Cannabidiol (CBD) has become one of the most popular all-natural health supplements over the last few years, with some analysts predicting the industry to hit $20 billion in sales by 2024. Naturally, this has led many entrepreneurs to consider this marketplace for their next business.
However, starting a CBD business isn’t as easy as it appears. With such nuanced laws and few clear regulations, there is no direct path to success in this industry. Not to mention, there are a number of obstacles entrepreneurs must face that they wouldn’t come across in other markets.
With that said, one of the quickest ways to get your foot in the door is through dropshipping. In brief, this means selling other companies’ CBD products on your own platform. While dropshipping comes with its pros and cons, it can be an effective way to learn this marketplace before you develop your own brand.
Throughout this article, we’re going to give you a step-by-step guide on how to dropship CBD.
What is Dropshipping?
Dropshipping is one of the easiest ways to get started in the CBD industry. It involves you developing a platform that markets and sells other brands’ products. You have no obligation to store and ship these products yourself. Rather, every time you make a sale, the brand ships the product directly to the customer from their inventory.
The benefit of dropshipping CBD is the fact that you don’t need nearly as much capital to get a business going. Some CBD dropshipping programs cost less than $1000 to join (not counting other costs like the money you spend on developing your website). Not to mention, since you don’t need to develop an inventory and push for sales, there’s no risk of spending too much on products.
As long as you have an internet connection and the will to develop such a business, you can start selling CBD products in no time at all with very little upfront capital. If you have dreams of eventually devising your own brand, this is a great way to garner funds while also learning the ropes of this industry.
However, before you dive into your CBD dropshipping business, there are a few steps you’ll want to be sure to follow:
1.) Only Source From Reputable CBD Suppliers
The CBD market is currently flooded with brands. Unfortunately, most of them aren’t reputable companies and sell ineffective and low-quality products. With that said, you’ll want to make sure you source top-quality CBD brands that will keep consumers coming back for more.
There are a number of ways to inspect a brand and determine whether or not they’re a reputable company. However, before we dive into that, it’s important to understand the products people are buying.
While you may come across niche items, such as CBD soaps and shampoos, the fact is not many people are buying these products. Currently, the products that are garnering the most search volume are as follows:
CBD Oils (Tinctures) – A bottle containing a carrier oil (usually MCT oil or hemp seed oil) along with a type of CBD extraction. These are not only extremely effective but can be developed in a number of flavors and strengths.
CBD Edibles – Whether it’s gummies, capsules, or a baked good, CBD edibles have developed a reputation as being a safe and familiar way to try this new health supplement.
CBD Topicals – Rubbing CBD on the skin through a cream, salve, or gel can be an effective way to both relieve chronic pain and rejuvenate dry areas. For this reason, many CBD topicals are developed using other beneficial all-natural ingredients.
CBD Vaping Products – While vaping CBD is mostly popular among the younger generations, many opt for these products as they provide almost immediate effects.
While drop shipping companies have a lot of products to choose from, they don’t want to stray away from what the target consumer-base is interested in. It’s worth noting that if you are trying to devise a niche brand, you may want to pick these products wisely. For example, if your CBD business is set up for older individuals, it’s likely they’ll be more attracted to tinctures, capsules, and topicals in comparison to vape or smoking products.
Once you’ve decided what products best match your business, it’s time to start looking into brands that you can work with. It’s important to understand that reputable brands have developed certain business practices in order to garner trust from their customers. These include:
How Does the Supplier Grow and Extract?
Since people ingest CBD products, it’s natural they have some concerns about how these products are made. Not to mention, there’s a growing awareness of whether or not businesses are harming the environment.
These are a few aspects of CBD dropshipping companies that you should keep in mind. In order to get a better sense of what a reputable supplier looks like, here is a checklist to consider when scouting out brands:
Does the company harvest their hemp under clean and sustainable growing methods?
Does the company practice organic farming?*
What kind of extraction process does use to create their raw hemp extract? Are their products full-spectrum, broad-spectrum or CBD isolates?
Where and how does the company source other ingredients found in its products?
Does the company run all its products through a third-party lab test?
What are the company’s business ethics (i.e. cruelty-free, sustainability)?
It’s important to source a brand you’d put your trust into as your company is going to be a reflection of that.
*It’s important to note that the USDA currently doesn’t certify the majority of cannabis farms. While there are a few CBD brands that have been able to gain certification, the majority of reputable companies still practice organic farming protocols without certification.
Does the Supplier Offer a Certificate of Analysis (CoA)?
Since the CBD industry remains unregulated, one of the ways brands have developed trust in their customers is by running products through a third-party lab test. In turn, these labs produce a Certificate of Analysis (CoA) that informs consumers of a number of aspects of the CBD. While some tests are more thorough than others, the majority will check cannabinoid and terpene percentages as well as whether or not the product contains contaminants, such as pesticides and heavy metals.
It’s important to make sure the company you’re purchasing from performs these CoAs. However, beyond this, you’ll also want to make sure the company runs batches of their products through tests. By running batches, they can guarantee they know exactly what’s in each bottle. Less reputable brands will only offer test results from an earlier stage in the process, such as a test of the raw hemp extract, or they will only test some batches. In addition, make sure that their lab results are relatively recent: they should be no more than 6-9 months old.
One of the most convenient ways to check for a company that holds certificates is through the U.S. Hemp Authority’s list of certified companies. Still, you can always check a brand’s website to identify their lab results. It’s important to understand that this is something you’ll also want to be transparent about on your website.
2.) Acquire All Necessary Business Documentation
When it comes to CBD dropshipping, there are two important pieces of documentation that you’ll need in order to practice the business.
The first is a resale certificate which grants you the right to buy products from a vendor without having to pay sales tax. In turn, the retailer will collect sales tax every time a product is sold through you.
The qualifications for a resale certificate vary depending on the state you’re operating in. Since it’s likely you’re going to sell online, it’s important to note that every state requires you to obtain its own resale certificate. Luckily, some certificates cover multiple states and there are a select few that don’t require any certification at all.
When applying for a resale certificate, you’re going to need to have your Employer Identification Number (EIN) and a description of your business and the products you sell on hand. The purpose of this certificate is ultimately to determine whether or not your business can be trusted to resell the products you purchase.
The second documentation you’ll need is a Tax ID. If you’ve already started companies under your own name, chances are you already have this along with an EIN. However, if you don’t you’ll need to obtain this document in order to identify your business.
There are a number of ways for you to apply for an EIN. The most convenient is submitting an application online. However, if you decide to take another route, keep in mind that this document may be called a Federal Tax Identification Number.
It’s worth noting that there are a few other applications you can apply for that aren’t required, but help to assert the authority of your business. For example, the U.S. Hemp Authority and the U.S. Hemp Roundtable offer specialized certifications that are only applicable in this industry. However, it’s worth mentioning that these organizations usually only certify specific brands.
3.) Collaborate with Payment Processors that Allow CBD
When this industry was first started, one of the biggest difficulties companies faced was finding a payment processor that allowed CBD. Luckily, many avenues have opened up and gaining a processor is much easier. Several major payment processors still don’t approve of processing payments for CBD products.
Currently, the most popular payment processors for the CBD industry include:
Easy Pay Direct
You’ll want to look into each of these before making your decision. Some payment processors allow certain perks. For example, some may give customers the opportunity to save a credit card on file.
4.) Develop Your Online Store
The most important aspect of your CBD business is going to be your online store. Customers are able to make a decision as to whether or not they like a website based on the first few seconds of their visit. With that said, you want to develop a store that’s stylish, trustworthy, and easy to use.
There are a few points of interest you’ll want to keep in mind during this process:
Choose a solid platform to run your business off of. While this is going to take some research, many have found Shopify to be the most convenient.
It’s important that your website is mobile-friendly as a large sum of online transactions now take place on smartphones. If your website isn’t as easy-to-use on a mobile device as it is on a computer, chances are your sales will be affected.
Make sure all CoAs are easily accessible. Whether it’s on individual product pages or a separate menu, you want to make sure customers don’t have to take too much time to find these lab results.
Host a blog or information hub concerning cannabidiol and hemp. Being as the market is so new, a good chunk of people still don’t fully comprehend what CBD is. Offering information about hemp and CBD can also help increase your search engine ranking.
Be clear about your Terms and Conditions. While it’s likely you’ll have a page ready that documents this information, it can help to advertise certain aspects of these terms more prominently. For example, some businesses opt to advertise their 30-day money-back guarantee or free shipping deals somewhere at the top of the webpage.
Of course, this is only a handful of what you’ll need to know when developing your online store. Beyond the dropshipping suppliers you work with, your website will require the most research. It can help greatly to check out competitors’ pages and see how they’re working.
The CBD industry isn’t the easiest to start a business in. However, many have found it to be rewarding. After all, not many businesses help people find relief.
While there are a few legal obstacles you’ll have to overcome, CBD dropshipping is the easiest way to get your foot in the door. It requires the least amount of capital, provides little financial risk on your end, and will teach you the ins and outs of CBD.
Even though dropshipping CBD is easier than a fully integrated business,from verifying suppliers to finding the right payment processors, it’s important to have a plan before you dive into the work. While we can’t cover every aspect of this complex industry, we hope this article got you started on the right path.
Paul James is a seasoned cannabis and CBD writer and expert. He is a mental health blogger who advocates CBD as a natural alternative to prescription medications. You can read more about this and other natural alternatives on his blog: https://bedlamite.co/."