What is dropshipping?
Dropshipping is a fulfillment method found in retail. Unlike traditional retail fulfillment methods, dropshipping does not require a store to stock products or purchase inventory upfront. Instead, a store buys a product directly from a third-party supplier who then ships the product directly to the customer.
Imagine you are running an online CBD store. Rather than buying your inventory in bulk and managing a warehouse, you could send orders directly to a supplier to have them manage inventory and ship orders to your customers. This is a common fulfillment model in retail with over 33 percent of online stores dropshipping.
The process is almost completely hands-off for the store owner. They don’t need to purchase inventory in bulk or fulfill orders. Instead, the supplier handles inventory and fulfillment while the store owner focuses on marketing and sales. It might feel like you’re just a middleman, but there’s plenty of profit to be had with this simple business model and many third-party suppliers don’t sell to the public.
Millions of people desiring to run a successful online store turn to dropshipping because of its simplicity and low startup costs. Include the fact that you can run your online store from virtually anywhere with internet access and it’s clear why this is a popular path for entrepreneurs.
Benefits of Dropshipping CBD
Easy to Get Started - Starting your CBD business is an easy process with dropshipping. Since you don’t need to worry about finding a warehouse or stocking and shipping products, not much is required to get started. Even with little to no prior business experience you can start setting everything up in a couple of hours.
Don’t take this as a claim that building a successful CBD business with dropshipping is easy. As with most things in life, you get out of it what you put in. Investing time and energy into building your foundational knowledge is key to finding success. This guide will help equip you with the basics of dropshipping CBD so you can jumpstart your own business.
Low Startup Costs - Since dropshipping eliminates most of the high-level investments required to start a retail store, you don’t need much capital to get your CBD business up and running. The entire online store can be built from your computer, so your initial costs are low compared to traditional retail expenses.
Wide Variety of Products - Dropshipping offers access to thousands of CBD products you can sell on your online store. This allows you to target different audiences and makes your business dynamic in the sense that you aren’t limited to just one product or supplier. Again, there’s no real cost to adding new products to your online CBD store since you only pay suppliers when a customer places an order.
Easy to Scale - The dropship model is built to scale with you as your CBD business grows. You’ll invest more time and energy into market and sales efforts, but your daily dropshipping tasks won’t change much. Without the need to purchase inventory or ship orders, your business can continually grow while avoiding any expensive costs thanks to the dropship model.
Be mindful of the work required to get your dropship orders fulfilled. If you’re entering orders manually on a site or emailing them to suppliers one-by-one, the process can quickly become time consuming as your order volume increases. Take into consideration how much effort is required to get orders fulfilled when looking for dropship suppliers. More on this later.
Disadvantages of Dropshipping CBD
Less Control of Products - The dropship model does not offer much control over parts of the dropshipping process. Suppliers control parts of the fulfillment process like shipping and packaging as well as restocking inventory and product branding. You have to trust that the suppliers you partner with are efficient and consistent when fulfilling orders for you.
Maintaining a positive relationship with suppliers helps build the trust needed to give up control over the parts of the process mentioned above. It also reassures you that you will be able to resolve any customer issues in a timely manner.
Restrictive Federal, State, and Local Regulations - Due to government regulations surrounding CBD and hemp, there are a number of considerations you need to consider when starting your business dropshipping CBD. This can increase the time it takes to get your store launched, but it’s worth it to ensure your business is operating within the law.
In some states CBD is still illegal. In other states, the sale of CBD may be legal but requires a certain license or permit. Familiarize yourself with state laws so you know where and how you can sell CBD. Leafly has an informative CBD guide with resources regarding CBD laws and regulations.
You should also consider where your products come from. Since you won’t be growing your own hemp, it’s important to select the suppliers you source products from carefully. Make sure they provide certificates of analysis for all products and are transparent about where and how their products are manufactured.
Payment Processing Challenges - Because CBD businesses are considered high risk, you’ll find that the process of finding a payment processor for your online store is more involved than what you might experience in other industries. Luckily, there are a number of payment processors who work specifically with high risk businesses. Some even specialize in the CBD industry.
Slim Margins - In order to avoid taking on the risk of purchasing inventory, you sacrifice some of your profit margin in most cases. Dropshipping CBD can be a profitable business venture, but understand that the price you pay to dropship a product is usually less than what it costs to purchase the product upfront in bulk.
The CBD industry itself offers very healthy profit margins. Largely because many CBD products come in a cosmetic form such as lotions and balms. The beauty and cosmetics industry offers some of the highest profit margins in retail, so there’s plenty of room to make money with the dropship model.
Finding an ecommerce platform for CBD
One of the first decisions you’ll need to make before launching your CBD store is which platform you’ll build and host the store on. There are a number of factors that will go into determining the right platform for you, but we’ll cover 2 that are specifically important to anyone planning to dropship CBD.
Ease of Use - Considering that you’ll likely be using this platform for the foreseeable future, it’s best to make sure you’re comfortable running your CBD business with it. Take note of how user-friendly the interface is and what level of familiarity with technology is required.
For example, Shopify is a platform that virtually anyone can use, whereas WooCommerce is an open-source platform that requires you or someone on your team to have coding knowledge. This doesn’t definitively make Shopify superior, but if you aren’t interested in learning to code or hiring someone with coding experience, Shopify is likely a better fit for you.
Designs & Themes - Your website’s first job is to grab the attention of your audience. To do this, you’ll need to invest in a well-designed theme for your website. The ecommerce platform you choose should have a selection of website themes you can apply to your store and customize to fit your brand. This is one part of the process where the ease of use of your ecommerce platform comes into play. Designing a website that matches your vision is difficult, but not impossible.
On one hand, you’ll find platforms like Shopify which offer easy to use website editors with well-built, professional website themes. However, this comes with limitations to exactly how much you can customize. On the other hand, open-source platforms like WooCommerce offer endless possibilities in terms of how you can customize your site. The downside is that you’ll need someone with extensive experience in coding to build the website.
CBD credit card processing
Many popular credit card payment processors like PayPal are not currently available for hemp or CBD products. As a result, you’ll need to apply to a third-party payment gateway that supports transactions for CBD products. The rising popularity of CBD among consumers has helped lead to more and more payment gateways accepting the sale of CBD, so you have plenty of options available.
Expect the approval process for any payment gateway that allows CBD sales to be more extensive than other industries. Many factors are taken into consideration when your application is reviewed like the date your business was created, the types of CBD products you offer, and your sales history.
Smoke Drop has teamed up with third-party payment gateways to offer CBD stores a fasttrack to finding the right banking partner. Review the requirements and apply directly to any of the gateways listed below:
Finding CBD suppliers
While the popularity of CBD continues to rise among consumers, the industry is still fairly new to retail. As a result, your options when it comes to dropship suppliers are limited. This can make the process of finding the right CBD supplier time consuming and expensive, but knowing where to look and what to look for can help speed up the process.
Let’s first review where you should turn to find CBD suppliers.
Where To Look
Manufacturers - A common way to find suppliers who will dropship their CBD products is to contact manufacturers directly. While manufacturers typically don’t sell to the public, they usually have a list of wholesale distributors they can share with you. With a list of wholesale distributors, you can begin contacting them directly to find out if a dropshipping program is available.
Use Smoke Drop - Smoke Drop does the hard work of finding quality CBD suppliers for you. We’ve curated a collection of quality suppliers offering great CBD products like oils, gummies, and lotions. In the Smoke Drop app, you can browse through suppliers and their products, add them to your Shopify or WooCommerce store, and start selling them in just a few clicks.
- Hundreds of CBD Products
- Automated Fulfillment
- Shopify & WooCommerce Integrations
- Inventory Sync
Search Google - This is an obvious one, but keep these things in mind while you’re searching.
- Search Extensively - You’ll find hundreds of thousands of results when looking for CBD dropship suppliers. The perfect fit for your business might not be on pages 1 through 10, so be prepared to do a deep dive when researching CBD suppliers for your brand.
- Use Search Filters - Take advantage of search modifiers to narrow down results. A comprehensive list of modifiers is available from Search Engine Journal.
Directories - You can find online directories that contain a list or database of suppliers in various industries. The best directories will organize suppliers by niche or industry and screen suppliers added to the list to ensure they are reputable. There is typically a one-time fee to gain access to a supplier directory, so make sure CBD suppliers are included before purchasing one.
What to Look For
Automation - Great suppliers invest in automation for their dropship program. Imagine partnering with a CBD supplier who has hundreds of products you can dropship, only to find out you have to scrape all product data from their website because there’s no integration or even a CSV available.
Features like automatic inventory updates, automated order processing, and one-click product sync not only make getting set up easier, but it makes scaling easier as well. Delays in inventory updates or order processing can threaten the success of your business, so reliable technology and automation is a necessity.
Quality Products - Product quality should be a main focus for any supplier you partner with. Given the nature of the CBD industry, you can’t afford to sell products with questionable quality or inconsistencies. Ask questions about the manufacturing process when considering suppliers and even place sample orders to see for yourself.
Location - The location of your suppliers will directly affect delivery times, so look for suppliers with warehouses close to your target audience.
Customer Support - When contacting potential suppliers, be mindful of how responsive their support team is. Long periods of time between responses or inquiries going unanswered should be a red flag. Customers with order issues will look to you for updates, so you need an open line of communication with suppliers to resolve any problems.
Smoke Drop eliminates the time and energy wasted trying to find the right supplier. We’ve curated a collection of reliable, established CBD suppliers with quality products. Each supplier is vetted using the information above along with other criteria.
Deciding What CBD Products To Sell
Where to start
With so many different types of CBD products available, it can be difficult to determine where to focus your product offering. Should you build a general CBD store or focus on one specific product type like CBD candy? A case can be made for both, but product and market research is required no matter what approach you take.
Before you start deciding what products to sell, take time to study your competitors. Understand their unique selling propositions and any gaps in the market your business could fill. If you’re still unsure, remember that there’s no cost to add or remove products from your dropship store so embrace the opportunity to test different products.
Cost - How much does it cost for you to ship the product to a customer? Anytime a customer purchases a product, the order is forwarded to the supplier who will require payment to fulfill the order. Included with the product cost is the cost of shipping as well. Identify these two costs when looking at potential products to sell on your store.
Inventory - Nothing is worse than finding a winning product only for your supplier to run out of stock as soon as orders start coming in. You want to find suppliers and products that have a lot of inventory available or at least restock inventory on a regular basis.
Quality - Last, but certainly not least, is product quality. Even though suppliers are shipping products to customers, your brand is what the customer sees and interacts with. Make sure the quality of the products you’re selling meet customer expectations and reflect the quality of your brand.
Following consumer trends is an excellent way to determine what type of CBD products you want to sell. In-depth market research on the CBD industry as a whole will help you understand the marketability of your products and can assist in identifying your target audience as well.
Let’s review a couple of places you can find information about CBD consumer trends.
Google Keyword Tool - A great way to measure demand is looking at search volume for keywords related to your product. Google offers a look into their search volume through the Google Keyword Tool.
Google Trends - After looking through Google Keyword Tool, get additional insights from Google Trends. It offers similar features with more advanced metrics.
Due to the fact that US laws and regulations around CBD and hemp are quickly changing, it’s recommended that you consult with an attorney prior to selling CBD online. Smoke Drop can’t advise you regarding what and where you can sell, but there are a number of resources available to help you understand federal, state, and local laws. A good starting point is the FDA site, which offers guidance on CBD and hemp-derived products.
Is building a successful business dropshipping CBD easy?
Absolutely not. While there is a low barrier of entry with the dropship model, finding success is not easy. Many entrepreneurs find that their first one or two stores fail before one becomes successful. Others might find a sustainable business with their first venture into dropshipping.
There’s no guarantee that your business will be successful, but the opportunity to build a successful business is there. The growth of CBD’s popularity among consumers and evolving regulations make now the perfect time to get started.
Start your research today with the help of this guide. You’ll undoubtedly hear that this is an oversaturated industry, but with the right suppliers, products, and strategy, anyone can find success dropshipping CBD. Don’t keep waiting. Get started today!