Since 2015 in Oregon, applications for hemp growing licenses have multiplied twenty-fold – and it’s all because of CBD.
Cannabidiol (CBD) is a non-psychoactive chemical found in marijuana and hemp. It has been anecdotally (and scientifically in some cases) proven to have medicinal applications, and although it is still viewed skeptically by the federal government, an increasing number of states are getting on board with it. This has made CBD more viable from a business standpoint than marijuana in many ways.
In other words, CBD is big money.
There’s a lot of potential here for those with the wherewithal to seize it (some projections suggest a 700% market growth between 2016 and 2020).
However, there are some obstacles in the way not apparent in other industries, and it is critical that you prepare for them.
1. Know Your Plants And Compounds
Marijuana vs. Hemp
Marijuana and hemp are plants in the cannabis family, and both have CBD content. People have grown and cultivated hemp for a variety of reasons over the years, none of which entail getting high.
Things like rope, textiles, plastics, food, and even biofuel can be made by using this fibrous plant.
Marijuana is consumed for medical or recreational purposes, achieved by smoking the flower or ingesting the concentrated oil (generally in the form of baked goods, chocolate, or candy).
Its ability to make people “high” is praised by some and condemned by others, and its legal status is hotly contested to this day.
CBD vs. THC
Screenshot – Chart by Feel Your Best, LLC
CBD and THC are both chemical compounds (“cannabinoids”) found in cannabis plants. Marijuana is generally higher in THC and lower in CBD, whereas hemp has significantly more CBD and negligible amounts of THC.
THC (tetrahydrocannabinol) is psychotropic and is responsible for that “high” feeling marijuana smokers feel. It is used medically as an anti-nauseant and an appetite stimulant. It’s illegal at the federal level.
CBD isn’t psychotropic at all. It has actually been proven to reduce the effects of THC. Its medicinal benefits range from pain reduction to treating epilepsy.
An FDA approved, CBD-based drug is to hit pharmacies in the very near future. As a standalone compound, it is completely legal.
2. Understand The Law
State vs. Federal Laws
Cannabis (which technically consists of marijuana and hemp) has been classified as a schedule I substance by the U.S. government since 1970 when Nixon commenced the “war on drugs”. Although industrial hemp has been differentiated in part by the Farm Act of 2014, it’s still illegal to cultivate in certain states (although importing it in most forms is legal).
The Bottom Line
CBD oil that contains .3% or more THC is illegal in the eyes of the federal government. That kind of THC scarcity can only be found in hemp oil extracts, so industrial hemp is going to be key in getting your business off the ground.
It is still okay to market CBD products with higher amounts of THC, but you’ll want to make sure you’re doing so within the borders of a state where marijuana is legal.
3. Decide On How You’ll Acquire CBD
Unless you plan on getting a license to grow industrial hemp and then extract its CBD content, you’ll need to get linked up with a business that has CBD products you can resell. Here are two ways of acquiring CBD as a business.
Option 1. Purchase it Wholesale
There are numerous companies out there that provide wholesale CBD goods for resellers. For instance, Bluebird Botanicals, Hemp Meds, and US Hemp Wholesale each have packages that allow you to purchase large quantities of their products at great rates.
Oils, snack bars, salves, lotions, even dog treats – consider what direction you want to take and start buying what you hope to sell.
You can also try a company like Global Cannabinoids if you prefer a more hands-on approach. Operating as a purely B2B wholesaler, Global Cannabinoids leaves the branding, packaging and everything else to you.
Although it is nice to have the name recognition of established CBD products on your side, working with GC or other similar wholesalers can be an effective way to differentiate your business through having your own private label.
Option 2. Join the Hemp Industries Association
The Hemp Industries Association was established in 1994, partly in order to fight the legal scrutiny hemp has received from the Drug Enforcement Administration (DEA).
Today, it is a trade group that aims to help any members of the hemp industry, whether they’re researchers, farmers, or business owners.
Joining this association will primarily help you make connections. If you like the idea of meeting people and hashing out (pun intended) deals face to face, joining the HIA is one way to facilitate this through conferences, summits, and industry events.
Sometimes it is simply more effective to do business in person.
4. Find a Fair Payment Processor
If you’ve acquired wholesale quantities of CBD but you can’t sell it, you’re not going to be making much (or any) money.
And unfortunately, due to CBD’s association with marijuana, payment processors aren’t exactly jumping out of the woods to help a business trying to sell it either.
In fact, banks generally classify all sellers of CBD as “high risk” merchants. This means higher rates, less flexibility, and the possibility of getting your account closed for minor infractions that wouldn’t even impact a member of a low-risk industry.
If you’re not sure of how to get your high-risk merchant account set up, you’re not alone. First, you’ll need to prove that you’re a serious applicant.
Having your paperwork in order (taxes, statements, licenses) is one way to emphasize that you mean business. Being organized is critical for high-risk merchants because their books are scrutinized more heavily than their low-risk counterparts.
If you want to survive as a CBD retailer, you’ll need to tighten things up.
It also helps, therefore, to handle your accounts very carefully and keep your books ready for scrutiny at any point in time. One way to do this is to synchronize your invoicing, CBD inventory and your accounts so you don’t miss out on anything.
Also, exploring your various options is crucial, because certain providers will be more suitable to your business goals than others.
Some companies provide specialized payment processing for CBD merchants, but it’s important to get a feel for what’s available before signing your name to any contract (even if you think you’ve found the best deal on the market).
With a bit of research, you’ll be in better shape to solidify your processing, which is often one of the biggest struggles facing high-risk businesses.
5. Market Yourself Online
This is the last and most important step of “making it” as an e-commerce business selling CBD – you must learn to sell your product effectively. There are two key steps to competing in the hyper-competitive online marketplace.
Step #1: Design a Great Website
One area in which you can quickly differentiate yourself from competitors is your website. Having a clean, attractive website is more important than you may realize – one study finding that 94% of respondents were affected by the design of a homepage, with only 6% first noticing the actual content.
With a CMS like WordPress, it is easier than ever to put together something visually appealing. Depending on your budget, you can hire a developer to enhance and customize your website as you see fit.
Once you get a nice foundation, you can work together with your payment processor to integrate customer billing (unfortunately, many of the easy-to-use gateways don’t accept CBD merchants).
Step #2: Write (or Hire Writers)
I’m not just talking about the importance of blogging, either. Authority and trustworthiness don’t grow on trees (although that’d be nice). They need to be cultivated through hard work, and writing about the CBD industry on your own blog or as a guest post for other websites will help you gain recognition, increase your organic traffic, and in general enhance the potential of your e-commerce site.
Speaking of organic traffic, making your website rank for keywords about CBD is by far the best way to lead paying customers to your doorstep.
Sites like Leafly, High Times, and The Cannabist each have numerous articles about CBD (news, educational pieces, and more), and such content helps them drive traffic (studies showing a 67% lead boost for companies that consistently blog). Put in some effort here, because it’ll set the foundation for your future success.
There’s never been a better time to become a CBD merchant. The market is young and growing quickly, and if you want to take advantage of it then make it happen. Start preparing today and reap the rewards of this booming industry.
Geoff Scott is an editor & community manager at FreelanceWriting.com, where he helps foster a positive environment for writers and those interested in making it as a freelancer. You can also read his post on Developing A Strong Returns Policy here.