CBD companies see online sales spike as coronavirus shuts down retail shops
When COVID-19 spread and forced store closures, California-based Papa & Barkley lost about half of the 400 small CBD retail shops where the company was selling its products.
Then online sales exploded.
Adam Grossman
“We’ve seen a pretty dramatic increase in our online transaction volume,” said Adam Grossman, CEO and founder of Papa & Barkley.
In March alone, as the nation went on lockdown, Papa & Barkley’s online sales transactions grew 240% over previous monthly averages, the company said. In April, online sales increased another 88%, according to the company, which sells both marijuana and CBD products.
It’s not just Papa & Barkley seeing a consumer shift to online purchases as brick-and-mortar retailers feel the financial pain of the pandemic. The U.S. Commerce Department reports that U.S. retail sales dropped 16.4% from March to April.
Colorado CBD maker Charlotte’s Web reported an $11.5 million loss during the most recent quarter, even as it contracted another 1,000 stores to sell its products, which are now in 12,000 retail locations.
“The impact from the COVID-19 pandemic so far on the retail side of our business has been countered by the strong online” sales, Russell Hammer, the CFO and executive vice president of the company, told investors during a quarterly earnings call Thursday.
CV Sciences, a San Diego CBD manufacturer, reported $8.3 million in revenue for the quarter ending March 31 – a 45% decrease from the same period last year – but the company’s online sales accounted for 24% of its total revenue. That’s up from 15 % during the same quarter last year.
E-commerce moves
About a third of CBD consumers say they will shift from brick-and-mortar stores to online to buy their products during the pandemic, according to Bethany Gomez, managing director of the Brightfield Group, a consumer research firm.
Forty-seven percent of CBD customers already had or planned to stock up on CBD and 37% of CBD customers planned to use CBD more frequently because of the COVID-19 pandemic, which means ongoing opportunities for more online sales, Gomez told Hemp Industry Daily webinar attendees in April.
Before the coronavirus pandemic, 85% or goods “were bought in a four-wall physical retail environment,” said Christopher Gavigan, founder and CEO of Prima, which sells CBD-infused topicals at Sephora stores.
“That is going to shift,” he said, adding that he didn’t “know how long that’s going to last” but he encouraged companies to focus on their e-commerce strategy.
“If you don’t have one, I’m sorry. You better build one,” he said during a recent Hemp Industry Daily webinar about new companies adapting to the pandemic.
Jennifer Culpepper, co-founder of Maryland-based i+i Botanicals, which sells CBD-infused beauty products, said the company was recently “really in the mode of searching and working with various retail partners when this all happened.”
“So that was really our main direction,” she said. “We are a skin-care brand, and skin care is something very personal to people and most people want to touch it, feel it, try it before they spend a considerable amount of money on a product.”
Now, Culpepper said her company is reevaluating its sales strategy, trying to figure out how to, “No. 1, support the retailers who are carrying our products and who are selling them online and No. 2, how can we drive more traffic to our e-commerce site and potentially shift that distribution channel a little bit.”
Grossman said the pandemic is changing other aspects of their business to online.
Instead of doing in-store demonstrations for customers and training for budtenders, for example, the company is producing educational videos for its website and YouTube.
“I expect that many of those assets and the approaches will just be the norm for us at the company going forward,” he said.