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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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Start A CBD Oil
Over the last few years, cannabidiol (CBD) oil has grown from a niche alternative treatment to a multimillion-dollar market. And as more people discover the benefits of CBD, the medical community and legislators alike are taking notice. CBD is used on a daily basis by millions of people, and because of the credibility given to it by doctors, researchers, and lawmakers who support it, more people are trying CBD for the first time every day.
Whether you use CBD yourself or you’re just interested in the industry, now is a fantastic time to enter the market and open your own online CBD store. Shift4Shop has everything you need to handle this unique industry and tap into the huge opportunities offered by the CBD market. You’ll have access to the most powerful eCommerce tools available for starting your store, reaching your customers, and getting the brand recognition that leads to a successful business.
While there is momentum growing in terms of FDA approval and lessening of restrictions on selling CBD products, it can still be a very difficult vertical for businesses to navigate. This is largely due to the lack of federal legislation on the topic in the United States. In particular, eCommerce businesses wanting to sell CBD-related products must adhere to the specific and widely varying laws in each of the 50 states. This guide will help you understand and be better equipped to thrive in this fast-growing industry.
Understanding CBD and CBD Products
There is a lot of confusion around CBD products due to its relationship with marijuana, so let’s go over the facts. CBD is short for cannabidiol, a compound found in all cannabis plants. What makes CBD oils different is that they do not contain THC (tetrahydrocannabinol) which is the compound responsible for the “high” associated with marijuana. CBD itself is completely non-psychoactive, meaning it does not affect the brain like THC does.
People take CBD for a variety of reasons including severe or painful conditions and anxiety relief. Everyone who uses CBD also has their own preferred method of taking it, which can be anything from vaping it to swallowing a pill. As a CBD seller, it’s important for you to understand the types of CBD products available and how they are used, as well as which types of customers the different products appeal to.
A tincture is a concentrated extract made by soaking herbs in very strong alcohol for long periods of time, or in the case of CBD tinctures, by combining natural hemp oil with alcohol or another solvent. Tinctures are administered by placing a few drops of the liquid under the tongue. Only a small amount is needed for a dose because they are so highly concentrated. This method of administering CBD appeals to people who want the fastest way to take CBD and feel its effects quickly.
An isolate is a pure substance that has been extracted from its source and refined into a powder. CBD isolate has been processed to remove all the other natural plant substances such as chlorophyll and wax and leave only pure CBD behind. Isolates are colorless and flavorless and can be used in a similar way to tinctures, or can be added as an ingredient to infuse CBD into a variety of foods and beverages. Isolates are popular with customers who like to mix their own CBD products at home.
CBD Topical Formulations
A CBD topical formulation is a cream, salve, lotion, gel, or other preparation made to be rubbed into the skin. These products can be applied directly to inflamed or painful areas similar to other pain relief ointments. They also provide an alternative for customers who don’t like to take CBD orally. These treatments can also include other ingredients like menthol to provide a cooling sensation. CBD can also be used in massage oils.
CBD Vaporizers and Vape Concentrates
Inhalation is a popular method for CBD delivery because, much like with tinctures, the CBD is absorbed directly into the bloodstream and so provides immediate effects. CBD concentrates can be vaped similarly to nicotine e-liquids, so vape supply stores often expand into CBD or vice versa (learn more about selling vape online). Traditional smoking methods like water pipes are also popular, but some CBD retailers find these products troublesome due to drug paraphernalia laws (regardless of their use with legal CBD) and the difficulty of shipping complicated glass items.
Summary of CBD Products and Accessories You Can Sell:
- CBD tinctures
- CBD topical formulations
- CBD isolates
- CBD vaporizers and concentrates
This list is a summary of hundreds of individual products which can all be sold quite successfully through an online CBD store. Customers will also need to restock their CBD products, including their preferred concentrates and delivery methods which could include numerous types of vaping accessories. If you build your CBD eCommerce website with advanced software like Shift4Shop, you can make the reordering process much easier for your customers by implementing a subscription service for needed products. You can also offer product bundles, like edible variety packs, CBD vape starter sets, and more.
Choosing a CBD Supplier
Choosing a CBD supplier is a very important decision that will affect the quality of your products, the satisfaction of your customers, and the reputation of your brand. Because of the well-known benefits of CBD, “fake” CBD oils are found in stores everywhere. These oils are considered not to be true CBD because they’re derived from hemp seeds — which contain very little CBD — rather than from the stalks and leaves of the plant where the most CBD is found. It’s crucial for your business that you choose a manufacturer that makes genuine CBD that will have the effects your customers want. This way, you can immediately differentiate your business from the brands that provide no benefit and only seek to cash in on a trend.
When evaluating a CBD supplier, find out as much as you can about their manufacturing process. Remember that if you want to sell CBD oil products, those products must be derived from industrial hemp with a THC content of less than 0.3%, processed from the plant itself and not the seeds. Here are some other considerations to keep in mind when
CBD retailers are not allowed to make medical claims on their websites, and neither are suppliers. Even though research shows potential benefits, the Food and Drug Administration (FDA) hasn’t yet evaluated these statements. CBD suppliers, including both wholesalers and consumer-level retailers, are required to display the FDA’s disclaimer on their website. If you’re looking at a supplier who makes medical claims about their CBD products, be aware that these statements have no FDA backing. Don’t choose a supplier based on medical claims, and if the supplier has particularly bold claims on their website (e.g., “cures cancer”), you likely want to avoid that supplier entirely, as breaking this rule means the supplier may be breaking others as well.
As a business owner, you should always look for ways to lower your costs, as long as you don’t compromise on the quality of your merchandise. CBD suppliers’ pricing can vary greatly and sometimes this is reflected in the quality of the product. For example, higher-priced CBD products are often more pure and potent — but this isn’t always the case. Make sure you learn as much as possible about the supplier so you can learn whether the quality of their products justifies the pricing. Likewise, stay away from suppliers who sell at abnormally cheap prices. These rock-bottom prices are almost always a sign of cutting corners and producing an inferior product.
Some CBD suppliers offer additional services like dropshipping and private labeling. While the quality of the product should come first, it’s also very helpful to know if a supplier can provide these services. If you’re planning on dropshipping your CBD products, this option is crucial to your business model. In addition, private labeling allows you to sell fully branded products with your own business name and logo, which helps you become established in the industry and start earning the trust of your customers.
Understanding the Legality of CBD
Whether you plan to stock inventory or sell by dropshipping, the quality of your supply chain makes all the difference. It’s also vital to choose a supplier that’s right for your business and can get your products to you in a timely fashion. Since the CBD industry is growing, it’s becoming easier to find good suppliers that will work well with you.
The Agriculture Improvement Act of 2018 (commonly known as the 2018 Farm Bill) legalized hemp on the federal level by removing hemp and its derivatives from the federal list of controlled substances. This legalized CBD so long as it derives from “hemp,” which is defined as the plant Cannabis sativa L. and any part of that plant, but only if it contains no more than a 0.3% concentration of delta-9-tetrahydrocannabinol (THC), which is the psychoactive component of cannabis.
Any plant that contains a higher than 0.3% concentration of delta-9-THC is classified as marijuana and remains a federally controlled substance and illegal on a federal level. And because it is still illegal, any CBD derived from such marijuana is also rendered illegal. The FDA has determined that CBD constitutes a drug or drug ingredient because a form of CBD is the active ingredient in an FDA-approved prescription drug (the drug EPIDIOLEX, for the treatment of certain seizures). Because of this, the FDA has taken the position that it is not lawful to add CBD to food, dietary supplements, or pet foods, even if the CBD comes from legal hemp. The same is true for other forms of delta-9-THC, since there are two drugs approved for therapeutic uses that contain a synthetic version of this substance.
Accordingly, products containing cannabinoids cannot currently be legally sold as dietary supplements nor can they be added to FDA-approved ingredients and sold legally. The FDA regularly issues warning letters to CBD sellers advising that the FDA considers this the sale of unapproved new drugs in violation of the Federal Food, Drug, and Cosmetic (FD&C) Act. In addition, the FDA considers any claims that CBD can be used to treat medical conditions or for other therapeutic uses as the sale of misbranded or mislabeled drugs also in violation of the FD&C Act. Misleading labels and unsubstantiated claims on products may also be deemed deceptive trade practices in violation of consumer protection laws.
On a state level, there is a vast range of laws, regulations, and treatments of both hemp-derived CBD and marijuana-derived CBD. Caution is warranted because state laws are not always equivalent and do not necessarily allow the same conduct. State laws concerning hemp-based CBD may permit or prohibit one or more of growing, selling, and/or using. States may also treat sales of CBD products differently, whether they are for medical or recreational purposes and whether or not they can be incorporated into foods, dietary supplements, and/or topical lotions.
Many states follow federal guidelines on these issues but many do not. When selling CBD products, it is important to show that the specific CBD products you are selling are lawful within the state in which it operates. Keep in mind that several states also require retail licenses and/or registrations for merchants to sell already-processed CBD products, including Louisiana and New York.
The FDA has advised that whether a CBD or other hemp-related product may be marketed and sold depends, among other things, on the intended use of the product and how it is labeled and marketed. In particular, ingredients that are derived from parts of the cannabis plant that do not contain THC or CBD might be able to be marketed as dietary supplements and may not require the same type of lab certification. In any case, all products marketed as dietary supplements must comply with all applicable laws and regulations governing dietary supplement products.
In no instance may CBD products be marketed using unsubstantiated claims that the product can prevent, diagnose, mitigate, treat, or cure any diseases, and should NOT contain any misleading claims or statements lacking substantial scientific support.
Any marketing of CBD across state lines (which includes most eCommerce merchants) will implicate federal regulations in addition to the laws and regulations governing each state involved in the transaction. CBD sold within a state will be governed primarily by that state’s laws, although some federal regulation may still be a factor.
Selling CBD Through
Some eCommerce providers won’t allow you to sell CBD, but with Shift4Shop this is not a problem! In fact, Shift4Shop has more built-in features to help a CBD business than any other shopping cart software.
Here are some of the reasons Shift4Shop is the best eCommerce platform for an online CBD store:
Support for High-Risk Payment Providers
While CBD is legal to sell, it’s considered a high-risk industry by payment processors and many providers won’t work for sales of these products. Shift4Shop, however, provides a seamless payment experience for Shift4Shop customers.
Easy Tax Setup
CBD is subject to taxes that vary from state to state, including sales tax and sometimes a state-specific cannabis-related tax. Shift4Shop makes it simple to automatically charge the correct tax rates — no matter where your customers are located.
Full Suite of Powerful SEO Tools
Many of the most familiar online advertising methods aren’t available for CBD sellers — for example, Google and Facebook will not run CBD ads. Therefore, a strong search engine optimization (SEO) strategy is crucial. Shift4Shop has the best built-in SEO features in the industry, all geared toward helping your website get listed fast and start gaining rank immediately.
Built-In Blog and Content Pages
Since SEO is so important for CBD sellers, you need a way to fill your website with high-quality content that will rank well in searches. With Shift4Shop, you can instantly add a blog to your site for posting the latest CBD news, studies, homemade edible recipes, product updates, and anything else you see fit. You can also create unlimited extra pages to provide vital information like your store policies, product purity guarantees, general CBD educational information and FAQs, and much more.
Here is a quick checklist for you to help make sure you are approved to sell through Shift4Shop:
Post all ingredients, product descriptions, and labels in your shop in order for Underwriting to review and ensure that the products are FDA compliant.
Activate Shift4Shop age verification tool
Complete the CBD Compliance Statement Form and agree to the terms posted on shift4shop.com.
Provide a copy of your hemp handler license or special hemp processor license based on the state’s requirements for the sale of hemp-derived CBD products and/or state, tribal, or federal licensing information during the submission of your store (listed under the compliance statement).
Certify your products with a third-party laboratory for all of the listed products for sale in your store and post the results from the laboratory for consumer review and underwriting purposes.
Several states require retail licenses and/or registrations for merchants to sell already-processed CBD products, including New York and Louisiana.
Merchants must label CBD products in conformance with applicable regulations and in a manner that mitigates risk of regulatory agency enforcement actions. As each state may have its own laws that govern labeling (and sometimes these laws can conflict with one another), there is no one-size-fits-all approach. If a particular state is a relevant jurisdiction, its laws should be more thoroughly examined. Below is a summary of general guidelines that pertain to federal labeling requirements. Generally, labels should include: