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Is E-commerce the future of the legal cannabis market?

by Jonathan G 9 months ago in industry

Buying CBD without leaving your house.

For most of the internet's history, cannabis and e-commerce never went hand-in-hand apart from dark web sellers. Since the 2018 Farm Bill effectively legalized cross-state transactions of low-THC hemp, most e-commerce platforms are inundated with cannabis-derived products.

However, entering the cannabis e-commerce sector isn't quite as easy as other legitimate markets. For example, you may have a hard time finding ways to advertise your products through mainstream advertising exchanges, which is why a lot of companies are opting for CBD affiliate programs and influencer marketing.

There is still room to grow as legislation is being cemented around the globe, and as cannabis becomes more normalized in society, you can affect fewer barriers of entry to start an online business.

Here are a few important market statistics to take note of:

  • The global cannabis market is valued at over $150 billion.
  • It is predicted that by 2025, legal cannabis (and products derived from it) will account for 77% of the global market.
  • Hemp-derived extracts, like CBD, is legal in all 50 states of the United States
  • 62% of Americans think marijuana should be legalized.
  • Within the next couple of years, legal cannabis sales from private businesses are expected to top medical sales.
  • In California alone, the legal cannabis market is worth $5.6 billion.
  • The market is predicted to grow by 21% per year.

CBD vs. Cannabis

You’ve probably noticed a prevalence of CBD (cannabidiol) being promoted practically everything. This is due to the way the United States has convoluted the way cannabis and cannabis extracts have been legalized. Generally speaking, CBD is freely sold everywhere while actual marijuana is scrutinized.

On the other hand, Canada had taken a very liberal approach to marijuana legalization since 2018. It is effectively legal for medical, recreational, or naturalistic purposes. The only nation to come close to this level of legalization is the distant nation of Uruguay, which was already far ahead of the rest of the world in marijuana legalization.

If your goal is to launch an online cannabis-based business catering to the US or international market, CBD is obviously the path of least resistance.

Online Payments in Cannabis E-commerce

Another concern a business owner may have is if there are any caveats to overcome when taking payments for cannabis-related transactions. After all, selling CBD to a person on the other side of the country isn’t feasible with cash.

While your business may be technically legal, there may be banks & credit card processors that wouldn’t touch your business with a 10-foot pole. Aside from the stigma, they don’t want to risk taking on clients that may be selling illegal substances on the side, and that could even result in a criminal prosecution against them.

Some states have tried introducing legislation to give local cannabis companies the green light to use banks, like this one in Colorado.

Businesses have claimed to have mixed results using mainstream payment options like Paypal. Certainly, there is a lot of progress to be made on the financial side of this industry.

Future Legislation

The ability for cannabis to take hold in the mainstream industry still depends on how the legislation will move forward. The United States still needs to decide on THC legalization, and states are still quite Balkanized in regards to how marijuana should be legalized & regulated.

And let's not forget that states could start to implement licensing requirements, for CBD-related products, whether offline or online.

I believe the outlook is overall positive, but anything could happen, and drastic changes will make or break any cannabis e-commerce business.

industry
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Jonathan G
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