How to Sell CBD Online
September 18th, 2019
The CBD market is booming and the growth of eCommerce will only amplify it. Now is the time to build and launch an online CBD store. Learn how to build your website and get the top tips for boosting your CBD sales.
Why you should look to start an online CBD Store
1. The CBD Market is Growing
CBD is a budding business. Actually, the cannabidiol (CBD) market is booming, but starting this post with a pun was unavoidable.
In a report released from the Brightfield Group, a company specializing in predictive consumer and market intelligence for the CBD and cannabis industries, they noted CBD sales are expected to reach $20 billion by 2022, with a compound annual growth rate of 147%. While forecasts aren’t set in stone, historical numbers can’t lie. U.S. sales of CBD products reached $238 million in 2018, which was up 57% from the prior year, according to a separate study by New Hope Network’s Nutrition Business Journal.
Numbers aside, it’s hard to miss the explosive growth and use of CBD products. People of all ages, backgrounds, and lifestyles seem to be avid consumers and it feels like almost everyone has experimented with various forms of CBD for one reason or another. It is truly becoming a mainstream component of today’s culture, which means there is a huge market opportunity for business owners.
Whether you’re already in the CBD business, or looking to break in, now is the time to launch your online store. For those with brick and mortar shops who might be wondering whether or not to expand, you honestly don’t have a choice. Taking an omni-channel approach to your CBD business will be the key driver behind continued success and growth, because if you don’t, your competitors will.
2. ECommerce in general is growing as well
While eCommerce sales only accounted for 14.3% of all U.S. retail sales in 2018, this was still worth $517 billion – and online sales are still growing. According to the Internet Retailer’s report, 475 of the top 1000 retail companies had increased their web sales by more than 15% in 2018. The new shopping mindset of the consumer is pushing more companies than ever to turn their sights to the internet, and you don’t want to get left behind.
3. The Constraints Around CBD are Loosening
This is especially true with the passing of the 2018 Farm Bill which federally legalized the production and sale of industrial hemp in the U.S., the plant that CBD is extracted from. This new legislation helped facilitate recent explosive growth in CBD products by reclassifying CBD and disassociating the compound from it’s cousin, THC, giving growers and businesses the ability to legally manufacture, sell, and ship hemp-derived products. This in turn gives consumers easier access to CBD, and as we know today, convenience in shopping is everything.
Positive public perception surrounding weed in general is on the rise as well and legislators on both sides of the aisle are looking to support the full legalization of cannabis.
Sixty-six percent (66%) of Americans supported the legalization of marijuana in 2018, compared to 31% in 2000, according to a survey by the Pew Research center. The same survey uncovered that 69% of Democrats, 75% of independents, and 45% of Republicans favored marijuana legalization as well (the last of which is up from 39% in 2015).
4. Consumer demand is high
From recreational use to treating every-day anxiety and stress, or even alleviating the symptoms of more serious medical conditions like Parkinson’s or PTSD, the reasons for consuming CBD is expanding, and just as with any product, consumers like having options.
You can find CBD coffee shops as well as established spas offering CBD massages. Companies even sell CBD pet products. From CBD oil to gummies, chocolates, creams, supplements, vapes, or even chapstick and nasal spray, manufacturers and distributors are getting more creative with what products they’re sticking CBD in.
The bottom line is, consumers want CBD. The demand is there.
- 64 million Americans have tried CBD in the past 24 months, according to a January 2019 nationally representative reports survey of more than 4,000 Americans.
- Over 90% of Americans believe CBD has some degree of medicinal benefit. The perceived health benefits of CBD, combined with the lack of psychoactive compounds, decreased negative public perception, and the array of products available is making CBD more appealing to a broader base of customers.
- While proliferating among all age groups, one study found that CBD consumers are on average, about 40 years of age, have a higher-degree of education, and are more likely than non-consumers to be employed full time.
An expanded customer base means more potential sales and opportunities for your CBD business, but it also means you need to find and define your ideal customer and product. The first step however, is making sure your business is legal.
Ensuring You Sell CBD Online Legally
The answer to the question, “is it legal to sell CBD online?” is yes and no. If you’re looking to expand your existing company or are interested in starting an online cbd business, I’m sure we don’t have to tell you this, but we’ll restate it anyways – selling CBD oil or other products, online or in-store, is not the same as selling marijuana. They are different and marijuana is in fact still federally classified as a Schedule I narcotic by the Drug Enforcement Agency (DEA).
A quick overview: CBD vs. THC
While federally legal, CBD is still highly regulated both nationally and at the state level. The Farm Bill shifted oversight from the DEA to the Food and Drug Administration (FDA), which means there is a whole array of testing that needs to be done and labeling regulations that have to be meticulously followed.
States also have the final say as to whether it’s legal to buy, possess, manufacture, or sell CBD products within their borders. For example, as of July 2019, anyone living in the state of Virginia can only buy CBD if they have a prescription. Having any CBD oil or other cannabis-based product in your possession in Idaho, South Dakota, or Nebraska is illegal.
Do’s and Don’ts of selling CBD
- Know your state-by-state laws. CBD sellers and buyers should know where CBD is legal. This is a two-way street. As a business owner however, you need to ensure that your online CBD store is built to handle the varying regulations.
- To legally sell CBD, all products have to be within the THC limit of 0.3%. You need to be 100% positive the products you’re selling, or if you’re manufacturing and providing wholesale options, that your CBD products follow this guideline and don’t surpass the legal limit.
- Do not make health claims. The FDA has issued warning letters against making health claims. While both marijuana and CBD have documented health benefits, there is only one FDA-approved drug that contains CBD at the moment, the epilepsy medication Epidiolex.
Some states have legalized medical marijuana and the grip on CBD is loosening, so the opportunities for researching cannabis and running studies to understand marijuana and CBD benefits are expanding. Until it’s been thoroughly vetted however, it’s best to steer clear of making health claims.
- Finally, your products have to be labeled correctly. Your label has to say CBD (among other things). This is essential for you to not only ensure your FDA compliant, but for shipping carriers to acknowledge and mail your products.
Finding a CBD distributor whose products comply with FDA regulations is vital, and just like your customers would expect to trust you as a business, you need to know you can trust your source. There are many components to a CBD business, and your distributor is just one piece of the puzzle.
Starting an Online CBD Business
So you’ve decided to dive in. You’ve researched how to sell CBD oil (or other CBD products), sculpted a business plan, and are now ready to build and launch your brand. There are a number of pieces you need in place to actually start selling and making revenue.
1. Finding a reputable CBD supplier
If you already own a CBD shop, you can skip ahead to part 2. If you’re just getting started and are looking at reselling CBD products that have already been manufactured or are interested in creating your own, you need a high-quality CBD supplier. There are a number in the market today, both U.S.-based and international that you can choose from.
Many wholesalers in the U.S. have been sourcing their CBD from Europe, where farmers have had years more experience in growing hemp, so sourcing from abroad is an option. With the 2018 Farm Bill in place, I would expect the national options to be on the rise.
Regardless, there are two key documents you’ll want to make sure any distributor has – the cGMP and COA.
- Source: BioCBD
- Current Goods Manufacturing Practice (cGMP).GMP is set of rules and regulations set forth by administrations, like the FDA, to ensure that products are safe for human consumption by outlining standards for how they’re manufactured, cleaned, packaged, and handed. Manufacturing facilities that meet these standards will be given a certificate, which is a good indicator for you that their practices conform to FDA and individual state guidelines.
Certificate of Analysis (COA). Make this mandatory and make sure you know how to read a COA report. It is essential for you to vet the quality of the products or CBD extract you’re purchasing and ensure you’re running a legal business. The COA is a report that provides the test results and analytics (usually run by a separate 3rd party lab), of the supplier’s CBD goods. It will confirm what plant species the CBD was extracted from, the levels of CBD and THC, and verify you’re within your legal 0.3% limit.
The COA will also give you a detailed analysis and the percentage breakdown of the other components that might be found in the CBD, including heavy metals, pesticides used on the plant (sample below), and terpenes, an aromatic oil that is secreted from the plants (it’s what gives off that skunky or sweet smell). If you’re ever in doubt, you can always get a test run yourself. Neither you nor your customers should be surprised by what’s in your products and you don’t want to be responsible for health risks.
2. Building and launching CBD websites
Your online store will be your most powerful tool for driving revenue, so you’re going to want to make sure it’s aesthetically pleasing and user-friendly. Ecommerce platforms come in many shapes and offer a myriad of capabilities and features. There is no one-size-fits-all solution. You’ll want to pick one that meets your business requirements.
- Option 1: Pre-Built Templates
If you find yourself short of a web developer and need a solution that provides front-end themes, store templates, and other UI components out-of-the-box, companies like Shopify and BigCommerce might be a good choice. Platforms like these will also include other business critical features like shopping carts, but often provide flexibility when it comes to customizing.
- Option 2: Custom stores
If you want to provide a unique shopping experience tailored to your brand and consumer and have decided to go with a custom front-end, you will need an ecommerce solution that provides core services and features like shopping carts, checkout processes, and catalogue management. These pieces will have to tie seamlessly into your website and companies like Elastic Path or Commerce Tools will offer the type of solutions you’ll need.
Either way, an attractive website with easy-to-understand navigation and fast loading times will make your users’ journey convenient and frictionless, the key to a higher conversion for you.
3. Insurance, merchant accounts, and payment gateways
Due to the nature of the CBD and marijuana industry, insurance companies, merchant account providers, and payment processors consider CBD businesses ‘high-risk.’ Many won’t take you on as a customer.
Payment gateways and payment processors are no different, but there are a number that specialize in helping high-risk businesses, or CBD companies specifically, such as PaymentCloud, or Authorize.Net. Make sure that whichever provider you choose, you can seamlessly integrate it with your full eCommerce platform or cart and checkout process. Without the ability to accept credit cards and process payments, an online store is pointless.
A note on cannabis-focused cryptocurrency
You can accept payment types outside of the typical credit card payment. For example, CBD companies like BlueBird Botanicals accept cryptocurrencty on their website. Accepting and processing cryptocurrency payments gives you a broader array of payment pathways you can give your customers, many of whom may be trading cryptocurrencies.
From household names like BitCoin, to industry specific options like HempCoin , there are a number you can look at. There is some concern that cryptocurrency as a whole will fail soon and that this link between industries will flop by association. However, it hasn’t yet and there seem to be close cultural ties between Cryptocurrency providers and CBD supporters , which is why many speculate the two industries have looked to each other for support.
4. Shipping Carriers
With CBD being federally legal, you won’t face a lot of restrictions here, as long as you make sure you follow the guidelines of whoever you decide on using. On March 4th 2019, the United States Postal Service (USPS) posted an advisory note on shipping CBD products. FedEx, UPS, and DHL will also carry your CBD products, just make sure you’re keeping tabs on what’s required.
Top Challenges with Selling CBD Online & Suggested Solutions
- Everything we’ve discussed so far is just the tip of the iceberg. Once you’ve guaranteed your CBD products are legal, built your website, and found funding, the real eCommerce challenges begin.
- Banking and payment processing.
We just walked through a short overview of why these are important, but finding a payment processor and merchant account for your company is probably one of the most frustrating parts of bringing your CBD business plan to life. Providers that specialize in helping ‘high-risk’ merchants usually have higher processing fees, more restrictions, and will give you less time to solve chargeback issues.
- Banking and payment processing.
If you’re only selling CBD products online, you’ll have to choose a 3rd-party provider that will process payments for CBD goods out of the gate. If you sell other goods and have decided to expand your product catalogue to include CBD, you already have these systems and providers in place.
This means you may need more than one, and your back-end website logic will have to treat CBD products differently. You’ll have to handle any payment restrictions or limitations at the product-level . This will add a lot of complexity to your site architecture and will require a higher-degree of customization in the back-end.
Resources for finding online CBD payment processors or a merchant account for CBD.
- Best Merchant Accounts for CBD
- The Best CBD Oil Merchant Account Providers
- CBD Payment Gateways
You’re at the mercy of whichever merchant account provider, eCommerce solution, or payment gateway you choose. It’s not unheard of for these companies to update their acceptable use policies on a whim and add new limitations to what their platforms can be used for. With CBD still a gray area legally, you’re pretty much always at risk of losing access.
Tip for reducing risk: Build a website that decouples your front-end, or what the customer sees, from the back-end and take a component-based approach to building your eCommerce experience. This is a pretty technical tip, but taking these steps will give you the flexibility you need to switch vendors quickly if needed, and will give you complete control over your website
What we mean by this is, don’t lock yourself into a single vendor that offers everything ‘out-of-the-box’ that has a particular list of integrations they suggest using. Giving yourself options and flexibility will reduce the risk of you losing the ability to keep your business running.
Tying state regulations into your cart and checkout process.
If you’re selling a mix of products that aren’t just CBD-based, you need to make sure your online store can implement product-based shipping rules that will guarantee you stay within safe shipping zones depending on what’s in your customer’s cart.
Different taxes may also apply to different goods and depending on the state, so your shopping cart will need to be able to access the right data, and apply it accordingly.
Competition and differentiating your business.
Earlier in this post, we talked a lot about the extensive market opportunity that CBD provides business owners and how the rise of ecommerce is geared up to support the continued growth of the industry.
Unfortunately, with opportunity like this, comes great competition. The ‘green-rush’ is very real. Everyone, from your next-door neighbor to your local coffee shop, gas station, and even multi-national organizations are looking to take advantage of this increase in market demand. CVS and Walgreens now carry CBD products, and even apparel retail giants like Urban Outfitters are starting to join in. The good news is, it’s still rather difficult to sell CBD products on major platforms like Amazon, and eBay prohibits it altogether.
Tips for beating the competition:This is why it’s vital you build a trustworthy brand that consumers will love and follow. This starts with you providing a custom, customer-centric online experience. It’s like that saying where you have 7 seconds to make a first impression. In this case, your website will have to do that for you.
Marketing CBD: Advertising and promotions.
Anyone’s initial thoughts on how to build awareness and beat the competition would be jump on the online advertising bandwagon. Sorry again, but you’ll face huge limitations here as well. Google and Facebook Ads will not run CBD ads. This means you can’t leverage some of today’s biggest consumer platforms to market your products, like Instagram, in the same way other retailers can.
This is a key reason you see brands vying for the attention and support of influencers, which, is a great tactic to explore. However, short of getting the Patriots’ tight end Rob Gronkowski to partner with you and publicly back your business and product, you’ll have to get a little more creative in how you advertise your business.
Tips for advertising your CBD business
Focus on increasing website traffic with an SEO strategy and blog posts. I can’t state this enough, but your website is really the heart of your business. Build and implement a solid SEO strategy around CBD keywords and your products. Start a blog and publish regular, educational and informational content.
The goal here is to establish yourself and your business as an industry leader, or at the very least, as a knowledgeable and trustworthy brand. Blogs are also a powerful tool to connect to other 3rd party CBD companies or industry publications. Offering to link to them in exchange for a mention on their site will increase your backlinks and make you more favorable in Google’s eyes.
Leverage industry publications. Speaking of publications, there are a number of marijuana and CBD magazines and sites with both print and digital editions, all of which offer advertising in one form or another and have facebook and twitter followers in the thousands. Take a look at some of our favorites:
Emails. I know, I know. Seems basic, but drive site visitors and blog readers to subscribe or leave their email so you can continue to send them information.
Tradeshows. This is huge. Due to limitations surrounding online advertising, you may want to place a higher priority on making it to in-person events. There are a number of shows globally, multiple times a year – and they’re expanding rapidly.
Tradeshows are not only a great place to meet potential customers and other CBD business owners (if you’re B2B) but also CBD suppliers, growers, manufacturers, labs for testing and analytics, flavor suppliers, and distributors. You might even meet a law firm or eCommerce platform that specializes in CBD.
Top Features To Look For In An Ecommerce Solution for CBD
I’ve talked a lot about how your website will be the key to success for your CBD business. I can’t strain it enough. All aspects of your business will flow through that online portal and because you’re selling regulated goods, some aspects will be more difficult to manage. Here’s the three key attributes you should look for when building your eCommerce site:
- Scalability. Whether it’s handling a larger volume of traffic and order placements, to a growing product catalogue, your site, and primarily your cart and checkout process, should be able to grow with you as your business scales.
- Flexibility. You need to seamlessly integrate with a multitude of 3rd party providers that address steps across the entire customer journey to keep the engine running. Just as you should be able to easily weave one into your architecture, should you be able to replace one.
When your payment processor decides to stop handling payments for CBD products you don’t want to be stuck and risk losing the ability to accept credit card info. If you’ve decided to accept bitcoin payments for your products, you ecommerce site will need to be able to handle multiple payment types. Long term, as you expand, you might want to start using multiple languages and accepting foreign currency
You will also need to implement a variety of tax specifications and shipping regulations by state. If you decide to include an age-verification step in your checkout process, your site will need to be able to accept and process this data.
- Speed.You lose revenue for every millisecond your site doesn’t load . I’m not kidding. Amazon did a whole study on it. Your site’s architecture and the tech stack that supports it will directly impact your site performance.
Building your eCommerce experience with Elastic Path
You only get the true flexibility you need from an eCommerce site that has an API-based architecture that decouples your front-end from your back-end. Yes, I’m talking about headless, but merely picking a headless solution isn’t enough – you need a headless approach that is also ‘services based’ (meaning each part of your eCommerce journey is a separate microservice component that can be assembled together).
I’m not talking about using a platform like BigCommerce, Salesforce, or Shopify that offer a form of ‘headless,’ where the APIs are bolted onto the infrastructure already in place. I’m talking about building CBD websites with a natively microservices-based backend completely built on APIs. This will enable you to create an eCommerce site with fit-for-purpose components and provide only the features you actually need.
You can learn more here, about why a headless approach to ecommerce is the best option for regulated or high-risk businesses. With Elastic Path, and the power of our core feature, Flows, you more easily manage complex back-end logic and alleviate many of the challenges you’ll have to face when building and launching your online CBD store.
Let us know if you want to learn more about how Elastic Path can help you launch and manage your CBD business.
The CBD market is booming and the growth of eCommerce will only amplify the growth of the industry. Now is the time to build and launch and online CBD store. Learn how to build your website and get the top tips for boosting your CBD sales.