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How to (Legally) Grow a Cannabis E-Commerce Business

8 min read Last Updated: October 12, 2020
Growing a cannabis e-commerce business

Written by Michael Trang

Michael Trang is a Managing Partner at SKU Agency - the e-commerce agency focused on growing your business through strategy, technology & design. Michael loves fishing, playing guitar, and learning about the latest & greatest technologies.

The Cannabis Business Is Growing

Times are changing, and one industry that’s really feeling those changes right now is the cannabis business. Marijuana legalization is spreading across the nation state by state. The federal government is now regularly considering legislation that would overturn the federal cannabis ban and allow states to make their own call without interference.

For those in the cannabis industry, things are looking up.

However, as with many controlled substances, there’s no ability to sell cannabis online through an e-commerce storefront. Naturally, that puts a damper on anyone’s plans to expand into online sales. If your cannabis dispensary can’t sell the product that acts as your main source of income, then what can you sell?

We have an answer for that.

absolutextracts

Is It Legal to Sell Cannabis Products Online?

If you’re in the marijuana business (or CBD business), you need to know the legal stipulations around selling your products.

As of 2020, cannabis is not yet legal at the federal level. Medical cannabis is legal in 33 states, but at the time of this writing, only 11 states have legalized recreational marijuana:

  • Alaska
  • California
  • Colorado
  • Illinois
  • Maine
  • Massachusetts
  • Michigan
  • Nevada
  • Oregon
  • Vermont
  • Washington State

 

It’s legal in Washington, D.C., too, and others are considering legalization bills. In November of 2020, five more states — Arizona, New Jersey, South Dakota, Montana, and Mississippi — will vote to legalize adult-use cannabis sales.

State laws vary from place to place, but as a general rule in legal states, recreational cannabis can be sold in limited amounts through authorized retailers within state lines. They cannot be sold online or shipped.

This essentially means that anything containing marijuana, from vape cartridges to edibles, cannot be sold through an e-shop except for local pickup.


Is It Legal to Sell CBD Products Online?

Cannabidiol, or CBD, is a legal substance by itself and can be found in many non-specialty shops and markets. Thanks to the 2018 Farm Bill, the production of industrial hemp and all its components was legalized federally. Even so, states still maintain their own regulations, so CBD remains illegal in North Dakota, Idaho, and Iowa.

The primary difference between CBD and cannabis is that CBD is a singular compound from the plant and contains no THC, which is the element that produces the “high” associated with marijuana. CBD is sold in many applications, from topical creams to oil tinctures.

It’s important to note that the FDA has only approved one CBD product for medical use — a prescription drug that treats certain rare forms of epilepsy. No other CBD products are FDA approved, and it’s illegal to market CBD by adding it to consumables or claiming it’s a dietary supplement. Keep this in mind when creating your marketing strategy and business plan.

Most importantly, e-sellers should know that CBD products must contain less than 0.3% THC content — under the federally legal limit —  to be sold in states that allow them. All products must derive from legally grown industrial hemp, as well.

Good news, though: If your CBD products meet these stipulations and comply with the 2018 Farm Bill, your cannabis dispensary can legally sell them online and ship them to any state where CBD is legal.


A Legally Grown Cannabis E-Commerce Business

absolutextracts

Sonoma County business CannaCraft has been killing it lately. In January 2018, the former Dean of Sonoma State University’s School of Business and Economics took on the CEO role intending to put Northern California on the map as a hub for cannabis business.

As any good businessperson knows, finding success means coming at a problem from multiple angles. CannaCraft may not be able to sell cannabis products online, but that hasn’t stopped them from building a thriving e-commerce storefront.

How? By improvising and being smart.

We had the pleasure of launching a full Shopify store setup for CannaCraft’s AbsoluteXtracts ABX brand. The brand itself creates strain-specific cannabis oil vape cartridges, sublingual drops, cannabis strips, and similar products. However, they can only offer pickup and delivery service — these products cannot be shipped outside California, even to other states with a legal cannabis industry.

Absolute Xtracts online store

So what’s the Shopify store for?

Branded apparel and swag. Genius, right?

CannaCraft’s already making a name for itself in the cannabis market through superior products and high-profile partnerships. To expand name recognition even further and add another revenue stream to the business, branded cannabis accessories seemed like the logical way to go.

Learn more about our work with ABX here.

Both vape culture and cannabis culture have enormous and passionate cult followings that are rapidly becoming mainstream followings. It’s the perfect time to capitalize on that forward momentum by considering a variety of products you can easily sell in an e-commerce storefront. It brings in money, it improves brand recognition, and it gives people outside your typical sale range an opportunity to connect with the brand.

The 2018 Farm Bill also saw them expand their business again with a CBD arm: care by design hemp. These high-quality CBD products target specific customer needs and are sold through their online shop. As mentioned above, CBDhemp products can now be sold and shipped to any state where CBD is legal. It’s been an incredible boost to their business.

Their innovation proves that every cannabis business can find an e-commerce niche if they pay close attention to their products’ evolving legality and are willing to expand and adapt their products as necessary.


How Shopify Is Revolutionizing Cannabis E-Commerce

Shopify is an excellent choice for a business owner with their fingers in many pies. It’s incredibly intuitive with a fast setup process, and you can use it as a center of operations for distributing on some of the internet’s biggest e-commerce hubs.

Launching a storefront is simple, and maintaining it is just as easy with the wealth of tools and apps that Shopify offers. You can:

  • Organize a diverse storefront
  • Keep an eye on inventory
  • Source product
  • Dropship
  • Print shipping labels on demand
  • Maintain a customer email list
  • Manage your digital marketing

… and so much more.

We can help you build out your Shopify store. Learn more about our Shopify design and development services.

Their website even has a section specifically addressing selling CBD through Shopify in the United States. Naturally, they recommend you consult an attorney when moving to online sales, but that’s a pretty common-sense recommendation. More specifically, they encourage e-commerce merchants to monitor their local regulations, keep an eye on evolving federal laws, and check updates from the FDA.

There are a few CBD-specific guidelines that Shopify recommends. After setting up your store, they instruct you to review and submit an attestation to sell of hemp-derived products. Make sure you have a Shopify account and are set up as a store owner before you complete the form. You’ll need a business address for this to work.

While Shopify typically offers its own payment processor called Shopify Payments (powered by Stripe), it’s not available for CBD products at this time. Alternately, they have you select one of the third-party payment gateways they’ve approved and partnered with, so you have a choice of gateways that support these kinds of sales.

Remember: It’s  your responsibility as the shop owner to keep track of all federal, state, and local laws and regulations that affect your business. Be aware that CBD sales are carefully vetted and may take longer for approval than other unregulated products. Shopify will support you in any way they can and are always happy to answer questions. You can also touch base with a certified Shopify expert for guidance.

Which Cannabis Products Can I Sell Through Shopify?

Which cannabis products can I sell on Shopify?

Shopify allows the sale of hemp products derived from industrial hemp as defined by the 2018 Farm Bill, which specifically means the products must comply with federal, state, and local laws. The following hemp or hemp-derived CBD products are allowed:

· Topical

· Sublingual

· Consumables

Recreational and medical marijuana products do not fall into the category of hemp as defined by the 2018 Farm Bill and are therefore not allowed for sale. CBD explicitly derived specifically from marijuana are not permitted for sale, either.

Your cannabis dispensary may be able to sell parts of industrial hemp plants, such as flowers or seeds, provided they’re under the 0.3% THC federal limit. As always, consult your legal counsel and ensure you’re following the letter of the law.

As far as shipping, Shopify Shipping is available to ship CBD products to customers as long as you select a carrier that allows it and you’re mailing to an area where it’s legal.


What Else Can I Sell?

Anything you like, provided it’s not regulated by law! Like CannaCraft, you could choose to sell clothing, books, magazines, stickers, art prints — whatever works for you and your brand.

The benefit of selling items like this in your store is an additional revenue stream, as well as brand recognition. Get creative. Consider items your target customers would enjoy, even if they may not be able to partake in all your products.

Check out food brands that have garnered national attention, like Voodoo Doughnuts in Oregon, Ghirardelli Chocolate in San Francisco, or Junior’s Cheesecake in New York. Their signature foods are available for purchase, but they also offer mugs, toys, t-shirts, and various other gifts for sale online. You can do the same!


Other Ways Cannabis Entrepreneurs Can Make an Impact

Cannabis entrepreneur

How else can you go about growing and sustaining a thriving e-commerce shop for your cannabis business? Once again, CannaCraft is a fantastic model, and we recommend checking them out.

They’ve expanded their business to include a number of ancillary brands, selling high-quality cannabis oil made from specific strains, handcrafted confections, and CBD products. They’re also cultivators and distributors, helping more than 500 third-party cannabis brands grow and bring their products to the public.

Additionally, CannaCraft has found even more name recognition through partnerships with other great brands. They paired up with Lagunitas Brewery to bring a brand new product to market: Hi-Fi Hops, a blend of cannabis emulsion and carbonated hop water that appeals to both craft beer fans and cannabis connoisseurs alike. A perfect marriage!

Always keep your business flexible and look out for new possibilities — they’re arising all the time.

It doesn’t always have to be about the products, either. While your products are of course your primary focus, you can also consider ways to be socially conscious and give back, which is something your customers may find very appealing. Make it clear that your business is aware of where you came from and all the people who had to pave the way to make it happen.

Find non-profits that speak to you and use your business to help them. You can sell a specific product and offer a cut of the proceeds to charity, or use social media to shout out organizations doing admirable work (in the cannabis space or otherwise)

If customers feel good about where their money is going, they’ll be more likely to throw you their support.

Draw more eyes to your website and e-shop by starting up a blog where you share updates on the marijuana industry, discuss cannabis culture, or recommend strains. Give shoppers a reason to visit and another reason to stay awhile. This not only builds community around your brand, it gives people plenty of content to read and share, which is good for your ranking on search engines.

Want help boosting your search rankings? Check out our Shopify SEO services.

In Conclusion, It’s High Time to Get Started!

The world really is your oyster when you use the powerhouse Shopify system to expand into e-commerce.

We really enjoy working with startup cannabis companies who are looking to move into the e-commerce sector. We’re always happy to offer up ideas for merchandise that’ll put your business on the virtual map. We’re currently working on a full-service offering that includes e-commerce site design, Shopify setup, e-commerce marketing, and product sourcing, so you’ll have everything you need to get off the ground in one neat package.

Now’s the time to start brainstorming. Do you have a solid brand and want to start selling apparel? Ideas for accessories? Maybe you’re even toying with the idea of keychains or vape-cleaning gear. Get creative! If you need a helping hand, hit us up.

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