hit $16 billion, up from $2 billion in 2018.
Compound the above with the fact that, among those who are familiar with CBD, 80% support its usage (even if they are not personally using it) and it becomes clear that CBD is a very promising niche for starting an online business.
9 Steps for Starting a CBD Business Online
Hyped products often have a short shelf life. But Inferring from above, the interest in CBD is here to stay.
So if are interested in exploring this high-growth niche, here are the main steps for starting an online CBD business:
- Identify your CBD niche and products.
- Understand the laws and regulations around CBD.
- Generate a thorough CBD business plan.
- Get your business documents in order.
- Find your CBD supplier.
- Discover the perfect ecommerce platform.
- Build up your site.
- Determine shipping and payment terms.
- Market your business.
Identify Your CBD Niche and Products
A quick sweep through the (digital) shelves of any wellness store will prove that you can now buy CBD-anything. Creams and ointments, human and pet chewies, hemp clothes and accessories — when the consumer interest is high, loads of entrepreneurs try to capitalize on the hype.
What should you sell then: the trendy stuff or the “classics”? Well, that’s for you to decide. When assessing the overall market prospects, look into the general niches first. Here are the most popular ones:
- CBD-infused foods/beverages.
- Supplements/wellness products.
- CBD-based cosmetics.
- CBD pet products.
Next, you should zoom in on your product types. Most of these differ, based on the CBD consumption method:
- Drops and sprays: The key ingredient in both is CBD oil, decarboxylated from hemp/hemp flowers and mixed with a carrier oil. Drops and sprays can also include flavoring agents and other compounds that make them more pleasant to ingest.
- Pills and capsules: Wrapping a dose of cannabinoid in gelatin or soft gel capsule makes it more digestible. Also, since many people take CBD as an alternative to over-the-counter medicine, this form may seem more familiar and thus appealing, to them.
- CBD vapes and cartridges: Inhalation products tend to be popular among recreational MJ users and people who enjoy the social aspect of vaping. Also, this method is often preferred by consumers using CBD for pain relief as it gets absorbed faster to the blood system through inhalations.
- Tinctures: Just like medicinal tinctures, CBD-based ones are made by combining cannabinoids with alcohol or another strong solvent. Sometimes CBD tinctures also contain extra herbs. While most don’t have great flavor, tinctures are popular with people who want to feel the effects of CBD quickly.
- Topicals and patches: Best suited for targeted action such as joint, back, or menstrual pain, topical ointments and CBD patches appeal to consumers who don’t like hemp flavor or prefer external applications for other reasons.
- CBD edibles: Gummies, candy, chocolate, honey sticks, there’s a huge variety of munchable CBD products on the market. Most of them make hemp look less ‘medicinal’ and more of a wellness treat. In 2019, 3 out of 4 chefs identified CBD-infused food as a hot trend.
Understand the Laws and Regulations Around CBD
The Farm Bill , passed at the end of 2018, legalized the commercial production of hemp in the United States . Specifically, you can grow industrial hemp and then legally sell products containing hemp-derived CBD across the country.
But there are some restrictions too:
- The hemp you are using to produce CBD cannot contain more than 0.3% of THC . Any cannabis plant with a higher concentration of THC is automatically considered a marijuana plant and stronger regulations kick in.
- CBD, produced from marijuana plants, is legal in 15 states for recreational cannabis usage and in 36 states for medical use.
Now when it comes to cannabinoid as a substance, the regulatory matter gets complicated. To date, FDA has approved only one CBD-based prescription drug, Epidiolex. Meaning that no other CBD brand can make health claims regarding their CBD products. Also, the FDA prohibits adding cannabinoids into food, or marketing anything with it as dietary supplements.
Wait, but what about an array of edible CBD products that are on the shelves? Are they illegal? It’s a gray area.
Because the stance on CBD legality status isn’t consistent across federal and state regulators. As PBS writes :
Federal provisions have a blindspot whereby a store can sell as much CBD as it wants, as long it doesn’t make any health claims about its products, put it in food nor add it to dietary supplements.
While FDA doesn’t allow CBD in food, they are not taking any action against CBD sellers either, except for issuing warning letters for falsely-advertised health claims.
1. Selling federally.
Federal laws allow legal CBD sales nationwide. So long as your products contain less than 0.3% THC, you are good to go to market.
2. Selling statewide.
Statewide laws differ. In general, all states should allow sales of hemp-sources CBD with the right THC threshold. But specific favorable or not-so regulations may kick-in in states where recreational marijuana usage isn’t legal. So it’s best to cross-check with a local legal specialist if there are any restrictions regarding CBD product sales in your state.
Create a Thorough CBD Business Plan
Jumping into a business without a solid business plan is like driving without a rearview mirror: you can do it, but you may miss a huge obstacle heading your way.
When it comes to the CBD niche, your business plan is also your navigator for staying atop of changing regulatory policies, conflicting operational priorities and new business opportunities, fueled by the market demand. Plus, it’s the document your financial supporters and other stakeholders will want to see.
Here’s what should go into your business plan for ecommerce CBD operations:
- Start with market analysis: The goal of a market analysis is to supply you with sufficient information about your industry size, customers, competitors and other market variables. So that you could make more informed decisions regarding your product positioning, pricing and overall go-to-market strategy.
- Pick your brand name and confirm product range: Explain how your brand name, along with other brand assets, differentiates you from the competition. Recap which CBD niche you plan to target and why. briefly describe your product range, focusing on the product quality and competitive parameters.
- Determine your financing: Estimate how much cash you’ll need to launch your operations. Break them down as one-time pre-launch investments (e.g commerce website development , inventory purchase, product design/branding) and ongoing monthly costs ( e.g. inventory restock, handling/packaging, shipping, marketing, taxes, etc.). Always add extra padding for ‘unplanned’ expenses because these will surely happen. Then look into how much time and how many sales you’ll need to make to break even monthly. If you are self-financing, estimate how much of a runway you’ll end up having. If you are planning to secure investment later on, prepare more figures describing your anticipated expenses vs profits, plus set targets for CPA (cost per acquisition), AOV( Average order value), sales conversion rates, customer retention rate, customer lifetime value (CLV).
- Include a realistic marketing plan: A marketing plan details your strategy for growing awareness around your CBD brand, acquiring new customers and fostering repeat purchases. It’s a cornerstone document that should be a) data-backed b) realistic c) channel-specific. Yes, writing a solid marketing plan will take a ton of time and research. But this early investment pays off in terms of reduced budget waster and better marketing results later down the road.
You can also learn more about business plan writing for ecommerce from our previous guide!
Get Your Business Documents in Order
To sell CBD online you need to obtain two types of licenses:
- A regular business license: get incorporated and register a business with your state to start operations. Also, request an EIN/TIN for your newly created company from the IRS.
- Reseller license: If you plan to purchase CBD from wholesalers, you may also need to get a Reseller’s license (certificate) from your state. This document is hugely important because it allows you to buy products wholesale without paying sales tax. The license also lets you collect sales tax from your customers afterward.
Find Your CBD Supplier
Arguably, the most important step of your ecommerce operations is finding a reliable CBD supplier. There are a few reasons for that.
First, if you are selling nationwide, you need to ensure that you are selling CBD, derived from hemp plants, not marijuana ones. The latter contains a higher THC dosage, making them legal only in a handful of states. The wrinkle, however, is that there’s no affordable testing for determining the levels of THC in the plant. This can make purchasing raw materials from a farmer challenging if neither you nor they have the capabilities to test the crop.
Reputable wholesalers, on the other hand, typically do lab testing and can provide certificates of analysis (COA), detailing the product content. Not being able to provide one is a major red flag.
(Sample certificate of analysis of a CBD product. Source: Alphagreen )
Apart from the general product contents, you should also ask to see the results of:
- Pesticide testing (you’ll want to have a ‘clean’ product).
- Microbiological testing (showing there’s no bacteria or mold inside the sample).
- Residual solvents testing (prompts if there any stray chemicals remaining from the extraction process).
Secondly, your product quality will impact customer satisfaction and your CBD brand reputation. After all, 24% of CBD users named the ability of the product to generate the “desired effect” as their primary purchase driver. When your product fails to deliver on the ‘effects’ promise due to poor content, you’d struggle to win repeat business. Other buying priorities include ingredients quality, price, concentration and consumption method (e.g. oil, edible, vape).
Considering that CBD production remains underregulated, many ‘fake’ products end up on the shelves: ones containing no cannabidiol inside.
Such sham brands and manufacturers, speculating on the CBD sweeping popularity, are making it harder for the honest CBD companies to break into the industry. As The New York Times feature on the origins of CDB popularity sums it up:
“As a result, the compound is often caricatured as snake oil, a scam, even as promising research into the full potential of CBD is starting to pick up.”
As a new CBD brand, you don’t want to end up on the sham side. Again, this is another reason why you should do careful due diligence when assessing different CBD manufacturers. Beyond requesting or performing an independent certification of analysis, also evaluate a potential wholesaler based on the following criteria:
- Hemp sourcing method and origin.
- Extraction method.
- Reviews from other entrepreneurs.
- Extra services (e.g. labeling, dropshipping).
Discover the Perfect Ecommerce Platform
Apart from finding a trustworthy CBD supplier, you’ll also need to identify the (best) ecommerce platform for your operations. Just like quality products, your tech infrastructure will positively contribute to your customers’ satisfaction with your brand.
But, not every ecommerce platform allows creating an online CDB store due to opaque regulatory status. Still, you have some really good options!
BigCommerce offers a bevy of B2C and B2B ecommerce features for CBD retailers , wholesalers and manufacturers. From drag-and-drop page builders to limitless customization opportunities to 0% transaction fees and 99.9% uptime, we provide global CBD businesses an integrated ecommerce solution they need to start their operations fast and scale without constraints.
Shopify only allows US-based merchants based in certain states to sell CBD or hemp-derived goods on their platform. If you are eligible, you gain access to a nice set of core commerce features for launching your digital operations including design templates, integrated shipping, marketing tools and payment processing. But the proprietary Shopify Payment method isn’t available for CBD products. So you’ll need to get approved by a third-party payment processor .
Shift4Shop is another ecommerce platform that allows hosting digital CBD and vape-related businesses . They offer similar ecommerce solutions — shopping cart software, embedded ‘buy’ button and full-scale ecommerce website builder, featuring themes, unlimited bandwidth, payment processor support and more. However, their website backend comes with a bit of a learning curve, so Shift4Shop may not be the optimal choice for non-coding beginners.
Build Up Your CBD Website
By opting for an ecommerce platform, over open-source ecommerce tools, or custom development, you reduce the website development timeline. Since the solution provider handles hosting, infrastructure and all that jazz, all you have to do to get your CBD operations off the ground is work on your store design and list products.
1. Customize your design.
Have you ever painted by numbers? Design experience on modern ecommerce platforms is pretty similar to that. Instead of starting with a blank canvas, you rely on a website theme — your set of pointers, pre-mapping the final store look.
You can still be creative though, changing colors, layouts, fonts and other visual elements or even adding new elements to your online store.
When it comes to CBD ecommerce store design make sure that:
Key product information has a prominent spot: Most of your customers will want to know the key product specs: dosage/strength, hemp origin, extraction method, and possible benefits. Make sure all of this information is displayed in a digestible manner for each type of product. CBDistillery goes straight to business and highlights product ingredients and suggested use:
2. Add products and descriptions.
In the CBD space, your product descriptions should be more than just convincing. They also need to be:
- Accurate and fact-based.
- Devoid of any health claims.
- Cliche- and jargon-free.
When it comes to CBD marketing , FDA does not allow businesses to suggest that any of their CBD products can “diagnose,” “cure,” “treat,” or “prevent” any type of medical condition. Even if it’s tempting, don’t go making any big claims.
What you can do though is reference actual medical research done around CBD usage. Also, you can leverage the voice of customer data — public/private reviews, first-hand accounts/stories, general feedback — in your product listings.
Lastly, don’t write overly complex product descriptions. Not every store visitor will be a CBD connoisseur, familiar with the industry lingo. So while you should always provide ‘technical’ product information, avoid niche chemical terms, industry jargon and odd CBD pop culture references.
3. Shoot and upload product photos.
Ecommerce photos do two important things:
- Act as an extension of your brand.
- Help sway customers’ purchase decisions.
For example, 90% of Etsy shoppers said that product image quality is a purchase trigger for them.
If you have the budget, hire a professional photographer to shoot a series of product-only and lifestyle images for your brand. Those short on cash can also snap amazing ecommerce pictures on a budget .
Determine Shipping and Payment Terms
After you designed your store layout and organized your product catalog, you need to sort out how your products will reach their new owners.
1. Determine your shipping policy.
Shipping is important to ecommerce consumers. So you don’t want to let them down in that department. To work out the optimal shipping policy for your CBD business ask yourself these questions:
- What’s the threshold I set for ‘free shipping’? For 79% of US consumers “free shipping” is a strong prompt to buy online more. But do people get upset when there isn’t such an option? In general, yes, over a third of consumers will be upset if there’s no complimentary shipping for an order valued above £135 ($150). Determine a reasonable threshold for your brand based on anticipated average order value.
- Do you plan to offer a variable fee? Destination-based or weight-based shipping fees can help a smaller retailer reduce logistics costs. But they may alienate some customers too: 50% of abandonments happen when the shipping/tax costs are too high . The fix? Provide estimated shipping costs or a delivery calculator option pre-check out if you plan to use variable fees.
- What delivery timeline is feasible? Most people are spoiled by Amazon Prime next-day deliveries, but few smaller brands can pull off the same levels of service nation-wide. So choose your battles. Limit same-day delivery to your city/state only. Set the right expectations regarding priority/express delivery if you plan to offer such.
- Which logistics carrier works best? Not all carriers have straight policies regarding CBD shipments. Do your research carefully. For example, while UPS allows shipping hemp and CBD-infused products, they also state that “[we] reserve the right to dispose of any shipment containing Marijuana, Hemp or Hemp products tendered for shipment which Shippers are prohibited from shipping, which UPS is not authorized to accept, which UPS states that it will not accept, or which UPS has a right to refuse.” That’s not very reassuring.
2. Select an ecommerce shipping solution.
Your next step is to select supporting shipping and fulfillment software — a tool that will help you set shipping rates, manage logistics, print labels and auto-dispatch updates to customers. To minimize hassle and mistakes, your app should integrate directly into your ecommerce platform. You can discover different shipping and fulfillment apps on the BigCommerce marketplace . Don’t forget to check if your pick also iterates with the carrier you plan to use!
3. Choose a payment processor, fit for CBD.
CBD industry is deemed as “high risk” due to the ongoing regulatory debacle. Thus, many payment processors choose to exclude CBD sellers to minimize their operational risks. But you are not completely out of options. To accept payments from customers, you can work with a specialized payment processor who knows how to handle high-risk business.
BigCommerce, for example, lets CBD businesses choose among 65 payment gateways that can be used to do business in over 100 countries, using some 250 local payment methods. Get to know more about how payment processing works for CBD companies .
Market Your CBD Company
Now that you are up and operational, you need to focus on customer acquisition. While the CBD industry is trendy right now, shoppers won’t flock to you on autopilot. Unless you set yourself up with a solid marketing system.
1. Focus on content.
CBD products are still largely misunderstood often, due to shady marketing from other brands or bogus medical claims made by self-proclaimed gurus. Build your initial customer base by seeding accurate content. Educate the interested, but cautious, buyers about:
- Different product types.
- CBD extraction methods.
- Possible benefits and results.
- Potential side-effects.
- Correct usage/dosage.
- The hemp industry as a whole.
Invite industry experts and use claims from verified sources to create more comprehensive content than your competition. Focus both on your blog and social media especially, as that’s where most younger consumers go looking for both product inspiration and info.
2. Leverage SEO.
Publishing well-research content is key to dominating the search engine results. Especially with the latest Google update called ‘ passage indexing ’. By honing its AI algorithms, Google now indexes individual passages from a web page (rather than just the entire page) to help users find needle-in-a-haystack info.
So for instance, if I’m googling something like “What’s the best strength of CBD oil?”, I’m redirected to a highlighted result on the page:
For CBD businesses this SEO change is a great opportunity to attract top-of-the-funnel customers and convert them with educational content.
Since SEO-competition around CBD-related keywords is pretty intense, going after long-tail, less-searched keywords can help you build the initial traffic, while you work on further optimizations .
3. Partner with influencers.
Much of CBD’s current popularity comes as a direct result of patients’ advocacy and evangelism. First-hand stories from people, whom CBD helped cope with chronic pain and seizures, initially spurred the mass-interest in the plant both for therapeutic and wellness purposes.
Today, a ton of celebs are outspoken fans of the CBD. Some of them even launched their CBD businesses. So finding credible advocates for your brand shouldn’t be an issue. Just ensure that you are partnering with people who share your brand beliefs and can speak about CBD with authority. Also, don’t forget about mandatory FTS disclosures.
Lastly, keep close tabs on the latest FDA regulations (as these change as we speak) to make sure your communication stays in line with the requirements. Also, individual states have different regulations when it comes to CBD advertising. Be sure to verify local rules too.
4 Evergreen Issues CBD Businesses Are Facing
While entrepreneurs in the CBD industry can capitalize on the industry’s rapid boom, they should also brace themselves for a set of unique challenges. With a lack of FDA guidelines and differences in CBD regulations on the state level, running a CBD business can feel particularly gruesome at times. Especially when it comes to:
1. Banking and financing.
Sadly, CBD businesses are considered ‘high-risk’ by many financial service providers due to the aforementioned gaps in state laws and regulations. So prepare to do some walking and negotiating when opening a merchant account. Securing extra financing via business loans can be challenging too, again thanks to the bad rep the cannabis industry has among certain FIs. But don’t despair. There are some hemp-friendly banks and investors in the field too.
2. Payment processing.
Payment processors aren’t making life easier for CBD sellers either. Most wrongly stigmatize such companies, unlike BigCommerce. Since 2019, we are offering our customers access to an array of hemp-friendly payment processors, along with other essential tools for building an ecommerce store .
3. Business insurance.
Insurers are slow to act on the recent legalization of hemp and hemp-derived products. Just like conservative banks, they are often barring CBD companies altogether or burden them with crazy-high premiums. But having a solid insurance plan is crucial for your company’s liability. So don’t skim on getting a good plan from a CBD-friendly insurer .
4. Differentiation from the competition.
With a slew of businesses touting ‘cannabis’ as a customer attractor, it may be difficult to stand out even when you sell genuine, high-quality cannabis products. A 2017 Penn University study , found that 70% of cannabinoid products sold online had issues with labeling. Over 42% of CBD products were under-labeled, meaning that they contained more CBD than stated. Some 26% were over-labeled — they had a lower condensation of cannabinoid than stated.
Such happenings, along with misleading marketing and grossly overstated claims regarding CBD’s effectiveness are making new customers skeptical towards recent market entrants. Gain their trust by being positively different when it comes to:
- Transparency : From telling where your hemp plants grow to display proper certification of analysis, explain to your customers what they are about to purchase and munch.
- Accuracy : Avoid unverified scientific statements (even if they look promising for marketing). Check your sources, invite known experts to help you create content and educational brochures. Make honest, no-nonsense claims to set yourself apart from the sleazier types.
- Storytelling: Some of the most successful CBD businesses were launched by long-term CBD evangelists and regular folks, whose chronic health condition was majorly alleviated by CBD. Your unique story, cementing your brand mission and values, can help you build a stronger emotional connection with your target audience. For example, CBD for Life tells a story of how their founder concocted a CBD cream to help her alleviate the back pain.
3 Core Tips for Nurturing Your CBD Business
New ecommerce companies are very tender. If you want your CBD business to grow, evolve and always be ripe, here are three things you should consider doing.
1. Ask for help.
Between murky regulations and operational issues, new CBD business owners will have a lot of their platter. While everything is searchable on Google these days, you shouldn’t underestimate the value of a mentor aka someone who already walked the same walk before you.
“That’s the rub of excelling in the cannabis industry: there’s no model of excellence right now. It’s a fluid and shifting industry that didn’t really exist just a few years ago.”
That makes finding a good industry mentor somewhat challenging. Yet, not impossible. AngelList has 1,210 marijuana investors and that’s just one place. Non-profit organizations such as CBD Alliance , National Hemp Association and Vote Hemp are also great places to find new industry connections and support.
2. Have patience.
Fast traction is often viewed as a given in the ecommerce industry. You sure have heard literally overnight success stories where some “$500 Instagram ad drove $50,000 in sales in a day”.
In the CBD industry, paid ecommerce ads are not an option. Click-bait marketing can cause compliance issues, while content marketing and SEO both take time to work. So take a deep breath and prep several buckets of mental patients to methodically work through the different kinks of running CBD operations.
3. Understand the industry.
Despite (or because of) slow FDA response, the CBD industry keeps evolving in somewhat contradictory directions. While some states e.g. Texas removed the ban on selling edible CBD products in 2019. , others banned CBD-infused foods and beverages last year.
Subsequently, market trends and consumer trends change from week to week too. Especially, when some celebrity like Gwyneth Paltrow announces her involvement in a new CBD venture or throws a CBD-themed baby shower as Kim Kardashian did.
For sure, no CBD business can or should stay atop of all the latest trends and fads. But they do need to keep close tabs on emerging tendencies among their clients, changes in compliance requirements, along with other major industry happenings.
CBD is an interesting product to trade. On one hand, you can make a genuine difference by supplying your customers with life-improving goods. On the other, you also need to constantly educate the general public (along with some B2B partners and other stakeholders) about your products’ actual benefits, their legality status and lack of connection with THC-dominant marijuana.
That can be a tough battle. But well worth it when you look at the CBD industry sales prospects again. Grandview Research estimates that the CBD market will swell by a compound annual growth rate of 22.2% between 2019 and 2025.
And you can be part of that revenue pool too if you launch your online CBD business today!
This material does not constitute legal, professional or financial advice and BigCommerce disclaims any liability with respect to this material. Please consult your attorney or professional advisor on specific legal, professional or financial matters.
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How to Sell CBD Online: Information and Tips on Selling CBD From Home
The cannabis industry continues to legalize and explode before our eyes. And it didn’t take long for its more legal archetype, Cannabidiols (otherwise known as CBD), to become a hot commodity.
You can find CBD products in nearly every large retailer these days, including Walgreens, CVS, Ulta, and even teen brands like American Eagle and Abercrombie & Fitch. But just as fast, it’s become a viable ecommerce solution for those who want to sell and buy it online.
If you follow ecommerce product trends, you know that CBD is everywhere — for humans, for pets, in your drinks, in your chapstick. It seems as though there is CBD-infused everything.
Of course, it’s not as simple as throwing up a website and watching the buyers flood in. If you decide to sell CBD at all — let alone online — you’ll face a complicated industry with complex legal and marketing challenges.
Before you start selling CBD products online, you should know exactly what to expect and how to prepare. Read on to get the full rundown on how to navigate building a CBD income stream in today’s climate.
Note: This article is solely for informational purposes and does not constitute legal advice.
What is CBD?
You may hear CBD being described as “cannabis oil but without THC,” and that’s close but not entirely accurate. CBD, or Cannabidiol if you’re using the scientific term, is an active component of Cannabis — a small, effective part of the larger whole.
Cannabis is made up of different cannabinoids. Cannabidiol is one of them. According to users, this is the ingredient that helps alleviate an array of symptoms, including pain, anxiety, and even epileptic seizures.
What helped CBD boom into its own segment of the larger cannabis market though is the fact that it doesn’t contain THC (tetrahydrocannabinol). THC is the ingredient in cannabis that causes the widely-known psychological effects: the euphoria, short-term memory loss, increase in appetite, paranoia, and more.
THC is the ingredient that many governments around the world have fought to keep illegal, whereas CBD is the ingredient that simply acts as a natural medicine without any psychological effects.
Because of this, CBD is ahead of the game in the cannabis industry in the sense that it’s more widely accepted and legalized — in most cases.
The CBD market is booming
The number one rule of going into business is “Go where the market is.” One clear way to tell that is by gauging where consumers are already spending their money.
You might look at the explosive evolution that the CBD industry has undergone in the past couple of years and find yourself intimidated by market saturation and competition. Fret not — there are still plenty of pieces of the pie for everyone who wants to try and partake.
Just how big is the opportunity, exactly?
The CBD market is worth billions
The CBD industry is projected to be worth $20 billion by 2024. To put this into perspective, ice cream was only worth $2.27 billion in 2018. CBD is well on its way to being a household item for frequent buyers who will come back again and again as long as you can fulfill the product.
But it’s not that simple. What about the legalities of selling CBD products?
New legal terms for CBD oil
CBD has definitely undergone its share of legalization battles and still has some opposition, but there has been major progress along the way. The 2018 Farm Bill legalized hemp production across the US, which is great for sellers because CBD is produced from industrial hemp.
The bill essentially states that as long as your CBD product has less than 0.3% THC in it, you’re free to sell it, with caution.
Legality of selling CBD
For obvious reasons, the legalization of CBD has been widely disputed across the board. As long as it’s a controversial topic, you’ll want to prescribe to your favorite news channels and set up alerts for updates to CBD laws. With that being said, a plethora of laws have been put in place that you need to be aware of, both federally and at the state-level.
In the United States, there aren’t any concerns at the moment other than making sure your products contain less than 0.3% THC. CBD is otherwise legal nationally. It is recommended that you stay aware of the state of legalization as laws can always be overturned.
It’s worth noting that the FDA has stepped in on occasion to call out unapproved products that market false health claims.
Statewide laws will of course vary by state. Some states allow marijuana-produced CBD, while others only allow industrial hemp-produced CBD. Your best bet is to simply sell the industrial hemp-sourced CBD, as it won’t have high THC levels and is accepted across the nation. Otherwise, you’ll want to get in touch with local representatives or research laws in your state to see what you’re allowed to sell.
From that information, build a list of products that you know are legal for you to sell and stick with your regular inventory to avoid any legal mishaps.
How to start selling CBD oil online
Once you’ve dialed in your legal allowances, it’s time to start setting up shop. There is a simple game plan you can follow to get set up and start selling online. From there, you can start refining your product, marketing, and ecommerce fulfillment strategies to grow your business.
1. Obtain licenses
In order to sell CBD, you’ll need to get a couple of licenses. One is a business license. Usually, small businesses go for an LLC. Research your preference at your local government website. Registration usually costs about $100 in most cases.
You’ll also want to get a resale license if you plan to purchase your product from wholesalers. Much like business licenses, resale licenses and permits are handled at the state-level, which can be handled differently state-to-state. Discover what your state requirements are to determine if you need a resale license and how to acquire one.
2. Find a certified supplier
You’ll want to find a reputable supplier that will sell you high-quality products (such as tinctures, oils, hemp products, and more) and is also certified to sell by the state or federally. They’ll also need to get regular tests performed by third-parties to make sure the quality is assured and you’re selling quality products. Many CBD companies have their own hemp farms.
3. Build your website
Now that you have the paperwork and selection process out of the way, it’s time to build your website. First, you need a domain name (or a “www.yoursitename.com” web address).
One of the most popular platforms to buy domains from is GoDaddy.com. But you can just as easily get your domain name from most web building platforms. There’s no shortage of platforms out there that make it incredibly easy for you to build an ecommerce site.
For example, BigCommerce offers full-featured solutions for merchants of all sizes, with no additional fees for selecting your own payment gateway.
Be careful to cover the terms of service and community policy to make sure you’re advertising and selling your products within the boundaries set by the platform.
You’ll need to find reliable credit card payment processing, which can be tricky for CBD products as the payment gateway landscape has been changing a lot in this industry.
CBD is not currently approved by all payment processors (e.g., PayPal), so you’ll need to make sure you’re working with a company that can do this. Note: Credit card fees with CBD gateways may vary by merchant based on a risk assessment done by the processor.
4. Market your CBD products
Now that your website is live, it’s time to bring in the buyers. You might think the “build it and they will come” mantra rings true here. Sorry to say, that’s not the case.
In a land where it’s difficult to market CBD using a lot of popular methods (as Facebook Ads, YouTube Ads, and other common ecommerce marketing channels ban these products from their advertising platforms), there are still two viable options that have the potential to bring in a lot of profit if you play your hand right.
The first is SEO, or the art and science of getting Google to rank your site above others in search results to show potential buyers your website first. In order to succeed with SEO, you’ll want to get an SEO professional to audit your site. They can make sure that Google views things like your site speed, meta data, image optimization and other components favorably. These things help Google trust that your website is worthy to show visitors.
You’ll also want to start a blog, master the skill of keyword research, and put out fresh content that captures the intent of what people are searching for. Make sure you’re targeting terms that bring in potential buyers and not just visitors looking for information on the topic.
Once you start getting organic website visitors through your SEO efforts, you’ll want to start an email list and use your website to grow it. In exchange for an email address, you can offer discounts or even free informational PDFs and trainings on CBD.
When visitors provide their email address for your freebies, they’re giving you permission to nurture the relationship and inform them of more promotions moving forward (e.g., having a sitewide sell for 4/20 or a Black Friday/Cyber Monday deal).
You can also look elsewhere and try partnering with marketplaces like CBD Oils, Ganjapreneur, and Pot.com, or CBD-specific ad platforms like Traffic Roots.
5. Fulfill and ship customer orders
You’ll need a system for warehousing your CBD products and managing inventory over time. When you’re first getting started, this may be done in your home. After experiencing growth, you’ll want to expand into a fulfillment center by either signing a warehouse lease or outsourcing fulfillment.
Just make sure your fulfillment technology syncs up well with your ecommerce platform, payment processor, and other software. For example, ShipBob is tech-enabled fulfillment company with warehouses across the US to help you spend less time worrying about packing and shipping orders and more time on growing your brand.
“Our fulfillment is on autopilot. ShipBob saves us so much effort, and the opportunity cost savings has been substantial. ShipBob’s platform is easy to use and navigate, the interface is intuitive, and the analytics are very clearly laid out. Today, our health and wellness brand sells three CBD products in the United States.”
Yannick Crespo, Co-Founder & President of Pot d’Huile
Take CBD company Nature’s Ultra. Last year, they started to experience a surge in orders. They were managing CBD shipping and logistics themselves but didn’t understand just how massive and difficult retail fulfillment was. They were getting so deep into the logistics and supply chain side that they didn’t have time to focus on their core products.
They knew they’d be doubling and then quickly tripling their order volume, so they wanted to get help on the front-end to ensure a long-term relationship with a lot of room for scalability. They searched for companies that could give them something similar to Amazon’s delivery capabilities for their website orders, so they partnered with ShipBob.
“Now that we’re working with ShipBob, we can easily ship to all 50 US states with ease. We use ShipBob’s fulfillment centers in Dallas, Texas, Chicago, Illinois, and Bethlehem, Pennsylvania. They help us to maximize our shipping and ultimately our growth potential.”
Andrew Hardy, COO of Nature’s Ultra
Challenges of selling CBD online
Once you get your CBD store up and running, you will likely face a new set of challenges as you grow. Here are a few considerations to help you break through the crowded space and set your business up for success.
Standing out in the market
In a saturated market, you must consider your competitors. Think through the following:
- Which keywords are your competitors ranking for and how can you write better content to outrank them?
- What kinds of products are they providing and how can you stand apart?
- What can you do differently from your competition that your customers will love?
Think through the entire customer experience to uncover where you can differentiate, whether that’s selling unique products, providing custom packaging or a branded insert, or even offering free 2-day shipping.
As mentioned earlier, you’ll want to go through the proper state channels to figure out what your regulations are so you can abide by them. Your best bet is to take inventory of any regulations, rules, and restrictions, and create company policies around them to make sure you’re following them. With the industry continuing to evolve, be sure to stay updated on these regulations.
As selling CBD becomes more widely accepted, you may eventually be able to sell internationally, ship to other countries, and build out an international shipping strategy. In the mean time, don’t ship products to destinations where they’re not allowed.
Without the proper support and systems in place it can become really difficult to fulfill your orders especially as demand picks up. When you can no longer go at it by yourself, you’ll need to find a solution that will ensure you’re able to deliver the products your customers buy in a timely fashion.
“We place considerable expectations and pressure on shipping so we can get close to what Amazon does. With ShipBob, 100% of our orders are going out via 2-day shipping. We see that people are far more likely to order and keep ordering from us when 2-Day Express Shipping Program is an option.”
Andrew Hardy, COO of Nature’s Ultra
Ecommerce shipping can be very challenging and order fulfillment boils down to three common options. What works for one business may be cost-prohibitive or inefficient for another.
There are plenty of CBD brands that fulfill orders by themselves. They keep inventory at home and run to the post office, or use local warehouse space to pack and ship each order by investing in the infrastructure and running operations. This option is often best when getting started or if order volume isn’t too much to handle. As your store grows, you need to scale seamlessly and find a more streamlined solution.
Dropshipping is when a manufacturer handles both product procurement and shipping orders. All you do is market the product without touching inventory. This can work well for some products, but is often difficult for CBD oil because you have less control over quality, product selection, and speed of shipment.
3PL (third-party logistics) solutions
3PLs are a happy medium as you don’t have to purchase land or hire a team to pack boxes, but you still have control over selecting a manufacturer. The 3PL is the middleman that stores your inventory close to your end consumers, while helping you quickly and seamlessly get the products shipped out.
“We were shipping a dozen orders per day, and now we ship hundreds per day. ShipBob has allowed us to scale up and become successful — we have gone from $70,000 in sales in 2018 to over $7 million in sales in 2019. When it comes to delivery, accuracy and timing are the most important to us, and ShipBob helps us execute on that.”
Andrew Hardy, COO of Nature’s Ultra
Starting an online CBD business might have some legal and marketing challenges involved, but with the growth of the industry and continued legalization, now is the time to get in. Since it’s still a young industry, you can still get ahead of the curve.
Already running a CBD store or anticipating a huge launch? Get in touch to learn how ShipBob can handle your CBD fulfillment so you can focus on your brand — not packing boxes . Request fulfillment pricing today.