Amazon’s Hemp Market Costs the CBD Industry Over $60 Million Per Year

Amazon’s hemp market is awash with low-quality products that don’t offer what they claim to. It’s a landscape where telling the truth will get your product pulled from the storefront, while keeping your mouth shut on the specifics but promising implausibly big things anyway can net you thousands of sales per month.

The people who buy hemp from Amazon are giving dishonest companies money that would otherwise go to legitimate hemp companies, but worst of all, their experience might put them off hemp altogether.

So the question is: how much does Amazon’s unreliable hemp market cost the CBD industry?

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TL;DR

• The hemp market on Amazon is estimated to generate $64 million per year for Amazon sellers.
• Although this isn’t all lost income for CBD companies, a large portion of it would likely have been spent elsewhere if there was no hemp on Amazon.
• The biggest impact is likely on reputation. Many customers may try poor-quality Amazon hemp and opt to not purchase CBD in the future.

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Amazon Hemp Likely Generates Over $60 Million Per Year, Directly Taking Customers from CBD Companies

CBD Oracle estimates that the hemp market on Amazon generates around $64 million per year.

All of these purchases may not have been made without Amazon, but this is the best estimate of the direct financial impact of Amazon’s hemp on the CBD industry overall.

We spoke to Andrew Livingston, Director of Economics & Research at Vicente, who pointed out the challenges in estimating the size of the Amazon hemp market:

“Without information on sales from Amazon, and with the reality that the hemp CBD supplement market is hard to accurately quantify given the multitude of different sales channels, it is difficult to know what percentage of the hemp supplement market is sold directly from company websites, sold through alternative stores, or sold through large online retailers like Amazon.”

While it is difficult to put Amazon’s hemp market in the context of the overall industry and estimates of sales on Amazon alone are limited, the company does provide some information on sales.

This comes in the form of “x bought in the past month” figures, which tell you that more than some specified number has been sold. Some sellers do complain that these figures are too low, but it remains the best sales estimate available.

Based on this information for the products covered in CBD Oracle’s lab analysis, we were able to estimate the average revenue per product. Each seller’s page was then analyzed to determine the total number of products available from all of the sellers in the study. Under the assumption that one-third of revenues per seller were missed using this method, and that approximately half of all Amazon hemp sellers were not included, it is estimated that Amazon’s hemp market generates $64 million per year.

However, the estimate has a lot of uncertainty, and CBD Oracle concludes that the true value could be anywhere between $36 and $125 million per year.

It’s true that some buyers probably only purchased because it was on Amazon, but it’s likely that most consumers were looking specifically for hemp products and landed on Amazon to make their purchase. So it seems reasonable that the majority of this is essentially money that would otherwise have gone to the wider hemp industry.

The Indirect Impact of Amazon’s Hemp Industry on CBD Sales

Arguably the bigger danger to the hemp industry is not the direct financial impact, but the indirect reputational damage poor-quality hemp does to the legitimate industry.  

Andrew Livingston commented that:

“It is hard to know how large their impact is financially, but I see two major risks they present for the industry. One, these products drive consumers away from the entire hemp supplement category for fear that the entire market cannot be trusted or is not properly regulated. This means legitimate businesses with great products that benefit consumers lose out.

Second, problematically labeled and branded hemp products indicate to regulators and public officials that the entire category needs more robust and stringent restrictions. But the products that incite this desire for more regulation often exist outside of the legal system thereby creating additional requirements for already compliant businesses without the necessary enforcement against those operating outside of the rules.”

These factors are arguably more important than the direct financial impacts. Combining our calculation of direct costs with the best estimates of the overall CBD market size, it would only be around 1.5% of the total market size. Financially, it’s a large amount but ultimately still a drop in the bucket.

But how can you quantify the impact of a person who had a bad experience with hemp on Amazon and decided not to continue using CBD as a result? How much would they have spent over a year? How many such people exist, and how many people do they tell about their experience?

While most CBD companies offer much better products than those available on Amazon, eBay, Walmart, and other retailers, a new customer wouldn’t know that, and with a sufficiently bad experience, they will never try to find out.

The loss to CBD companies from this stretches beyond quarterly balance sheets and into a broader, societal mistrust of the whole industry. As Andrew points out, this can also reach legislators and justify actions that could cripple the industry for the long term.

How Much Revenue Could Amazon Generate If They Sold Real CBD?

While Amazon is already likely depriving the wider CBD industry of a lot of revenue, if they embraced CBD products, it’s likely that their income would increase substantially.

We spoke to a hemp company with experience selling on Amazon, which wishes to remain anonymous, who commented that, “Amazon could make a ton of money from selling real CBD products, in fact, it’s my opinion that they would be the largest single seller of CBD in the world if they were to do so.”

The reason for this is very simple: Amazon has a huge reach in terms of customers and the only thing currently holding it back is the awful quality of the hemp on the platform. The seller continued:

“If Amazon changed their CBD policy, I think most companies would immediately sign up to become sellers on the platform. Amazon could do consumers and legitimate brands a huge favor by removing fake CBD/hemp products from the platform. Unfortunately they are doing the opposite.”

We asked specifically if honest CBD sellers would be willing to compete with the scammers and deceptive products our investigation revealed:

“Honest sellers would be willing to compete, even though they would make next to no money after advertising costs and Amazon platform fees are factored in. This is the scary part about the monopoly that Amazon has created for all industries for their own benefit, not just CBD.”

On the whole, despite the impact Amazon is already having on the hemp industry – and despite the downsides of selling on the platform – they could generate even more sales if they embraced products made by reliable and respected companies.

As things stand, though, they are hitching their brand to the worst names in the industry and tarring every hemp company’s reputation in the process.

Dragging the Industry Through the Mud

Like someone committing a crime spree while dressed in your clothes, even if the CBD industry hasn’t done anything wrong, the widespread poor-quality hemp on Amazon drags the industry’s reputation through the mud.

You might protest that you would never do that, but for every person you convince, there are ten more who saw the imposter from afar and will never trust you again.

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Related:

• Half of the Hemp Product Listings on Amazon Make Illegal Medical Claims
• Study Reveals Amazon’s Hidden Market for THC Gummies
• Amazon Could Get Fined Up to $1.3 Million Over INFORM Consumers Act Violations

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