The State of CBD in eCommerce

These days you can’t throw a rock without hitting some new CBD infused product. From coffee to lotion, product designers are creating every kind of CBD product. Despite the proliferation of these products into the marketplace, the permissibility of cannabis-based products across the eCommerce landscape is often unclear and confusing. 

When considering an ecommerce solution for a CBD-based product, you need to carefully consider two things:

1. eCommerce Platform / Hosting – The product/service you use to create product pages, accept orders, and many other things.
2. Payment Gateway – The product/service you use to accept credit card payments.

Many people get these two things confused because they assume that they’re the same thing, which is understandable because many ecommerce platforms do offer a built-in payment gateway solution. But as you’ll find out further on, a platform can allow CBD products, but their built-in payment gateway may not.

Your eCommerce platform is the software you use to create your website and manage your products, orders, and a myriad of other services as well. Usually, it provides the checkout functionality, but where it stops, and your payment gateway comes in, is the portion of the checkout that processes credit card transactions.

Just recently, Shopify officially announced their foray into the US CBD market. But aside from the announcement itself, not much has actually changed about the platform’s capabilities. Their announcement is likely more about quickly trying to stem the flow of CBD retailers to BigCommerce that are looking for a SaaS solution. Differently from BigCommerce, Shopify has a legal agreement that you must agree to where they essentially shift all the potential legal liability that could be associated with CBD products to the merchants. As they’re a publicly-traded company this was probably necessary to get the sign-off from their internal legal and insurance departments.

In Canada, where recreational cannabis has recently been legalized, Shopify also allows the sale of cannabis products. But many people might be confused by that because Shopify’s built-in payment gateway (powered by Stripe), does not allow any cannabis products to be sold through it, including CBD.

So you’re able to sell CBD products on the Shopify eCommerce platform, but you’ll have to find an alternative payment gateway that allows CBD products and supports Shopify. (More about payment gateway options later on.) Along with their recent CBD announcement, Shopify does provide links to 3 potential payment processors (Authorize.net, DigiPay, and eMerchant Brokers) that, if accepted, will allow you to sell CBD products, but the transaction fees vary widely among these and are significantly higher than standard payment gateways.

But there’s one big catch to all this. If you don’t use Shopify’s payment processor (which you can’t with CBD products), you’ll be subject to an additional 2.0%-0.5% fee (depending on the plan) on top of every transaction combined with whatever high-risk fees you have to payment to your merchant provider.

In the past, many retailers were successfully selling CBD products on BigCommerce, but BigCommerce recently started specifically promoting the fact they allow CBD products to be sold on their eCommerce platform. 

But different from Shopify, BigCommerce doesn’t have a built-in payment gateway, and they don’t have fees on top of using your own payment gateway because Shopify’s largest source of revenue is in their payment solutions. The alternative payment gateways they do support often have issues because Shopify isn’t incentivized to support them. As a result of BigCommerce not having a built-in payment gateway, they have more direct relationships and support for alternative payment gateways than Shopify (like Square payments) because they’re not in competition with them. 

When the state of CBD permissibility on SaaS platforms was a little more unsure, WooCommerce was the platform of choice for startup CBD retailers because it’s based on WordPress, which is an open-source product that’s relatively easy to set up. So that means you’re also able to choose any hosting solution and you have more control and less worry about getting “kicked off” the platform as many CBD retailers on Shopify were in the past. You should still check with your specific host to make sure they don’t have any specific restrictions, but there are thousands of hosting solutions for WooCommerce so you shouldn’t have a problem finding a hosting provider. WooCommerce is still a popular choice, but as other platforms are opening up and making their positions on CBD less opaque, it’s not necessarily a clear choice anymore.

Magento is an open-source product, similar to WooCommerce, that you’re able to choose your own host. So with Magento, you have a similar level of control as WordPress, but with a more powerful and flexible ecommerce platform than WooCommerce.

However, many merchants might be confused by Magento’s stance on CBD because they quietly stated they don’t allow CBD products on Magento Cloud. But Magento Cloud is essentially just Magento’s Enterprise product and a hosting solution combined. They still allow CBD products to be sold on a host of their choosing, whether it be Magento Open Source or Magento’s Enterprise product.

There are many other eCommerce platforms popping up like Squarespace and Square which do not have a public stance on CBD products, but even if you choose one of those platforms, you still have to make sure your payment gateway allows it.

Your payment gateway is the service that accepts customers’ credit card numbers, processes the payment, and deposits the funds into your account. So while you might be able to list CBD products online most places, if you don’t have a payment gateway that allows it you’re at immediate risk for being suspended from accepting payments.

Stripe has been a major player in the eCommerce payments industry for a while, so virtually every major eCommerce platform supports it. Shopify uses it on the backend as its default payment gateway. Stripe has a zero-tolerance policy for cannabis products of any kind, including CBD. As such a big US processor and with it still being illegal on the federal level in the US, don’t expect that to change until federal laws in the US change, which will probably come sometime in the future, but as people know, the wheels of government turn very slowly.

PayPal is currently lobbying the US federal government to pass the SAFE Banking Act, which would allow banks and payment processors to handle money related to the sales of cannabis products, without legal risk.

But currently, PayPal, similar to Stripe, has a zero-tolerance policy for cannabis products. And if they detect you’re selling cannabis or CBD products through PayPal, they’ll immediately suspend your account.  

Before Stripe, Authorize.net was one of the most widely used payment gateways online. Authorize.net itself doesn’t explicitly allow or forbid CBD products to be sold through their gateway, but Authorize.net splits their payment processing between the gateway (Authorize.net) and a separate merchant account. 

Various Authorize.net merchant accounts have different rules on CBD based products. There a number who do explicitly allow CBD products to be sold, but their merchant fees are typically very high due (sometimes 10-15%) to the increased risk profile of those types of sales.

While Square has been around for a while in physical and POS sales, they’re a pretty newcomer into the online payment gateway space. Not to be confused with their eCommerce platform, they also have a separate payment gateway that can be used on Magento, WooCommerce, and BigCommerce, but is currently unavailable on Shopify. They recently announced an invite-only CBD payments “beta” and the processing fees are reportedly a fraction of most other gateways.

Ultimately, the right choice of eCommerce platforms can be confusing and very nuanced. We’re Shopify, BigCommerce, and Magento partners so feel free to reach out to info@netalico.com or use the form below if you’d like any more information or to discuss CBD sales in eCommerce.