Jul 13, 2021
 in 
Ecommerce

CBD Dropshipping 101: Everything You Need To Know

What Is CBD?

Before we get into CBD dropshipping, let's talk about CBD. CBD stands for Cannabidiol, and it one of the major active ingredients in Cannabis (aka Marijuana, weed, etc). In Cannabis, the two main ingredients are THC and CBD. THC is what gets you high, while CBD is primarily known for its medicinal properties. Cannabis strains usually come with both compounds, but we have learned how to isolate CBD through specific strains.

CBD is typically farmed and extracted from the leafy form of Cannabis that we would normally recognize. It is then shaped into two main types of products — ingestible and topical CBD.

Ingestible products are items that can be eaten to gain the benefits, such as gummy bears, snacks, or even cooking oil. Topical products are absorbed through the skin and include items like lotions, roll-ons, and even bath bombs.

CBD dropshipping has become one of the leading dropshipping categories in recent years. Read on to learn more!

What Are The Benefits Of CBD?

Let's preface this by saying that we are not doctors, and this can by no means constitute medical advice. Instead, we will draw on publicly published research to give you an idea of how CBD can benefit its patients.

According to the Harvard Medical School, CBD can be used to:

  • Treat seizures and epilepsy in certain cases
  • Address and reduce anxiety, and possibly insomnia
  • Reduce swelling and inflammation due to arthritis (when applied topically)

There are also several potential side effects such as nausea, fatigue, and irritability. But again, you should always do your own research, as we are simply compiling information.

What Is CBD Dropshipping?

CBD dropshipping involves selling products you don't actually own.

To understand CBD dropshipping you must first understand dropshipping.

Dropshipping is a product fulfillment model whereby one business (the product supplier) makes its products available for sale by third parties (dropshippers). Dropshippers select which products they want to sell, and then market them as their own. When the dropshipper makes a sale, they then place an order with the supplier, and the supplier ships the order directly to the end customer.

The result is that the supplier makes a sale at a price between wholesale and retail without doing any of the legwork. The dropshipper takes the profit margin (retail price minus cost of goods) for finding the buyer. And the customer receives the product that they might not have known about without the dropshipper's introduction.

Example: John is dropshipping products from his friend's jewelry shop. When John makes a sale through his website for $100, he sends $60 to his friend (the negotiated price) and pockets the $40. His friend then ships the item directly to the customer.

In essence, dropshipping allows a business to sell products without holding any inventory.

CBD dropshipping is simply dropshipping while selling CBD products.

How Is CBD Dropshipping Different?

Compared to dropshipping regular products, CBD dropshipping can be much more complicated, especially in some regions.

Due to CBD's medical uses, and its ties to Cannabis (which is still heavily stigmatized), CBD products are subject to a lot more regulations than other items you might dropship.

First off, you'll need to make sure that you can find a reputable supplier. If you're going to dropship CBD, you definitely want to make sure that the CBD delivers on its promise. If the products haven't been made in a way that conforms with regulations, you've got a bigger problem on your hands.  

Second, you'll need to double-check the laws of your region and the region you are planning to find customers in. CBD is still illegal in many countries, and in countries like the USA, the laws can even vary state-by-state. You may want to seek out legal advice just to be sure. This will impact your business's legal structure, your shipping, your advertising, and more.

Third, many service providers won't work with you if you are selling products they deem to be 'high risk'. Unfortunately, this still includes CBD in many instances. We'll get into this more later in the article, but just know that many of the services (payment providers, shipping partners, advertising companies) you would normally use will not be available for your CBD business.

What Do I Need For CBD Dropshipping?

Looking to get started? Here is what you need!

As we mentioned above, many companies are uncomfortable working with CBD businesses. You'll need to double-check before incorporating any tech companies into your business plan. However, there are enough companies out there that you can get everything built.

At its core, there are 4 parts to a CBD dropshipping business — your website, your payment processor, your supplier(s), and your method of advertising.

Website Platforms

  • Shopify: You can sell CBD products on a Shopify site provided that you follow the laws of the country and state that you are doing business in. They even have a dedicated CBD landing page if you're thinking of getting started.
  • WordPress: As long as you are using WordPress.org (and not WordPress.com) then you can sell CBD and hemp-based products on your site. However, you will need to find a hosting service that allows for it, as WordPress does not include hosting like Shopify. You will also be restricted from other services offered by the parent company Automattic, like Jet Pack.
  • Magento: Magento is similar to WordPress as it allows you to sell CBD on your website as long as it isn't hosted on their servers.
  • BigCommerce: Similar to Shopify, BigCommerce has decided to allow CBD to be sold on its websites, even if the sites are hosted on its servers. They have more information available here.
  • Wix: As of now, Wix does allow sellers to sell CBD products on their sites, so long as the business is based in the USA.

Payment Processors

Payment processing is perhaps the most difficult part of CBD dropshipping. Choose wisely!
  • Shopify Payments: Shopify Payments is not an option for stores selling CBD products.
  • Stripe: Stripe currently has restrictions in place barring any business that sells products containing THC or CBD.
  • Square: Square does allow you to process payments for CBD products, both online and for retailers.
  • Paypal: Paypal currently classifies CBD as a 'high-risk industry', and is not compatible with it.
  • Wix Payments: Wix Payments is not compatible with CBD businesses.

Your payment processor options will ultimately depend on the website platform you choose to go with, and the region you're in. BigCommerce has a helpful guide for determining which payment processor to select, and it comes with some suggestions.

Whatever you do, just make sure you're absolutely certain that the payment processor you choose is fine with CBD. There are horror stories of payment providers like Paypal freezing people's accounts with tens of thousands of dollars for years at a time, or even indefinitely. It's a nightmare to get that money back, so you're much better off doing proper research beforehand.

CBD Dropshipping Suppliers

There are few different types of CBD dropshipping suppliers to choose from.

First, there are CBD product manufacturers. These are the companies that produce the final products. They are likely to offer the best rates, but may not have the best selection.

There are a few sites like THCAffiliates and ThomasNet that have compiled lists of some of the bigger manufacturers in the market.

Second, there are platforms similar to DropCommerce that have multiple CBD dropshipping suppliers on them. These platforms can usually be integrated directly with your store through their applications, making the setup process simple. There is naturally more selection, but you will often be buying from a middle-man or private-labeled brand, which can come with lower margins.

BoutiqueSetup has an article going over the top CBD dropshipping suppliers from this category.

Note: DropCommerce does not have any dropshipping suppliers at this time, since one of our partners would deem us to be high-risk.

Third, you can dropship from a branded supplier directly. This would be the organization that usually retails the products themselves. The selection can be great, and you can get whatever margin you are able to negotiate.

For this option, you would just need to search for direct-to-consumer CBD sellers. Just make sure they aren't already dropshipping from some other supplier!

Advertising CBD Products

Advertising is another big challenge for this industry. Be careful who you choose to partner with, as not every business is comfortable with CBD.
  • Facebook: Advertisers on Facebook can advertise ingestible hemp (no THC or CBD) or topical CBD products, as long as the ads don't feature those products specifically. You cannot advertise ingestible CBD products (e.g. gummies), and the website you link to needs to be pretty reputable. However, even if you follow those vague instructions, you may get flagged.
  • Instagram: Instagram is owned by Facebook, so most of the same rules apply. If you do something incorrectly, you risk having your ad disapproved, or worse, your ads account shut down. Tread with caution.
  • Google: While the nuances around advertising CBD products on Google are more complicated, the short answer is that you can't. There are some cases where you may be able to, but the risk of Google removing your site from search results is high enough to warrant caution.
  • TikTok: TikTok is the newest mainstream social media, and its policies towards CBD products are more liberal than its Facebook-owned counterparts. There does seem to be an opening to companies to advertise (or just create content surrounding) CBD-based products.

You can, of course, find another method of attracting customers that is less reliant on these advertising giants. And this is probably your best bet. The more aspects of the business that are completely within your control, the better.

How To Start CBD Dropshipping

While there are certainly many ways to get started, here is a brief rundown of the concrete steps that you'll absolutely need to follow to be successful.

#1: Register Your Business Entity

You might be able to get away with not being incorporated while you dropship regular products like clothing (at least at first), but any time you're dealing with something as controversial as CBD you want to protect yourself. By incorporating your business you'll make sure that your personal assets and possessions are protected in the event of a lawsuit or legal issue. There's also a better chance of a supplier taking you seriously.

#2: Partner With A Reliable Supplier (Or Multiple)

The next step is to figure out what you're going to be selling. Are you going to focus on ingestible or topical CBD? Or are you going to serve both markets? Your decision will play a role in your store's branding, design, marketing, and more.

When finding a supplier, make sure to test them. Get the product in your hands, place a trial order, and don't take any shortcuts. The fewer middlemen between you and the manufacturer, the better prices you'll pay and the more reliable your fulfillment will be.

Make sure to set up a legal agreement with your suppliers!

#3: Set up your store

If you're building an online store, we recommend using Shopify. Shopify is a platform exclusively built for online stores, and it does a great job. There are over 6000 apps on the Shopify App Store that can give your store features that would normally be way out of your budget.

You'll also need to set up a payment processor, and your options will vary by region. Just make sure you avoid Stripe, Paypal, and Shopify Payments. Go with Square or another high-risk provider.

#4: Start marketing your business

When your store is ready to start selling, then so are you. This is the part where you need to find customers, without bumping into the restrictions we outlined above. And make sure you have a way of enticing customers to return for 2nd and 3rd purchases since existing customers are much easier to sell to than new ones. This could be an email marketing campaign, retargeting ads, a loyalty program, or whatever you come up with.

Final Thoughts

Although DropCommerce doesn't currently have any CBD products, it's something we are looking at for the future. If you want us to start carrying them, let us know! And if you decide to dropship other products, then DropCommerce is the best place to start.

If you enjoyed this article, then make sure to check out:

2021 Side Hustle Ideas: Proven Ways To Earn From Home

What Is Dropshipping? The Ultimate Overview

Top 5 Loyalty Program Examples To Increase Customer Engagement

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