Two Business Models that are changing the CBD Industry

By March 28, 2019CBD Industry
CBD Industry

Although it is no secret that CBD products have been available for decades in the United States, the recent passing of the Farm Bill in 2018 officially allows their production, sale and consumption across the entire country. This has allowed the industry to move closer towards a free market scheme, in which the competition for quality and customer satisfaction determines the success of each company.

To start a CBD business from scratch, it was previously necessary to invest thousands of dollars in expensive equipment to grow, select and extract the hemp plants and produce tinctures and other cannabidiol products. However, two business models are changing the industry and allowing an increasing number of companies to grow and engage in a competition for quality and customer satisfaction.

Private Label: Wholesale Manufacturers for CBD Firms

While this model is fairly common in other industries, it had not reached the cannabidiol business until recently. Nowadays, private label CBD suppliers are critical for the success of many cannabidiol brands.

Private label CBD manufacturers in the United States take care of the growth, selection and extraction processes required to produce cannabidiol tinctures, edibles and other products. They sell these final products to CBD companies, which keep them in stock ready to be shipped to their customers. This allows cannabidiol firms to enter the market without large investments and provide the best quality to their customers.

Drop Shipping: From the Manufacturer to the Customer

Unlike companies having warehouses full of products made by private label suppliers, firms engaging in the drop shipping model have little or no stock by themselves. They take care of the branding, marketing and customer communication, but when an order is placed by a customer, they simply forward it to the manufacturer.

While many users are skeptical of drop ship models, the fact is that they often offer superior quality than brands with entire in-house manufacturing processes. Drop ship CBD suppliers have access to the most modern equipment and teams of experienced scientists, chemists and developers. Their large demand allows them to constantly invest and innovate, keeping quality standards high across the entire industry.

The main difference between these two business models is the way in which CBD brands keep their stock. Those purchasing products from private label suppliers usually have a set offer for their customers and readily available products within their facilities. The drop shipping method allows businesses to operate without even having any products in stock at a given point, focusing on marketing campaigns and other business aspects instead.

How are the Final Consumers Affected by These Business Models?

Although there are many CBD users who prefer to buy their products from smaller companies with in-house manufacturing facilities, the fact is that drop shipping and private label manufacturers are increasing the level of competition in the cannabidiol industry. This allows quality to improve, increases the availability of products for customers and lowers the prices for final users. If you are an entrepreneur, both business models make it much easier to start your own CBD company without thousands of dollars’ worth of initial investments.

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