The CBD eCommerce industry has been steadily growing over the past few years. And this upward trend is expected to continue as CBD is more widely understood and accepted.
As a matter of fact, according to a study by Brightfield Group, US sales of CBD products — which include food-grade products like vitamins and therapeutics like topical creams — are predicted to hit $23.7 billion by 2023.
That means opportunities abound for retailers and wholesalers who get in the game now and establish a brand presence online.
But how do you get started selling CBD online?
The best way to begin is by understanding regulations, limitations, financing, and shipping — while strategizing awareness and educational marketing campaigns.
Sounds like a lot, but we put together this guide with help from our strategic partners at BigCommerce and ShipperHQ to help you navigate it all.
Let’s start from the basics.
What is CBD?
Cannabidiol, or CBD, is a non-psychoactive molecule that occurs naturally in marijuana and hemp plants. Research started in 1940 and since then studies have shown benefits like reduced anxiety, better sleep, or pain relief. But there wasn’t much mainstream awareness until 2018 when the Farm Bill legalized industrial hemp agriculture on a federal level.
That same year, the number of US CBD consumers doubled from 2.6% to 4.8%. That number continues to increase with the estimated annual CBD usage rate to skyrocket by 35%.
Challenges for CBD eCommerce Sellers
Most CBD used today is extracted from hemp plants, which contain very little THC (tetrahydrocannabinol)(0.3%), the psychoactive component of marijuana. Meaning, these products are not intended to get consumers “high”. However, the two plants look and smell so similar that hemp regulation has been a bumpy road due to:
1. State-by-state regulations
Yes, the 2018 Farm Bill allowed hemp to become federally legal, but individual states can still set their own laws. This can create risk for the business, its owners, and its financial backers.
2. Banking scrutiny
Some CBD businesses are considered a marijuana-related business; this causes further regulations. For instance, banking institutions must perform in-depth risk assessments because MRBs are considered high-risk.
3. Legitimate sellers vs scams
As with any industry, there are always some bad apples without concern for the customer, product, or industry. And with the rapid growth of the CBD industry, it’s often difficult to weed out frauds.
4. Picky payment processors
The extra work between assessing, monitoring, and vetting new businesses takes a lot of resources; in some cases, payment processors might see more value in not partnering with CBD sellers.
5. Carrier Regulations
According to our partners at ShipperHQ, most major carriers will ship CBD, but each carrier has their own rules and regulations.
Here’s what the team at ShipperHQ found:
UPS: UPS will not ship a product if it has been made at the same facility that also has marijuana-derived products.
FedEx: FedEx only recently allowed CBD shipping, but now allows shipments of hemp-derived CBD only (no marijuana-derived products!). They also ban the shipment of any “raw or unrefined hemp plants”.
USPS: Along with the federal and state law regulations, the USPS requires that the mailer “retains records establishing compliance with such laws and plans, including laboratory test results, licenses, or compliance reports, for no less than 3 years after the date of mailing”.
Some carriers may also require lab tests to be presented or available before shipping. Be sure to check each of your carriers’ requirements carefully so you know exactly what you need to do to remain compliant. Especially since the guidelines are constantly changing when new laws come into play.
Financing for CBD Online Sellers
The same tried-and-true ways of financing a new business can work for CBD sellers, but with a caveat. You’ll need to make sure any financial institution you choose does in fact work with the CBD industry.
There are specific cannabis-industry lenders and high-risk lenders that cater to CBD brands. These are viable options while many banks and credit unions are slow to adopt.
However, when it comes to starting any business, the following options can help you get started:
- Private financing
- Starting with low inventory
- Starting a savings while researching loan options
- Crowdfunding
Maintaining Compliance and Scaling Your CBD Store
Here are three more strategies to maintain compliance when selling and growing your CBD online store, from our partners at ShipperHQ:
1. Define Delivery Zones
With ShipperHQ, you can define specific delivery zones to allow or restrict shipping to certain areas. For example, let’s say you are restricted from shipping one of your products to Arizona. Within ShipperHQ, you can set up a shipping rule where the system automatically eliminates Arizona as a delivery option.
2. Set Up Shipping Groups
Creating shipping groups will allow you to apply specific rules to certain groups of products. For example, if you sell a number of products that cannot ship via air travel, then you can flag those products to prevent that particular carrier option from showing up in the customer’s checkout.
3. Utilize Dimensional Packing
Dimensional Packing can take into consideration aspects like padding and tolerance within the boxes. For example, if your products need to be stored in fragile packaging, then this tool can take into consideration the exact padding needs for that shipment. This helps to get a more precise shipping quote at checkout so that you (the merchant) are not stuck with additional charges.
Marketing your online CBD store
We consulted another one of our strategic partners, BigCommerce, for digital strategies to successfully market your CBD eCommerce business.
6 Strategies to Market CBD Online, Courtesy of BigCommerce
By marketing hemp-derived CBD effectively with the following methods, you can master the art of learning how to sell CBD online.
1. Focus on SEO.
Perhaps one of the most organic ways to build your brand on the Internet is by paying close attention to search engine optimization, better known as SEO. Although this method can be somewhat difficult to execute, the cost is usually a lot lower than it is for alternative methods of advertising.
Hiring an SEO expert to help is often the best way to ensure your money and time are well spent. Additionally, you need not fret about breaking the CBD marketing rules.
However, please be aware SEO “keywords” will be considered as marketing and advertising materials if the FDA is investigating any health or disease claims.
Practicing proper SEO will ensure that you are seen as a trusted thought leader in the nascent industry and will enable web visitors to find your site based on what they are searching online.
2. Grow content.
Content creation can fit in seamlessly with your SEO plan, due to the fact that SEO focuses on the implementation of suitable high-volume keywords and phrases throughout blog posts, articles, product descriptions and web content.
Get in the habit of sharing your content on social media platforms and watch the traffic grow! Carefully curated content will bolster your credibility as an authoritative and influential leader in the CBD industry.
3. Attend trade shows.
Word of mouth marketing has always been (and continues to be) one of the most powerful forms of marketing. Consider attending industry trade shows for an opportunity to meet with other industry players face-to-face, as well as to assess the competition.
Not only this, but at trade shows you can also demonstrate what your brand has to offer and get people on your side. By doing so, there’s a possibility of attracting a new audience and potentially, investment for your CBD advertising strategy.
4. Build an affiliate network.
Affiliate marketers are valuable people who can help to inform the world about your product, without you having to lift a finger. According to industry data, affiliate marketing expenditure will inflate by 10% over the next few years. Worth a whopping $12 billion, affiliate marketing accounts for 15% of all digital media revenue and back in 2017, web users clicked on affiliate marketing links over five billion times!
If that wasn’t enough to blow your mind, consider the fact that global affiliate marketing transactions surpassed $170 million during the same year! Some trusted affiliate networks include ShareASale, CannAffiliate and Clickbank.
5. Use influencer marketing.
Aim to include as many marketing tactics in your CBD campaign as possible. The more diverse your marketing campaign, the better the chance of attracting your target market and turning over a rather healthy profit from CBD marketing.
Influencer marketing is a fantastic way of doing this and it is one of the fastest-growing segments in the marketing world today, with 17% of companies claiming to spend more than half of their marketing budget on influencers.
This year, 65% of influencer marketing budgets are predicted to inflate. Of course, an influencer that is compensated in any way must follow FTC guidelines and conspicuously disclose their connection to the brand being promoted.
6. Utilize email marketing.
Another marketing method that should not be ignored is email marketing. Although this is one of the oldest forms of online marketing, it maintains its efficacy at attracting customers from all corners and all walks of life.
Sending coupons and deals to your existing newsletter subscribers/customers is a fantastic way to get the word out about products and improve customer relationships and retention.
Now that we’ve provided a broad overview of how to grow your CBD online store, let’s work together to create a roadmap to success.
Contact us today to learn how to build or migrate your eCommerce store and continue growing your online presence.
This post is for educational purposes only and is not intended to be used as legal advice.
Gentian, CSO and co-founder of Shero Commerce, guides the company and client digital strategies. He's an expert in technical SEO, Inbound Marketing, and eCommerce strategy.
