Sell CBD Online: A Complete Guide to Dropshipping CBD
More than 25% of adults in the US have tried CBD, while one out of seven say they use CBD products every day.
While 40% of consumers are in their 20s, CBD is popular among people of all ages. Fifteen percent of people 60 or older enjoy it, too.
If you’re contemplating selling CBD online, now is the time to take advantage of this global movement.
Analysts expect the global CBD market to reach $20 billion in sales by 2024. That’s an impressive compound annual growth rate (CAGR) of 30.7%
Selling CBD online presents a few obstacles you must overcome before launching your business. From the legalities that surround the industry to payment processor risk assessments, you must do your research to stand-out in the CBD market.
What Is CBD?
CBD stands for cannabidiol, a naturally-occurring compound that is found in the cannabis plant. It is only one of over one hundred phytocannabinoids that supply the cannabis plant with its robust therapeutic profile.
Cannabidiol acts on cannabinoid receptors in the human brain to alter neurotransmitter releases and reportedly helps address a wide range of health claims—from ridding a simple headache to chronic pain.
CBD is non-psychotropic, unlike tetrahydrocannabinol (THC), which is the primary mind-altering substance found in cannabis.
The cannabinoid from hemp and marijuana plants is extracted to produce products such as oils, tinctures, and topicals. Now, manufacturers are adding CBD to coffee, tea, bottled water, beer, cosmetics, and more. This recent shift is largely due to changes imposed by the 2018 Farm Bill.
The Farm Bill allows each state to decide whether to legalize the sale of products made with CBD derived from hemp within its borders. It also changes the definition of marijuana in the Controlled Substances Act. Now, the definition doesn’t include CBB derived from hemp, so it has been removed from the DEA’s list of controlled substances.
Thanks to the Farm Bill, US Farmers can legally grow industrial hemp, which means product availability will only continue to increase.
Is It Legal to Sell CBD Online?
Whether you can launch an online CBD business depends on your state of residency. You must also consider the products you intend to sell and whether you want to start selling CBD extracted from the marijuana or hemp plant. You can only sell CBD products derived from hemp online.
While the 2018 Farm Bill opened up the sale of CBD, it didn’t alter the FDA’s authority to regulate products. While many states removed hemp from their controlled substances acts, some still prohibit the sale and consumption of cannabidiol.
Even in states where CBD is legal, some limit the sale of certain types of CBD products or require sellers to have an appropriate license.
Three states have restrictions on all forms of cannabis. In Idaho and Nebraska, hemp-sourced CBD for any use is illegal. South Dakota is one of the most strict states in America regarding cannabis use—CBD remains illegal and remains on the state’s list of high-risk, controlled substances.
If you’re selling CBD products online, you must ensure that you have the right systems in place to comply with state laws surrounding CBD fully. Consider implementing product-based shipping restrictions to help you stay within safe shipping zones.
How to Start Selling CBD Products Online
While selling CBD products with less than 0.3% THC is legal in the US and the EU, it’s prohibited in Canada and Australia.
Dropshipping allows you to sell CBD products without handling any of the inventory. Your CBD supplier maintains, packs, and then ships products to your customers.
This fulfillment model is especially attractive for entrepreneurs who are looking for minimal startup and overhead costs. Another benefit to dropshipping is that you’re not responsible for maintaining the precise temperature for food and hemp products.
Your CBD supplier will ship products directly to your buyers, and you pocket the difference between the wholesale price and the amount you sold it for—money in the bank for every sale.
Dropshipping relieves you of handling the more technical and logistical aspects of fulfillment. In turn, you get to spend your time developing a marketing strategy for your new business, fine-tuning your social media accounts, and attracting niche customers to your website.
1. Select Popular Products from Reliable CBD Suppliers
Today, you can find CBD in just about anything. Some of the most popular products on the market include tinctures, topicals, infused edibles, and even novelty products such as bath bombs.
- Edibles: Edibles make up some of the most popular CBD products and include candies, baked goods, gummies, cooking oils, and other foods. These products face increased scrutiny from the FDA, but more and more products continue to enter the market.
- Topicals: Many people seek relief from chronic pain using topicals, including creams, gels, and sprays. You can place these products directly on your skin to address a specific area of the body.
- Vape Concentrates: There are also CBD oils and waxes that are made exclusively for vape machines. These products are compatible with specially designed devices that vaporize the CBD for the consumer to inhale.
- Sublingual Tinctures: Sublingual tinctures come in small brown bottles with a dropper inside. You place the CBD-containing drops under your tongue, which allows the oil to permeate your bloodstream.
- CBD Capsules: Those looking for a convenient and quick way to enjoy CBD buy it in capsule form. They’re easier to ingest than isolates and tinctures and ideal for buyers who aren’t interested in edibles or prefer to take CBD in a more familiar form.
Not only is it essential to select the right products, but you must do your research to select a trustworthy supplier to source from.
When considering suppliers, ask them questions about their growing standards, extraction methods, certification, and testing.
Growing Standards and Extraction Methods
Consumers are increasingly concerned about how the products they use and consume affect the environment, which means you should be, too.
One of the first things you should scope out about any supplier is to ensure they’re maintaining clean and sustainable growing conditions.
Hemp is known for having a positive impact on the environment, as it can soak up contaminants in soils, sediments, sludges, surface water, and groundwater. If CBD is not extracted properly, it can contain these harmful substances.
The way a grower extracts CBD from the hemp plant will also affect the quality of the final product. While petroleum-based extraction is the most common (and cheapest) method, it utilizes harsh chemicals such as propane and butane, which can negatively affect the product. For this reason, the most favorable extraction method is CO2 extraction.
Testing and Certification
To provide the best products, your supplier should have strict testing procedures in place—this includes sending their products to third-party testing facilities. Through these tests, the supplier will obtain an analysis of the potency of their product, as well as confirm that the product is free of contaminants.
As part of your research, look for suppliers on the US Hemp Authority’s list of certified companies. You’re more likely to gain customers’ trust by picking a CBD supplier with an official certification.
2. Obtain Proper Business Documentation
Before you start selling CBD online, you’ll need to go through the process of becoming a legitimate retailer by obtaining a resale certificate and Tax ID.
A resale certificate allows resellers to purchase goods from a vendor without paying sales tax. The reseller (you) sells the product to the end-user (your customer) and collects sales tax.
The requirements for resale certificates vary by state, and if you’re planning on reselling merchandise in multiple states, you must obtain a certificate in each state you’re selling in. This may sound like a lot, but you will discover that some resale certificates cover multiple states, and some states don’t require one at all.
To apply for a resale certificate, be ready to present the following information:
- Your name, address, phone number
- Your Employer Identification Number (EIN)
- Description of your business
- Description of the items you intend to sell
You will provide your signature to verify that you’re purchasing the items in good faith and will resell the items you’re purchasing.
If you don’t have an EIN yet, you’ll need to apply for one of those, too. This is also called a Federal Tax Identification Number, which is used to identify a business entity. As a general rule, all businesses need an EIN.
You can apply for an EIN in several ways, including submitting an application online.
3. Partner With a CBD-Approved Payment Processor
Next, you’ll need to find a reliable credit card payment processor. This can be tricky for sellers of CBD products, as the payment gateway landscape is littered with grey areas surrounding “high-risk” items. Many payment processors won’t take on customers selling these products.
At this time, the sale of CBD products is not approved by all payment processors, so you’ll need to find a company that approves high-risk merchant accounts.
Be aware that credit card fees associated with CBD payment processing can vary by merchant depending on a processor’s risk assessment.
When choosing a payment provider, guarantee that it can seamlessly integrate with your preferred ecommerce platform and checkout method. Flxpoint, for example, offers a payment processor integration with Square Payments, allowing users to save credit cards on file to accept payment for wholesale and dropship orders.
4. Set Up Your Online Store
Finally, it’s time to set up your ecommerce platform.
Take the time to do some research before deciding which platform to use. You’ll need to ensure that the platform allows you to select your preferred payment gateway. Plus, check service and community policies to ensure you advertise and sell your products within the platform’s boundaries.
Consider a “move-in-ready” approach by selecting one of US Direct’s Turn-Key Shopify Stores. Purchasing a store pre-loaded with a stylish theme and products from trustworthy CBD suppliers can eliminate the work involved with the initial setup.
The Turn-Key option also includes Inventory Source’s inventory and order automation software. Sell more products by automatically uploading product data and keeping inventory in sync—without manual file imports.
You can also take advantage of automatic order processing, where Inventory Source sends your order to your supplier and syncs shipment tracking information back to your sales channel.
Start Your Online CBD Business Today
Sure, there are a few bureaucratic hoops to jump through before you can sell CBD online.
However, if you do your research, you can get ahead of the curve by solidifying your business plans, working with high-quality, verified CBD suppliers, and partnering with a CBD-approved payment processor.
If you’re interested in sourcing CBD from trusted suppliers, contact our team today to get started.