BigCommerce Goes Green
Whether it’s cosmetics, health supplements, pet products, or food, CBD seems to be a star ingredient these days. Cannabidiol (CBD) is a chemical compound found in the cannabis plant, which has two primary species most of us are familiar with; hemp and marijuana. Unlike THC — another compound found in the cannabis plants — CBD is non-psychoactive and many people believe it can be of benefit for a wide variety of health conditions. According to a study by Cowen, nearly 7% of responders reported using CBD as a supplement and they estimate the industry will reach revenues of US$16 billion in retail sales by 2025.
The Challenges of Selling CBD
Despite the boom the CBD market has experience — largely due to the U.S. Agricultural Improvement Act of 2018 (a.k.a. the Farm Bill) removing hemp from the Controlled Substances Act — the process of merchandising products containing cannabidiol has been far from smooth. Currently, the FDA does not officially recognize any drugs that contain CBD aside from Epidiolex, a prescription drug used to treat epilepsy induces seizures. As a matter of fact, the FDA has issued letters against unfounded firms making therapeutic claims and warns users to be wary over the source of the CDB they might be interested in acquiring and using.
One of the main challenges CBD merchants are facing comes down to securing payment partners. According to Kevin Murphy, Chairman and CEO of Acreage Holdings, an average of only one in thirty banks actually do business with CBD merchants, and often for much pricier fees given their perceived high-risk status. Despite the decriminalization of hemp, CBD continues to languish in a legal grey area. Many banks and payment processors are leery of offering their services to cannabis companies and this reluctance understandably hinders growth opportunities, and for some, severely impacts the way they run their business. This leaves merchants of CBD products in a difficult position as consumer interest in their products continues to rise.
Iris Dorbian explores the issues that CBD product merchants are facing in her in her article, CBD and Hemp May Be Legal But Discrimination Continues, on Forbes, where she talks to entrepreneurs like Sabina King, CEO of Hempure CBD, who is struggling to find merchant processors, or Morris Beegle, Co-Founder and President of WAFBA, who has struggled to promote his products and claims he has been discriminated against due to the nature of his business.
I had the pleasure of chatting with Russell Markus, founder of Lily CBD, and given the opportunity to learn more about why he got in the business and what challenges he has had to face, thus far. Much like the other CBD merchants, Russel has struggled to find a partner that would provide the online services he needed to grow his business. Like other CBD business owners, he was stuck with high-risk payment processors, which often have significantly steeper processing fees and rates. Not exactly helpful to a start-up business. Markus needed a platform that would allow him to meet the demands for his high-end clientele. He chose BigCommerce, thanks to their user and developer-friendly approach.
BigCommerce introduced a “streamlined way for merchants to sell hemp and hemp-derived cannabidiol (CBD) products online” by launching their BigCommerce for Hemp & CBD. By bringing “together industry-leading eCommerce tools and services tailored for hemp and hemp-derived CBD commerce,” the eCommerce platform provides manufacturers and merchants a solution to their problem of legally distributing and selling their products in the U.S.
BigCommerce for Hemp & CBD will supply a securely hosted, online storefront that connects CBD merchants with trusted US-based service providers, as well as payment gateways for any type of retail model — be it digital or brick-and-mortar. In addition, BigCommerce Shipping will help with order fulfillment solutions and shipping.
We reached out to BigCommerce and spoke with Meghan Stabler, Vice-President of Global Product Marketing, to learn more about their new platform and how they’re helping hemp, and hemp-derived CBD retailers, thrive online.
What are some of the challenges that the CBD industry is facing when doing business online?
“Every component of doing business online can be a headache for Hemp and CBD merchants.
Let’s start with finding an eCommerce platform, which is the foundational software that gives merchants the tools to host and build a shoppable website, list products, attract shoppers, facilitate online transactions and manage shipping customers’ orders. Selling CBD online is a new and rapidly growing market, and a lot of brands run on lean budgets and handle everything in-house, which makes finding an affordable eCommerce platform that non-technical users can easily grasp and manage is key. Even in the post-Farm Bill era that we’re in, BigCommerce is one of the only full-featured eCommerce platforms that supports merchants selling legal hemp-derived CBD through their website.
The biggest obstacle for the CBD industry’s eCommerce growth has always been with financing and payments. To get started selling online, you need a merchant services provider - a business bank account - as well as a company that will process your site’s credit card transactions, which is called a payment gateway. Unfortunately, there are some bad actors operating in the CBD category that are taking advantage of the limited options for tens of thousands of merchants to work with. Some of these are based outside of the US, which is quite risky, and some are known to charge near double-digit fees for every transaction processed, or require merchants to continually hold thousands of dollars in a reserve for potential chargebacks.
Shipping can also be tricky. Certain carriers will not ship hemp or hemp-derived CBD, while others will. There are also several 3PLs, or third-party logistics companies and solutions like BigCommerce Shipping that work with CBD retailers to streamline shipping operations that integrate with the platform to keep everything in one intuitive dashboard.”
How is BigCommerce helping merchants? What are some of the solutions you provide?
“In August, we rolled-out BigCommerce for Hemp & CBD, which was the first dedicated eCommerce product offering designed specifically for the hemp and CBD industry. Our goal with this initiative is to provide merchants selling legal hemp and hemp-derived CBD a clear, outlined path to building a reliable and scalable eCommerce presence with BigCommerce and our vetted, hemp-friendly partner ecosystem. BigCommerce’s platform is fast and secure, and our open SaaS architecture lets merchants build the type of shopping experiences that drive conversions and help build relationships with their customers.
And, perhaps most importantly, our clear stance on hemp and CBD assures our merchants that their days of getting shut down by one vendor or another are behind them. Now, they can just focus on growing their brand.”
How are these solutions different from other services out there, whether from you or competitors?
“Pioneering into CBD eCommerce with BigCommerce for Hemp & CBD reflects the company’s partner-first approach that guides us to always do what’s best for our all of our merchants, including those in high-risk categories like CBD.
Other vendors have recently followed our lead into the CBD market, and while having another eCommerce platform option is a step forward for the industry as a whole, their first-party payments solution still does not allow CBD transactions. Historically, that would mean the merchant would have to use a third-party payment gateway, for which they will be charged a penalty fee for every single transaction. From our perspective, that’s only setting hemp and CBD entrepreneurs back.”
Why did BigCommerce feel the need to develop these solutions and do you plan on expanding on them?
“Hemp is legal, and it was time for the entrepreneurs driving this huge market to be treated as such. As long as these merchants are operating within federal and applicable local regulations, we’ll have their back.”
Good News on the Horizon
Currently, some industry veterans seem to think that the impending SAFE Banking Act will help to overcome the issues that cannabis business owners are facing when it comes to finding and securing payment processing services and financing, and give them access to the banking system. Kevin Murphy thinks that “the bill will not only be good for the government but also for banks and will help the cannabis industry grow and stay accountable.” Meghan Stabler of BigCommerce adds, "If passed, the SAFE Banking Act will help BigCommerce's hemp merchants at all stages of their growth, and is another step forward in legally leveling the playing field for entrepreneurs driving a booming $20b industry."
As of the date of this article, the SAFE Banking Act bill is on its way to be voted upon in the U.S. House of Representatives.