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.
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.
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.
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, e.g.: www.thecbdistillery.com) 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).
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, i Logistics USA 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.
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.
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.
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? If your product is less than 0.30% THC, Get in touch to learn how i Logistics USA can handle your CBD fulfillment so you can focus on your brand — not packing boxes. Request fulfillment pricing today
Note: This article is solely for informational purposes and does not constitute legal advice.