By the end of 2019, Colorado could have around 50,000 acres of hemp, and the biggest driver behind the demand is CBD, according to the Colorado Sun.
As a non-psychoactive chemical compound, cannabidiol (CBD) present in hemp is known to have several medicinal properties. Although the federal government still views it with skepticism, the number of states that allow the sale of CBD is on the rise.
The potential of the CBD industry prompts many entrepreneurs and business owners to wonder how to get started selling CBD online. In this post, we’ll walk you through the step-by-step process on how to get started with a step in the right direction.
Note: The contents of this piece pertain solely to hemp-derived CBD.
1: Differentiate Between Plants and Compounds
Hemp and marijuana are plants that both belong to the cannabis family and contain the CBD chemical compound.
Farmers grow hemp for several reasons, most of which are for non-recreational purposes. That said, this fibrous plant has real-world applications as well, such as making textiles, biofuel, rope, plastics and food.
Marijuana, on the other hand, is mainly used for medicinal or recreational purposes (i.e., getting high) which is typically achieved by consuming the concentrated oil (either as a baked product or chocolate) or directly smoking the flower.
Both THC and CBD are chemical compounds – also known as cannabinoids – that are naturally present in plants. Marijuana is rich in THC and has a lower CBD content, whereas hemp is high in CBD and has a negligible amount of THC. CBD isn’t psychotropic and is known to minimize the effects of THC.
2: Develop a Better Understanding of State and Federal Laws
Since the 1970s, cannabis has been classified as a Schedule I substance by the U.S. government. Although the Farm Act of 2014 differentiates hemp grown on the industrial level, there are still some states that don’t allow its cultivation even though importing it is legal in most forms.
Federal authorities consider CBD illegal if it contains 0.3 percent (or more) THC content. CBD oil extracts have THC content under 0.3 percent, which is why you’d most likely start your business selling CBD oil derived from industrial hemp.
3: Figure Out How to Acquire CBD Products
The Hemp Industries Association was formed in 1994 as a result of legal scrutiny received from the Drug Enforcement Administration (DEA). It acts as a trade group whose objective is to lend assistance to members of the hemp industry. This includes farmers, researchers, and business owners.
Becoming a part of this association will enable you to make important business connections and network with other like-minded individuals in the industry and possibly even figure out how to acquire CBD products by connecting with other people in the industry. Plus, it’s always helpful to stay in the know about the latest industry events, summits and conferences.
However, unless you’re looking to grow hemp on an industrial scale and then extract the CBD content out of it, you’ll have to partner with a business that produces CBD products that you can resell online.
As a business owner, the easiest way to go about acquiring CBD products is by purchasing them wholesale for reselling.
There are several companies – like Hemp Meds and US Hemp Wholesale – that produce CBD goods wholesale for resellers. You can buy CBD products wholesale from these types of companies at reasonable prices. Generally speaking, they’re available as snack bars, ointments and lotions, oil extracts, and dog food.
Global Cannabinoids is another company that takes a more hands-on approach to selling CBD-based products. It’s a strictly B2B wholesale business that sells products without any company branding and packaging. In other words, you can have your own private label if you purchase from them.
4: Find a Payment Processor
Due to CBDs association with marijuana, there aren’t many payment processors out there that are willing to facilitate businesses selling these products.
Additionally, most banks classify CBD sellers as high-risk vendors and charge them higher rates. Not to mention there’s the ever-present risk of getting your account closed for minor infractions that wouldn’t have any effect on a merchant from a low-risk industry.
Of course, it helps if you’re able to prove that you’re a serious applicant. Getting all of the paperwork (including statements, taxes, and licenses) in order is a good start. Once that’s taken care of, focus on handling your accounts and keeping your books ready for evaluation at all times. An inventory management system can help you keep things in order.
Some businesses provide specialized payment processing for CBD sellers. However, you need to make sure they offer what you’re looking for before you enlist their services. A little research will go a long way in helping you solidify payment processing.
5: Enlist a 3PL to Manage Order Fulfillment
E-commerce order fulfillment comes down to three main options namely in-house fulfillment, dropshipping, and partnering with a 3PL service provider.
There are many CBD businesses that complete orders on their own. Some store their stock at home and use the local postal service to deliver customer orders. Others store their inventory at local warehouses and use the space and infrastructure to fulfill customer orders.
This method works effectively for people who are just starting out selling CBD goods and aren’t worried about handling large orders. As the demand for your products increases though, you’ll likely have to look for better alternatives to meet your growing needs.
Dropshipping involves both procuring products and shipping customer orders. In other words, you only market the products online without actually dealing with inventory yourself. This is a great option for a number of products but not an ideal solution for CBD-based products because you won’t have control over product selection, product quality, and shipment speed, which is important for growing businesses.
Enlisting a 3PL
Using a third-party logistics service allows you to complete orders without having to purchase storage space or hire a workforce to pick and pack items. You’ll still have the option to select the manufacturer of the product. You then outsource order fulfillment to a 3PL company that stores your inventory at a location closer to your customer base, enabling you to ship out orders faster.
Disclaimer: Symbia Logistics does not provide fulfillment services for CBD products with more than .3 percent THC content.
Let’s take a look at the benefits of enlisting a 3PL to manage CBD order fulfillment:
Fulfillment centers in multiple locations: Symbia’s fulfillment centers are located throughout the United States, allowing you to deliver orders to customers in much less time.
Integration with warehouse management software: Symbia’s Veracore Warehouse Management System offers integration with popular e-commerce platforms, including Shopify, Bigcommerce, Order Desk and Amazon. This will enable you to stay on top of your orders by tracking them in real-time.
There are several challenges associated with selling CBD-based products online, including legal, financial, and marketing hurdles. But, as the industry grows and more states continue to legalize this medicinal compound, there’s definitely room to establish yourself as a successful CBD vendor.
What are some of the CBD products you’re thinking of selling? Do you agree that enlisting an order fulfillment service can help you achieve a competitive advantage in the CBD industry?