How to Start Selling CBD Online

After the 2018 Farm Bill legalized hemp and CBD products containing less than 0.3% THC, the CBD industry became both highly profitable and highly competitive. Starting with online CBD sales requires a solid business plan, familiarity with local laws, and a reputable high-risk payment processor.

Choose Your CBD Product Niche and Business Model

The CBD space is not one-size-fits-all, and there are multiple niches to choose from. Before you start a successful CBD business, become familiar with what business models are best for your needs.

• Hemp-derived CBD products or THC from the cannabis plant: Hemp and marijuana plants have different regulations. Hemp CBD is legal nationwide as long as it has less than 0.3% THC by dry weight, though some states require 0% THC. Selling cannabis legally is only possible in areas that have legalized marijuana, and you will have to verify the purchaser's address.
• Billing Models: One-time purchases are typically considered lower risk than subscription models, as customers may forget to cancel a subscription and then request a chargeback.
• Product Types: Topicals, like CBD oil for pain relief or CBD creams, are generally less risky than CBD edibles, which require much higher product standards as they are considered dietary supplements. CBD vapes are under regulatory scrutiny and may face challenges.
• CBD Pricing: CBD product sales pricing is challenging because commercial production is expensive, but new customers may be reluctant to pay high prices. Some sellers may inflate prices without providing quality products, so reasonable pricing may seem suspect.

Confirm You Can Sell and Ship In Your CBD Market of Choice

You will need a license to sell CBD products. In some jurisdictions, you only need a regular business license, while others require a specialized license for CBD sales, such as a reseller license. As some areas do not allow certain products, you must confirm that shipping hemp-derived products is legal in the purchaser's area.

Get Your Documentation Ready Before You Build the CBD Website

Before you set up your ecommerce store, ensure you have a reputable supplier. Companies that grow industrial hemp should provide detailed information about each batch so that purchasers can trace the CBD production from start to finish.

Likewise, companies that produce CBD tinctures, CBD patches, edibles, and similar products should be transparent about flavoring agents and other ingredients.

You will need Certificates of Analysis (COAs) for every batch of product. The COA identifies the THC concentration and CBD isolates while also assuring customers that there is no heavy metal or pesticide contamination. Not only must you keep these in your business documents, but you should also make COAs available to your customers.

Your labels should clearly identify all ingredients and break down the percentages of isolates, including THC. You must also avoid making medical claims, like stating that your products can cure anxiety or treat insomnia. Place disclaimers about potential side effects and provide links to COAs so consumers can confirm product safety.

These are crucial aspects of our CBD merchant account approval checklist, and having them available can ease the approval process.

Choose a Platform for Your CBD Sales

Though millions of consumers want to purchase CBD products, many online marketplaces and processors exclude CBD sellers. Built-in payment systems often have tight restrictions that you must be familiar with, or you could face account termination.

CBD is age-restricted in most places, so your online business will need strict age-verification protocols to avoid legal challenges. Once you have these in place, you must pick a CBD-friendly payment processing service.

Using PayPal for CBD is strictly prohibited and can result in account termination, so CBD business owners must find an alternative payment processor.

Selling CBD on Shopify with the built-in payment processor is constrained by Stripe's policy on CBD products because Shopify Payments is processed by Stripe. While Stripe has placed cannabis products in its restricted business category, it combines CBD from hemp plants with THC in its FAQ. Your Shopify store will need a third-party processor like Adaptiv Payments.

Selling CBD using WooCommerce requires you to either use Automattic's preferred processors, Square or Viva Wallet, or download the WooCommerce plugin to use alternative gateways. Square's CBD program started in 2019 and has helped many online stores process CBD payments.

However, Square still has some restrictions, particularly around marijuana-derived cannabis and hemp flowers. If you sell restricted products, you'll need the WooCommerce plugin and a different gateway that integrates with WooCommerce.

Set Up a Website Focused on Customer Satisfaction

When selling CBD online, four pages are critical: Contacts, Terms of Service, Privacy Policy, and Disclosures. On your disclosures page, ensure you state that your products cannot diagnose, treat, cure, or prevent any diseases, and avoid making health claims in any marketing material.

Reputation is everything for a CBD brand. Your website should explain your refund, return, and cancellation policy in clear English, with links to the policy on every page of the site. This improves satisfaction and prevents costly chargebacks.

CBD shipments can sometimes be delayed due to customs or logistics. Have a clear shipping policy, such as only allowing refunds after a set period. Use a reputable shipment tracker and clarify any delivery requirements, such as package signing.

Customer support is another essential part of your CBD business plan, as it prevents disputes that could damage your reputation and result in issues with your acquiring bank. Provide your support team with clear guidelines on when to issue refunds and how to manage complaints. You may consider using chatbots to answer common user questions outside business hours.

Set Up the Right Payment Gateway

Traditional financial institutions often refuse to work with CBD sellers because this industry is considered high-risk. Complex regulatory frameworks, high chargeback rates, and frequent disputes mean that CBD proprietors typically need to look for alternative processing tools.

The ideal option is known as the stack: a merchant account for CBD, a specialized payment processor, and a high-risk payment gateway.

A specialized CBD merchant account is the best option because it ensures consistent access to funding without the risk of account termination. These companies undergo a thorough underwriting process that considers your entire business model, business insurance, products, and cash flow before approval. Merchant account providers will also assess your regulatory compliance and identify potential risks.

Gateways and processors are the next step. Gateways authenticate and encrypt payment information, while processors transfer the funds from the initiating bank to your merchant account. When choosing a payment processor for your CBD website, consider whether it has the integrations you need for your website platform, what types of payment options it supports, and whether it has robust security measures.

Fraud and chargebacks are common issues when selling CBD online. Fraud controls must be precise enough to identify issues and reduce declines, but not kill conversion rates. Check if your processor provides measures like AVS, CVV, or 3D Secure to prevent fraud without placing an undue burden on the consumer.

Lastly, you'll need chargeback controls. One of the best ways to prevent chargebacks is to have a clear descriptor strategy so that your purchasers recognize the charge. The processor should allow custom descriptors with your business name so that buyers automatically recognize the charge.

Plan Inventory, Fulfillment, and Returns Like a Risk System

Inventory management is essential for any business, but especially a CBD business. Stockouts and shipping delays can lead to disputes and chargebacks, such as when your website claimed you had CBD oil in stock but the shipment was delayed. Determine how many units you consider low stock, then set automatic triggers that will deliver an "out of stock" message for those items.

A smooth fulfillment process delivers orders to your warehouse or fulfillment center as soon as possible, then generates a tracking number. You can either have shipment tracking on your website, such as via Shopify, or provide the carrier's shipping numbers. Some carriers allow clients to sign for their products in advance, which can be highly useful for an online CBD business.

Lastly, returns and refunds are a common area where chargebacks occur. Have a clear return policy and step-by-step instructions for how to complete a return. Prompt refund timing, such as same-day or within 48 hours, is crucial to prevent chargebacks.

Marketing and Selling CBD Products Without Getting Blocked

Do not make health claims in your advertising, emails, or landing pages. This includes claims such as improved sleep, reduced anxiety, or better focus, which are edge cases that may result in challenges.

Certain email marketing channels, such as MailChimp, may not accept CBD marketing, and paid advertising can be limited. You also may not be able to pay for advertising on social media sites like Instagram or Facebook.

During your early stages of growth, prioritize tools like Search Engine Optimization (SEO) and organic marketing, like social media pages. You might also want to partner with lifestyle influencers and other brands, ensuring you use the proper disclaimers to identify paid partnerships. Product reviews are another strong way to improve your reach without costly advertising.

Choose Adaptiv Payments for Your CBD Business Online

Adaptiv Payments is a leading provider of credit card processing for high-risk industries, including CBD businesses. Our underwriting process prioritizes growth potential and performance as well as regulatory compliance, preventing costly account terminations or delayed cash flow.

You'll receive dedicated support from industry experts who understand both the benefits and challenges of the CBD industry, including the changing regulatory landscape. Our accounts use next-level fraud prevention and chargeback mitigation to preserve both your cash flow and reputation.

In addition to comprehensive support, you will also enjoy competitive rates, transparent terms, and simple integration with major shopping platforms. Our goal is to make it simple to benefit from the CBD industry's explosive growth while maintaining the highest data security.

If you're ready to start selling CBD, we're here to help. Contact us today for a free quote and learn how we help CBD merchants capitalize on new market potential.