How To Buy And Sell CBD Wholesale
If you’re considering becoming a CBD wholesaler/distributor you’re in the right time and place. The popularity of CBD is on the rise and the market will be growing for several more years.
It could be argued that buying and selling CBD wholesale is an ideal business model. Wholesaling offers several benefits over other business models such as farming hemp, manufacturing CBD products, or selling CBD at retail. If you don’t have a green thumb, don’t love complex engineering projects, or don’t have a knack for retail marketing, then starting a wholesale CBD business is a good choice.
What Is Wholesale Distribution?
A wholesale distributor is essentially the middle man between the companies that makes CBD products and the stores that sells the products to the public. The distributor buys products from manufacturers in lots at below wholesale prices and then sells them by the box at wholesale prices to retailers so they can mark up the prices and make a profit.
A good rule of thumb — but by no means a standard — is that the manufacturer gets one-third (or one portion) of the retail price. You, the wholesale distributor get to keep one-third of the retail price. And the retailer gets to keep one-third of their selling price.
To be clear, manufacturers often sell wholesale too. The difference is that they generally only sell their own products. They can sell not only to distributors but directly to retailers. A distributor, on the other hand, buys products from several manufacturers and offers retail buyers a catalog of different brands and products.
The benefit of buying from a distributor rather than a manufacturer is that distributors offer a one-stop shop where retailers can order several products at once. That being said, it’s a good time to point out that even if your focus is on CBD, you’ll probably want to offer other types of dietary supplements in order to be competitive.
Benefits Of Running A Wholesale CBD Distribution Business
Distribution is an attractive business model for many entrepreneurs as it doesn’t require a lot of technical knowledge or a knack for retail sales. There are also several additional benefits over other business models.
Here are some of the benefits:
- There are far fewer regulatory issues. Those details are handled by hemp growers, CBD manufacturers, and retailers.
- There’s no lab testing to worry about. By the time CBD arrives on your loading dock, it’s gone through all that.
- Because they don’t generally deal with end users, wholesale distributors have far less liability. If something goes wrong and someone gets tainted products, it’s generally the manufacturer and the retailer that take the heat.
- For most people, it’s easier to learn how to run a warehouse than it is for a farm, or a factory, or a retail business.
- A warehouse is easier to set up than a factory or store.
- Changes in market prices and shortages are less likely to have a negative impact on a wholesaler than on a retailer or manufacturer.
- Real estate and machinery are cheaper for warehouses than for retail stores or factories.
What’s Involved In Starting A Wholesale CBD Business?
Although this is going to sound complicated at first, wholesale distribution is actually one of the simplest business models to understand. Aside from all the usual things that businesses require to run smoothly like ways to take orders and process payments, the only other requirement is a warehouse.
Here’s a bullet point list of some of the things you’ll need to do to get a wholesale CBD distributorship up and running — not in any particular order:
- Find commercial warehouse property to rent or buy.
- Build out a warehouse/shipping facility.
- Locate and reach out to CBD manufacturers for catalog and pricing info.
- Negotiate lines of credit with manufacturers when possible.
- Set up and utilize inventory software to track stocks.
- Begin ordering and warehousing wholesale CBD products.
- Identify and reach out to prospective buyers.
- Take orders from retailers and fulfill them.
Of course, each of these tasks is a sizable project of its own.
Some of the products can be drop-shipped if the maker offers this service. But if you’re offering a wide array of products you’ll inevitably need a warehouse and shipping facility of some kind.
Shipping can be done using third-party shippers such as UPS. Then at some point, it might be more profitable to run a fleet of delivery vehicles.
How And Where To Buy CBD Products At Wholesale Prices
This is probably the easiest of the aspects of running a wholesale CBD distribution company. Not only is it generally easy to find product manufacturers. Once you get your name out there, they’ll find you. They need you!
Oftentimes manufacturers will offer delayed payment terms to wholesale buyers. If you can fill your warehouse without laying out cash you should do so. Sometimes products go unsold, and manufacturers will generally take them back and credit your account. In turn, many distributors offer delayed payment terms to retail buyers.
As we touched upon, finding CBD manufacturers is the easy part. These days a quick Google search offers a good jumping-off point. There you’ll find manufacturers pitching their product lines as well as industry directories that list multiple manufacturers.
There are always some forms to fill out before a CBD manufacturer will do business with you. There’s often a credit check, so it’s really a must to gather all your credit info before you start reaching out to manufacturers. (If you have bad credit you’ll just have to pay cash for your orders — at least early on.)
Once you’re signed up as a distributor you can start placing wholesale CBD orders. Most companies these days offer a handy online ordering system, but in some rare cases, orders might need to be called in.
Finding Retailers That Buy Wholesale CBD
The next step is to get out there and sell. At first, while you’re just getting started, you’ll have to cold call potential buyers. Over time sales efforts can focus more on adding new customers.
Ideally, distributors are looking for customers in their own general vicinity or region. At some point having a fleet and delivering products yourself rather than paying UPS will increase your profits. That being said there are also plenty of distributors that sell nationwide or even globally.
If you’re wanting to do business locally then Google Maps is a great tool for finding nearby retailers. Keep in mind when searching for buyers, the smaller your company, the smaller your clients will be. National chains buy from big distributors.
These days, just about any general consumer retail store can sell CBD products. CBD oil and CBD edibles are sold at health food stores, vitamin shops, convenience stores, gas stations, and so on. But if you think about it, the best customers are the ones that sell a lot of CBD and other health products such as your health food and vitamin shops. These could be retail stores or they could be online shops.
Running A Wholesale CBD Business
As with any business, a distribution business is a collection of systems. You’ll need systems for ordering, inventory, marketing and sales, payment processing, fulfillment and shipping, and, of course, warehousing.
Here is a brief bird’s eye view of each of these:
Online Ordering System
Before you start reaching out to prospective buyers you’ll need to have your catalog in order and preferably an online ordering system where buyers can place orders at their convenience.
Inventory System
Your online ordering system should ideally be tied into an electronic inventory system. Inventory software can tell you (and your buyers) how much of a product you have on hand. It can also warn you when stocks of a particular product are low and it’s time to reorder, tell you exactly where the product is located in the warehouse, store all the pertinent information about each product, and so on.
Marketing System
Marketing and advertising wholesale CBD is a topic all its own. Most importantly you want to make sure that your company can be found in the places that buyers are shopping. Beyond that, depending on the methods being used, there are a wide array of systems and tools that help companies plan and track marketing campaigns.
Sales System
You’ll also need some sort of sales management system. Sales software is often referred to as customer relationship management software or CRM. A CRM, such as those provided by SalesForce and PipeDrive, facilitates the storage and retrieval of all kinds of data related to your prospects and buyers. A CRM lets you track the history of your conversations and orders and let you know when it’s time to follow up with each buyer.
Payment Processing System
Today almost all wholesale orders are paid via check or credit card. Your online ordering system will need to be tied into an electronic payment gateway. Online payment processing systems can be provided by the company that offers merchant services or via an ecommerce hosting company such as Shopify.
Fulfillment And Shipping System
If you’re using UPS, FedEx, USPS, or other cargo carriers you’ll need to open accounts with each of them and negotiate your rates. You’ll also need in-house computer systems for tracking shipping, calculating shipping costs, and calling for pickups.
Warehouse System
And, finally, you’re going to need the manpower and machinery to receive heavy boxes off cargo trucks, move them onto warehouse shelves, and then back onto other trucks for delivery to fulfill orders.
Ideally, all the above systems should interface seamlessly with each other. Your purchasing and sales systems need to feed into your inventory and fulfillment systems. There are software packages that cover all of these bases in one product.
How To Get Started
Once again, each of these departments and systems discussed above can be a daunting undertaking on its own. Where to begin?
One way to get started in wholesale is to start with manufacturers that offer drop shipping. This means that you take orders and pass them onto the manufacturer, then they ship the orders to your buyers. This completely eliminates the need for a warehouse which is by far the most costly piece of the puzzle. You can work your way up to the warehouse.
Another tip for beginners is to sell on eBay. Millions of wholesalers are selling on eBay. Instead of spending time cold calling prospects, you can get started by listing wholesale lots. You could also become an Amazon seller.
We hope this summary of what it takes to become a wholesale CBD distributor helped you see the big picture. If you can decide that you’re interested in buying and selling CBD wholesale you’ll have some idea of what’s involved so that you can dig deeper into the topic. Best of luck to you!
