Customers Are Ready for CBD, But Is E-Commerce?

It's still a bumpy road to sell CBD online, but these tips will help.
Customers Are Ready for CBD, But Is E-Commerce?
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Guest Writer
Chief Product & Strategy Officer
4 min read
Opinions expressed by Entrepreneur contributors are their own.

We all know there's a growing demand for CBD, with the cannabis plant extract showing up in everything from face creams to dog treats.

According to a survey done by cannabis researching firms BDS Analytics & Arcview Market Research, the booming U.S CBD market could reach $20 billion by 2024. The race for merchants to successfully market CBD first and early—is on. 

But don’t get too excited. While it seems like CBD is easy for customers to get their hands on, it’s not quite as easy for e-commerce merchants to sell. A grey area exists between the legal, payments, fulfillment and shipping to navigate before sellers can rake in the green.

It may take a few early adopters and disruptors to break down these barriers. It’s these entrepreneurs that win big being first, but also learn from mistakes and help the industry implement safeguards and better efficiencies. Here are some things to look out for.

Related: How Cannabis Ecommerce Challenges Are Driving Web Innovation

Selling CBD isn’t like selling yoga pants

Selling anything online requires four main components:

  1. Website, designed beautifully to convert traffic to paying customers

  2. Checkout optimized for conversion, and accept payments

  3. Backend to organize inventory, SKUs, pricing, orders and customer information

  4. Fulfillment, shipping and customer support to manage exchanges and returns

For CBD sellers, the website and backend are easy to launch. However, an additional layer of care is required for accepting payments, protecting yourself against fraud, and running fulfillment and shipping.

Optimizing your checkout = profitability

Getting the right payment processing tools is critical to successfully sell CBD. 

When it comes to your checkout, you have to consider:

  1. Multiple merchant processing accounts (MIDs)

  2. Transactional routing

It’s recommended if you’re selling CBD to have two to three backup MIDs to mitigate the risk of disrupting the checkout experience and flow of sales.

Payment processor Elavon recently notified its hemp and CBD clients that it recategorized them as prohibited businesses and that their accounts would be closed within 45 days. The time and revenue lost from an event like this can be crippling to a seller's business cash flow.

Don’t let this happen to you—be prepared. If you’re looking for an easy of what you need, check out this infographic with what you need to know.

Finding a payment gateway is key

Just because companies like PayPal and Stripe are big, it doesn’t mean they’re bold. Unfortunately, they’re not ready to take transactions associated with CBD online sales. 

The reason? Many of the well-known payment processors depend on big banks to do business, therefore, sales of CBD products with uncertain legal status’ are not easily supported by their services.

Square is the most notable payment gateway to recently lax it’s policy and accepts CBD sales. In addition to Square, there are other payment gateways to consider: Transact Fast, Authorize.net, and NMI.

You found a gateway, now make the most of it

Many online sellers who process a million-plus in transaction volume already leverage what’s called: transaction routing. It’s effective for CBD sellers to implement regardless of volume, as this strategy:

  • Helps support the use of a backup MID

  • Efficiently routes transactions to acquiring banks with the best approval odds

  • Distribute transactions to the right MIDs for volume discounted rates

It’s highly recommended having a transaction routing strategy and tools in place prior to making your first CBD sale.

CBD is hot, but selling it online can be an icy road if you’re not a seasoned merchant. If you’re looking to launch your CBD e-commerce store, be sure to connect with the knowledgeable industry experts to guide you in a fast-changing, competitive environment.

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