“Interest in cannabidiol, or CBD, is rapidly transforming the consumer product landscape,” says Todd Eliason, publisher and editor in chief of Direct Selling News (DSN), which conducted the research. “The trends also indicate that global direct selling sales of CBD products could exceed $1 billion by 2020. Established companies as well as a growing number of startups have begun announcing their entry into the market.”
Direct Selling News will be exploring the many factors related to direct selling companies’ leading role in the CBD market in an upcoming edition of the magazine as well as at a Nov. 6 CBD Symposium it is co-hosting with parent company SUCCESS Partners at its Plano, Texas headquarters.
“With an ingredient that is as easily misunderstood as CBD, the direct selling channel may prove to be the perfect fit for companies seeking channels of distribution,” says Eliason. “Direct sellers and network marketers are known for their one-on-one training and education methods that can meet the consumer on a personal level even if it’s the first time they’ve heard of CBD oil. That personal connection and ability to address specific misconceptions has the potential to create a loyal customer base.”
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One purchasing channel that continues to see sales while flying under the radar is direct selling. In 2020, 13% of CBD consumers reported purchasing from direct sellers. This channel is also referred to as “multi-level-marketing,” MLMs, or network marketing.
Other companies, such as Hempworx , Koi CBD , and Prime My Body have experienced vast growth using the MLM model as well.
Growth Drivers for CBD Direct Sales
One example of a successful CBD MLM is Medical Marijuana Inc. The company is one of today’s largest hemp CBD manufacturers. It receives most of its revenues through its MLM arm, Kannaway . The company has also spread to Latin America. In this region, direct sales is a very strong channel and shows strong potential in the longer term.
Examples of CBD Direct Sellers
These companies offer a wide range of products. We see traditional tinctures that first dominated the CBD market, as well as beauty products with added functional ingredients like collagen. The successes of these companies should be noted by mainstream direct selling beauty companies – like Mary Kay and Avon. Once the US Food and Drug Administration makes its final ruling on hemp, these larger direct sellers could jump in CBD as a functional ingredient.
3. Hold Back Your Marketing Efforts Until you are Approved
You may have an amazing new CBD product, and you can’t wait to tell the field and your customers. However, posting too soon might put your new account approval at risk. Your processor should give you guidelines about what you can and cannot say about your pending products.
2. Check with Your Payment Processor Before Selling Products with CBD in Them
Many businesses wrongly assume they can add CBD products to their list of offerings simply because of the perception that everyone is doing it. Merchants from several industries—nutraceuticals, pharmaceuticals, and even beauty products and weight loss—have made this potentially fatal mistake, placing them in breach of their merchant account contract and risking account termination and being placed on the TMF.
5. Stay Aware of the Federal and State Laws Regarding CBD and Hemp
The laws surrounding cannabis, hemp-based products, and CBD are still largely a grey area. Federal and state laws vary widely. Staying up to date and maintaining compliance with the evolving laws and regulations will ensure that you and your field can be confident in selling your products.
The Path to Selling CBD Products May Not Be Simple
Even with the onslaught of new products, banks and U.S. based merchant service providers have struggled to distinguish CBD from marijuana. Historically, both have been considered prohibited products by most payment processors and their sponsor banks. Even after the recategorization of CBD from a Schedule 1 Narcotic to Schedule 5 by the DEA, many banks still worry about legal challenges and liability for providing financial services and issuing merchant accounts to companies selling CBD products.
A word to the wise, the FDA has been known to take decisive action against CBD companies for making product medical or health claims. This applies to your field as well. As we all know, over-enthusiastic product claims from your field can leave you liable. You don’t want to spoil the party before it even gets started because comments about an upcoming product are in violation of your merchant agreement and incur the FDA’s rancor.
Here are Five Essential Keys to Selling CBD products
For years, the only legitimate way to sell CBD products was to transact in cash—not an efficient or scalable solution and certainly not tenable for direct selling companies.
The good news is that old perceptions are changing, and your ability to sell products containing or formulated with CBD as an ingredient is becoming more feasible. The SAFE Banking Act, HR 1595, which was passed by the House in 2019, is likely to be reintroduced to Congress this year. This bill would allow financial institutions to provide financial services to legitimate cannabis-related businesses without facing potential penalties