As countries relax their laws around cannabis products, more and more entrepreneurs are taking advantage of this sudden increase in demand. CBD products in the UK, for instance, have a quarter of a million users by 2017, following its legalisation.
However, similar to running any business, there are plenty of things that you need to stay on top of when setting up an online CBD shop. Let’s take a look at what you need to do to start and run a successful online business:
1. Understand Your Products
Riding on a trend isn’t a bad motivation for starting a business. After all, the CBD industry is looking to be a lucrative market that’s projected to grow to $16 billion (£13 billion) by 2020.
However, for you to effectively sell a product, you need to fully understand its components and terminologies, as misunderstanding can get you in trouble with the authorities and with your customers.
Take note of the following:
- Marijuana vs hemp — These are both plants included in the cannabis family. Marijuana is used for medical or recreational purposes, while hemp is cultivated for a variety of products (e.g. rope, biofuel, textiles, etc).
- CBD vs THC — CBD and THC are components both found in a cannabis plant. THC is the mind-altering substance that comes from marijuana, while CBD is the non-psychotropic substance that comes from hemp.
- Various CBD products — It’s your job as the seller to understand which type of product appeals best to certain customer segments. There are also pros and cons to each product type that you have to be aware of, so you’ll know which one would best fit their preferences.
For instance, CBD oil can be used as a food additive, CBD capsules can prevent a user from taking more than what’s necessary, and CBD vape products can be absorbed directly to the bloodstream. There are also CBD products for pets to help them with pain and anxiety.
2. Learn and Comply with The Law
CBD products are now starting to shed their association with the recreational (and still illegal) use of marijuana. However, given its history, you need to be extra careful with selling these products as you still need to contend with multiple restrictions.
To stay in operation, learn the law and comply with them lest your risk paying fines, closing down your business, and/or facing legal actions:
- Register your business — Whether you’re a sole proprietor, a private limited company, or in a business partnership, make sure that you submit all necessary paperwork for registration prior to starting operations.
- Obtain licences — Sale of CBD products (especially if it contains THC like in e-liquid) requires you to obtain licences before you put them out in the market. Whether you sell CBD as food or as a medicinal ingredient, you need to obtain separate licences for each of them. The process involves submitting your application to an expert panel, waiting for their approval, and paying the corresponding fees.
- Understand your restrictions — Despite its legalisation, you will still encounter strict regulations, be it for advertising or selling your products. Remember that growing hemp or CBD-rich cannabis is illegal in the country without a Home Office Licence. We’ve covered all these restrictions products that you need to be aware of in a more comprehensive guide.
3. Know Where to Source Your Products
If you don’t intend to grow your own hemp and extract the CBD from it, then you need to find a reputable and reliable supplier or manufacturer where you can source your products.
Remember that getting subpar and/or fake products will affect your customer service, your store’s reputation, and ultimately, your profit. To prevent these issues, look for the following when choosing a supplier or manufacturer:
- Medical claims — Since CBD is legally considered a medical ingredient, your supplier can claim the medical benefits of their merchandise. However, they should also be able to show their licence as granted by the Home Office. Without it, they are illegally marketing their products, and associating with them will only do your business harm.
- CBD and THC content — Do they specify the amount of CBD, THC, and other ingredients in their products? Remember that the THC content should not be more than 0.2%, while CBD products should contain only 1mg or less THC.
- Method of extraction — How your manufacturer extracts the CBD from the hemp can greatly affect the quality of their products. CO2 extraction is considered the gold standard in the industry, as the end products are free of chemicals and other contaminants. Work with one who uses CO2 extraction and can show their certificates of analysis.
- Pricing — The highly-priced products tend to be more pure and potent, but this isn’t necessarily true for all suppliers. On the flip side, rock-bottom prices should be a red flag, as it implies cutting corners on quality. Of course, you need to watch your bottomline, so find the balance between quality and a price point that won’t hurt your profit margin.
- Other services — Do they offer dropshipping services or private labeling? These two can help you market your brand and your products better.
4. Get An Approved Merchant Account
Despite its legalisation, plenty of payment processors like PayPal and WorldPay have still blacklisted CBD products. CBD’s close association with marijuana means sellers like yourself are considered high risk, which translates to higher fees, less flexibility, and higher chances of getting your account closed for the smallest of infractions.
To get your store an approved merchant account, do the following:
- Shop around for more options — The fact of the matter is that big payment processors would most likely reject your application. However, there are a few payment processors that specialise in high-risk merchants. You need to do your research, ask around, and look for the pros and cons of these processors. They may be few, but they will believe in your business.
- Sell high-quality products — While it’s tempting to go for the cheaper supplier, it’s the quality of the products that you should always look for. If you have the capital to work with well-known brands, go for it. It’s better to invest in them to boost your reputation as a business than sell DIY products with handwritten labels.
- Have strong financials — You don’t need to be raking in six-figure profits to be approved. However, you do need to have a good credit history and a healthy bank account so these processors can put their confidence in you.
- Prepare all paperwork — It’s easy to be lax with paperwork when you’re just starting out. However, as a high-risk merchant, you need to always put your best foot forward. So organise your licences, statements, and taxes. Be ready to have your books scrutinised to establish your credibility.
If you get turned down, don’t feel discouraged. You’ll eventually find one who will be willing to work with your business. And when you do find one, don’t immediately sign without first exploring the services that they have and all the fees involved. Consider this as one of the many hurdles that you need to deal with as you run your business.
5. Start Your Marketing
Once you’ve laid the foundation of your business, you now need to lay the foundation of your online store:
- Choose the right platform — Each platform available today fits a variety of e-commerce needs, depending on your strategy. However, the nature of CBD often colours its reputation, so similar to merchant accounts, do your research and find out which platform can cater to your niche.
- Design your site — Make sure your site is clean and visually-appealing, all the while still functioning on multiple devices. Then, integrate your payment processor for customer billing.
- Produce valuable content — Since this is a relatively younger market, customers are still wary of buying CBD products. You can write the content yourself or hire an expert to do it. The idea is to publish content that will help answer your customers’ questions and display your expertise at the same time.
- Build your brand — Spread the word about your brand by being active on social media and connecting with other business owners in your niche. Read our in-depth guide on promoting your shop, including SEO, advertising, and content marketing, so you’ll know how to run these campaigns successfully.
The Best Time To Start Your Online CBD Shop Is Now
This market may be young and there are still controversies surrounding it, yet it cannot be denied that more and more people are seeing its benefits. Cover the bases of your business by following the steps we’ve outlined above.
And if you want to work with a legally compliant CBD wholesale supplier, give us a call at 0116 273 1706, send us a message on WhatsApp at 079 5875 1841, or email us at email@example.com.
Since January 2019 CBD has been considered a ‘novel food’, meaning that you need to apply to the FSA for authorisation to sell it in the UK. At JM Wholesale, all the CBD products we stock are Novel food compliant, meaning you can buy with confidence, knowing they’re fully approved by the Food Standards Agency.
To find out more about CBD, or to purchase from the UK's leading CBD distributer, visit the JM wholesale website.