Thinking about becoming a CBD retailer? Good move—CBD is now one of the fastest-growing industries in the US. The US CBD market shot up by a whopping 706% in 2019, and it’s estimated that CBD sales will top $800 million this year alone. Sales are forecast to hit $1.8 billion by 2022.
Unsurprisingly, those figures have resulted in a flurry of CBD businesses popping up around the world.
The demand for CBD products isn’t going away anytime soon.
Profitable as it may be, setting up a CBD business isn’t easy. As with any business, there are a number of steps to take before you can even think about making your first sale. From building a brand to shipping products, the work never stops. And the better your groundwork, the more successful you’ll be.
Then there’s the fact that selling CBD has its own set of hoops to jump through. It’s only since The Agriculture Improvement Act of 2018 (aka the 2018 Farm Bill) that hemp is no longer a controlled substance. This means that only hemp-derived CBD—not marijuana-derived CBD—is legal for sale in the US. The distinction is crucial, particularly when it comes to determining the THC content of a product.
Understanding how to legally market and sell CBD products is vital. Competition is fierce, but fortunately, so too is demand. The world is clambering to use CBD for their pain, inflammation, anxiety, stress, and other ailments.
So—let’s talk about how to become a CBD retailer.
Cannabidiol (CBD) is one of the main compounds present in the cannabis sativa plant. It’s a safe, non-addictive substance with a huge range of potential therapeutic benefits.
The hemp plant itself is naturally high in CBD and low in THC. Hemp includes the varieties of cannabis that contain less than 0.3% THC content by dry weight.
THC, on the other hand, mustn’t be confused with CBD. THC is the psychoactive compound of cannabis that produces the ‘high’ associated with marijuana. Marijuana encompasses the varieties of cannabis that contain more than 0.3% THC (by dry weight). This is the one that produces psychoactive or euphoric effects.
While scientific research is limited, CBD is shown to be effective in treating a range of health conditions and symptoms.
In addition to CBD, the hemp plant also contains terpenes, flavonoids, amino acids, and over 100 minor cannabinoids. These compounds combine to create the ‘entourage effect,’ which means they work synergistically to boost the health-boosting properties of one another.
How does CBD work?
CBD works by interacting with your endocannabinoid system, otherwise known as the ECS. Your ECS plays an important role in regulating many of the processes that keep your body functioning every day: blood pressure, mood, energy production, immune function, glucose metabolism, appetite, pain management, and more
CBD works by mimicking human body cannabinoids, encouraging the body to activate parts of the endocannabinoid system where it is most needed at the given moment. And unlike THC, CBD won’t make you feel high or intoxicated. This is because CBD and THC have different effects on the endocannabinoid receptors in the brain and body.
Understanding your customers’ needs
As with any new business venture, it’s vital that you research the market before jumping in. Sure, there’s money to be made and sales are looking to double within the next couple of years, but no business can survive without adequate planning.
One of the first things you must consider is also the simplest: why do people want CBD and what are they looking for?
Product diversity is key. The way each person wants to use CBD will differ widely—it’s the reason there’s now a huge range of CBD products available, from oils and tinctures to infused candles and gummies.
CBD is also produced in a variety of forms, including:
- Purified isolate
- Full-spectrum CBD oil
- Broad-spectrum CBD
The more options you offer to your customers for taking CBD, the more marketable your business will be.
Who are CBD customers?
A recent CBD consumer insights poll that included 5,000 responses revealed some interesting insights about CBD customers.
The two largest consumer segments include “stressed-out millennials”—people aged 21–35 who seek CBD to treat anxiety, depression, and insomnia—and baby boomers aged 56+ who are looking to address chronic conditions for pain management and inflammation. Also interesting is that 15 percent of adults aged 21 and older have consumed CBD products. Of those, 40 percent have a college degree or higher.
The legality of CBD in the US
As per the 2018 Farm Bill, the federal government no longer considers hemp to be a controlled substance. This includes derivatives such as cannabinoids (such as CBD) that contain no more than 0.3% THC.
As of April 2020, 33 states have legalized medical marijuana. The remaining 17 states have all passed laws allowing the use of cannabidiol (CBD) extract, usually in oil form, with minimal tetrahydrocannabinol (THC).
It’s vital that you refrain from making claims about the health benefits of your products that cannot be backed up by reputable sources. You need to know how and where you can legally market and sell your CBD products. Do your research beforehand to make sure you’re fully compliant with each state’s laws around CBD and that you sell only within safe shipping zones.
States where cannabis and related products are fully legalized
The following states allow the sale of CBD products as well as the medicinal and recreational use of cannabis.
- Washington D.C.
States allowing cannabis and related products under certain conditions
These states allow the purchase and consumption of all cannabis and cannabis products (including CBD oil) for medical use only. Consumers may require a medical marijuana card or a prescription.
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Dakota
- Rhode Island
- West Virginia
How to sell CBD wholesale online
An online CBD store frees you from operating costs such as rent and upkeep. You’ll also have access to a huge customer base, including those who may not have access to a physical store. At present, it’s estimated that a whopping 43% of CBD sales are made online.
Choosing a payment processor
It may seem strange, but one of the first things you need to do is to secure a payment processor. As a CBD retailer, you can’t just use any payment processor. Major processors such as PayPal, Stripe, and even Shopify are yet to permit payment processing for CBD—mainly because they are still bound by the rules and regulations of large corporate banks.
Unfortunately, this means that some CBD retailers end up using third-party payment processors, which carry an element of risk. Talk with other CBD retailers to find out how to get a CBD merchant account and payment processing. Some options include Authorize.net, DigiPay, and Square (beta only), and BigCommerce.
Finding a quality supplier
A quality CBD supplier is crucial. You and your customers need to know that your products have been manufactured with high-quality, uncontaminated, hemp-derived CBD.
- Check that your supplier is legally licensed to manufacture and sell CBD. An unlawful product won’t do your business any favors.
- A trusted supplier should be certified by the US Hemp Authority program. They should also be compliant with regulations laid out by the Food and Drug Administration (FDA).
- Check the THC to CBD ratios of the plants before buying. Request to see lab test results for each production batch of CBD for the levels of cannabinoids and terpenes.
- Choose only an experienced breeder with a solid reputation in cultivating CBD-rich hemp strains.
Verified CBD is one of the most sought-after CBD retailers in the US (and in other parts of the world). Our products are formulated by pharmacists and regulated by the highest standards in the industry, so they’re fully compliant with GMP.
All of our products are made in the USA from organically-grown hemp. They contain high-quality, non-GMO, THC-free CBD oil. Most importantly, every product is lab certified to be safe for use.
Like Verified CBD, a quality supplier will source from farmers who grow hemp in accordance with the highest cultivation standards. Quality CBD should be organic—that is, free from herbicides and pesticides. It should also be manufactured using CO2 extraction with no hexane, butane, or other harsh chemicals or solvents.
The most important determinant of quality is the certificate of analysis. This is a document issued by an third-party accredited laboratory that provides a full composition of the product: the total list of cannabinoids, microbiological levels, terpenes, and possible contaminants such as pesticides, solvent residue, or heavy metals.
Buying wholesale vs. white label vs. private label
The wholesale process begins when a manufacturer sells to a distributor, who then puts their company name on the product and marks up the price. As the retailer, you then buy the branded product in bulk from a sales coordinator.
White label products are mass-produced and sold to retailers who sell it under their own label and brand name. These products contain standard formulations and can be sold to a range of different retail brands. The only difference between two white label products is the label.
Private label products are also produced by manufacturers and sold to retailers, but the formulation is created exclusively for a specific retailer. This allows retailers to create novel formulations in order to differentiate their products and cater to a niche audience.
So, what’s best?
White label products are generally cheaper to buy from manufacturers than private label ones; however, the fact that these products are generic will mean you’ll be competing with other brands—so you may end up spending more on marketing. Both methods cut out the middleman, but they require starting from scratch. Your product is your product, and you’ll need to engage in time- and cost-intensive marketing to build up your reputation.
Buying wholesale offers less creative freedom (you don’t get to design the label or decide product specifications), but allows you to leverage the reputation of an established, respected brand. You can focus your efforts on driving sales rather than proving the legitimacy of your products.
Marketing your CBD products
The current demand for CBD products is huge—which means so, too, is the competition. But the more effort you put into your marketing, the more likely you’ll be seen in the crowd. Here are some of the marketing strategies that will help you get noticed:
Search engine optimization is essential for boosting your online visibility—and it can be done with minimal time and effort. It involves growing the quality and quantity of traffic to your online store by increasing the visibility of your website to search engines. It’s the unpaid results, or organic searches, that matter here. Website load time and product descriptions are also key.
When you launch your site, your first step should be to optimize your backlinks and keywords.
A great way of doing this is to start writing guest posts that include links back to your website. Pitch ideas to local publications for articles that users will want to read and that will entice them to browse your online store. You can also start a blog on your own site to generate user interest.
Keyword optimization begins by finding out what your target market is looking for. You need to have a clear idea of who you’re trying to reach and what they’re typing into the search bar. This can be done using keyword tools such as Ahrefs and Keywords Everywhere. Platforms like Answer the Public also help to generate the questions your customers are asking. Once you’ve got a list of high-ranking keywords, you can include those words (naturally) in your website copy so that Google will rank your site higher in the search results.
A massive 87% of social media users say they’re more likely to make a purchase after seeing an influencer promoting a product. Partnering with an influencer is a powerful way to drive traffic to your site—just make sure they will comply with FTC guidelines and have sound work ethics.
Emails are particularly important for CBD retailers. Online marketing requires compliance with state and federal regulations, and there are numerous advertising restrictions for CBD on social media platforms and search engines such as Google. The cost of advertising on social media can also be fairly high.
Email marketing is a safe and effective way to reach your customers. Surveys show that 80% of retail professionals believe email marketing provides greater customer retention than any other form of marketing. You can entice customers to sign up for your mailing list by offering coupons, discounts, and deals that are ‘not to be missed!’
Selling CBD in a retail location
While an online CBD store cuts out many of your overheads, a brick-and-mortar store allows you to interact with customers face to face, which means you can build loyalty and rapport. A retail space is also a great way to introduce people to CBD, especially in areas where CBD products are not yet available.
There are three key ways this can be done:
- Setting up a CBD shop
- Adding CBD to your existing product lineups, such as in pharmacies and health stores
- Providing CBD products for health-focused businesses, such as yoga studios, gyms, chiropractic clinics, etc.
As with any other business, there are many things to consider. You’ll have to register your business, gain the appropriate licenses, decide which customers to target, choose a range of products to sell (and how you’ll source them), and then embark on a marketing plan to attract customers.
Choosing a location
You’ll first need to buy or rent a retail property, then kit out a store from which you’ll be selling your products. CBD may be legal, but it’s still easier to sell it in some states than others. In states where recreational cannabis is legal, many people will choose marijuana over CBD—so it may be a good idea to open a store where it’s more difficult to get marijuana. Look for an area with plenty of visibility and foot traffic, so you can reach as many customers as possible.
A brick-and-mortar store comes with a range of overhead costs. Start by checking out vacant properties in the area where you want your store to be. Talk to building owners and/or management companies to establish the high end and low end of retail rents. Most areas have an average price per square foot—for example, a store in a busy mall near a highway may run $23 per square foot. If the store is 1,900 square feet, monthly rent might be around $3,642.
Identifying your customers
While it’s important to offer a comprehensive range of products for your customers, it’s also wise to focus on what the majority of users are looking for. As mentioned above, the largest proportion of CBD users are those aged 18–24. It also appears that these users are more interested in the anxiety-reducing effects of CBD, while older users are more interested in the pain-relieving benefits. These insights should be taken into consideration when marketing your store.
Addressing legal matters
You must register your business, set up your business accounting, and register for taxes. This will depend on local state laws and regulations for businesses in your area. In order to stock up on wholesale CBD and sell it to customers, you’ll also need a resale license or EIN. Fortunately, you don’t need any kind of special license to sell hemp-based CBD products.
Creating a marketing plan
There are lots of ways to attract customers to a store using brick-and-mortar marketing. These include loyalty campaigns, in-store events, relationship marketing, social media marketing, click and collect, and many more. Creating a Google Business page is also important. Make sure your page includes all the information about your location and then post an update every week to help Google understand you and your customers. This makes it easy for your customers to find you and add their own positive reviews.
The CBD craze is gathering momentum all around the world. And as the scientific evidence of CBD’s benefits continues to come to light, that craze is only going to keep growing. Over the next few years, it’s likely that more and more stores will be stocking CBD products. That’s why now is the time to capitalize on this budding market.
Of course, becoming a successful CBD retailer isn’t just about smart marketing. No matter how clever your slogans or how smart your store looks, your customers will only come back if they’re satisfied with the quality of what you’ve sold them.
The key? Obtaining the best product. Sourcing from a reputable, high-quality supplier of CBD oil such as Verified CBD will ensure that you’re providing only the very best to your customers. From there, your business can flourish in whatever direction you choose.
Are you a business owner? We’re happy to speak with you directly to help you understand the product and trends, as well as offer support as you establish your business. Our B2B department is run by a professional with nearly a decade of experience in high-profile finance and business and numerous qualifications in these fields. We want to ensure you have everything you need to develop a successful business—visit our B2B page or contact us as [email protected]
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