Read this before you launch.
Thinking of starting a supplement business in 2020? There is one crucial component you need. For your new venture to be successful, get a merchant account.
It’s no surprise that 2020 has turned the world upside down. But one thing that’s been crushing it is e-commerce. Retailers are adapting quickly to online stores. Copywriters are transitioning into brand owners. And affiliate marketers are pivoting to selling new products on the internet.
As more people are stuck at home, sales of supplements have been booming. This includes nutritional supplements, a dietary supplement, immunity pills, protein powder, whey, creatine and weight loss aids. And this is most likely going to create a long-term habit for anyone who has made online purchases in the past few months.
That’s why many people see this as an opportunity to start a new business or a new product. And most of them are looking into starting their own supplement company too.
You see, the supplement industry has spiked above 12% this year. This is being driven by the pandemic. So it’s never been a better time to start thinking about having your private label supplements, hiring a contract manufacturer, labeling, pricing, and a marketing strategy.
Are you going to rely on blogging? Social media? Or Amazon? Think about how it will look when your supplements business startup is live.
As Harvard Business Review says, you can turn your pandemic solution into a viable business. And if you’re still unsure of your supplement business plan, stay with us until the end of this blog. We will provide a step-by-step guide on starting a supplement business (and why you’ll need a merchant account to help you succeed faster).
A Simple 3-Step Guide For Starting A Supplement Company
Whether you’re a copywriter, affiliate marketer, or a new entrepreneur looking to become a nutraceutical merchant, you’ll need to consider these first steps:
1. Is there demand?
Before you even start to think about product development, you have to determine your target customer needs. Because in reality, it doesn’t matter what you want for your supplement brand. It matters what your target market wants. In the end, they’re the ones paying you.
So a simple way you can find out is by looking into another supplement line. Are people still buying from them during a pandemic? How are their sales throughout the year? What are people saying about their product line?
One place you can do this is on Amazon. You’ll get to see what items are the most popular and read the customer reviews too. It’s like researching your competitors to find out what your target market wants and how you can be different in a better way.
By doing this, you’ll create a quality product and thrive in direct sales once you’re ready to launch.
2. Your business model for selling supplements
Once you’re clear on what to sell, you’ll need to figure out the costs. How many products do you want to start with? Do you want to position your offer as a bundle package? What type of insurance do you need?
As you can see, there’s a lot more to consider other than the formulation and product labels. But this process shouldn’t be too hard to follow once you have the right resources in place.
And if you’re starting a supplement business for the first time, you’ll want to find out which supplement manufacturer will work best for you. When it comes to sourcing and distribution, you can choose either drop-shipping or traditional inventory.
For drop-shipping, your supplier will ship your supplements straight to your customers. You won’t have to hold any of the inventory or deal with the shipping process. However, the downside of this is that there could be a lack of security, and customer service is out of your control.
As for the traditional inventory model, you can control your supply process, and orders can be filled immediately. You’ll also have higher margins for in-house inventory. However, storage space could be a high cost, and there could be higher capital risks from excess inventory.
After knowing this information, which model will you choose? Keep in mind, if you plan on fulfilling orders during a pandemic, you’ll need to pick which model will make you more successful carefully. We recommend you go with the traditional inventory model to be safe since you’ll have more control.
With drop-shipping, there could be delays and travel bans in different areas worldwide. This makes the shipping process more of a headache. Its simpler to have orders fulfilled in your main market. Regardless of your decision, you need a viable solution that will help reduce customer refund requests and chargebacks as much as possible.
Also, keep in mind that when you apply for payment processing the provider you apply to will want proof of your order fulfillment. So, get copies of all agreements with your dropshipping firms or suppliers. If your products contain CBD, you will definitely need to show certificates of analysis for each individual product. It’s not only part of compliance, but it will protect you if any legal issues arise.
That said, as a nutra merchant, you’ll want to bulletproof yourself from lawsuits and payment processor holds. This means you need to make sure your supplements are compliant and approved by the FDA. If they’re not, the FDA will call for swift action and stop any sales of unapproved products.
As Fox News recently reported, “FDA list of fraudulent coronavirus products grows.” That’s one list you’ll want to avoid.
Sure enough, a certificate for Current Good Manufacturing Practices (cGMP) or National Science Foundation (NSF) should keep you safe.
This will build trust with your brand and ensure high-quality supplement products.
3. Double-check your website compliance to avoid getting banned
Speaking of being compliant, starting a supplement business can be a real pain if you keep getting denied for payments because of website compliance.
It’s most likely because your website isn’t secured, or the information isn’t entirely transparent. And this can cost you a lot of money.
Imagine you have an in-demand product, excellent marketing strategy, appealing label designs, and you’re driving tons of traffic and sales to your website. But then all your payments are getting denied due to compliance issues.
What happens then? Do you lose all your customers? Will your business be put on MATCH or TMF (Terminated Merchant File)?
According to various surveys, in most situations where a credit card was rejected, only 25% of customers returned to attempt transactions with a new payment method. In comparison, 39% completely abandoned the cart.
These are common mistakes most people make when they’re starting a supplement business. But don’t worry, we don’t want that to happen to you.
Here’s a quick checklist of some website compliance requirements:
- No claims your product can heal medical diseases, viruses or other illnesses and conditions
- No confusing or free trial offers that violates credit card company rules
- Clear terms and conditions including your refund policy, legal business name and contact information
- Customer support contact info whether that’s by phone, email or chat bot
- Shipping policy and returns including geographical regions served and number days for delivery
- Company name and mailing address clearly displayed in the home page footer and contact page too
- Checkout page details like credit card logos, descriptor and trust symbols for sites that are proven to be secure
- After-sales support such as clear cancelation policies, customer service contact info, and more
Failing to meet compliance standards affects approval to accept credit card payments
Avoid consequences and make sure you’re set up for success right from the start. You’ll need to present your supplement business as a trusted website. Not only does this mean you have to be careful with being compliant, but you’ll also need a payment processor that can trust you.
If you offer a subscription-based model, it could pose a higher risk in transactions versus if it was just a one-time sale. Most platforms and payment processors are quick to ban you if that’s the case. If you currently or plan to use ClickBank, Shopify, Stripe or Paypal, check to see if they allow supplement stores in the first place. Being a prohibited merchant and using a subscription model could invite you to get shut down or have funds frozen immediately. Working with Stripe or other 3rd party processors can make scaling tough as these payment processors easily suspend accounts and hold funds if the product or marketing is questionable. This gives you less leeway to push the envelop in your campaigns.
We always recommend high-risk nutra merchants diversify their payment options. High-risk merchant accounts are a necessity for your business type. And, you will have the luxury of scaling to large volumes like US $100,000 per month or more.
That’s why DirectPayNet has excellent solutions for supplement businesses small and large. Contact one of our team members to get safely set up.
Having more than one payment option can boost your success rate
Don’t make this same mistake that most new supplement owners do. They typically go with the payment options that most online retailers use without doing their proper research.
You see, some merchants are at higher risk of account closure more than others. So while a payment option could be safe for one business model, it doesn’t mean it will be for you.
For example, Stripe is quite popular when it comes to e-commerce. But if you sell supplements, you will get banned more easily. That’s because, as a nutra merchant, your products are at a higher risk. This is especially the case for supplements in controversial categories. Do you sell supplements for erectile dysfunction, body enhancement or to boost brain function? Sometime ingredients in these products or even the association with a body part is frowned upon by most.
That’s why we suggest having a supplement merchant account to gain control over every transaction you make and avoid any fatal pitfalls. When you have a high-risk merchant account provider with a higher appetite for risk, you’ll have peace of mind knowing your payments are getting approved at a higher rate.
And here’s an essential key lesson we want you to know. Don’t be fooled by payment providers with excessively low rates. Even though they say you’ll get a 2% + $0.25 rate per transaction, there could be other fees. And instead of getting paid daily or weekly, your money could be put on hold for 14 days.
Securing a merchant account saves hassle and a lot of money down the road. This payment method is a more suitable choice for your business model. Especially if you plan to sell lots of products that cost over $1000. A high-risk merchant account allows you a higher monthly volume limit. It also lets you process larger transactions (while most payment providers will deny it).
Look for a merchant account before a shopping cart
This section alone can save you from making a lot of mistakes when starting a supplement business. Before you search for a shopping cart or CRM, you should consider looking for a merchant account and payment gateway first. There could be some significant drawbacks between your shopping cart and the payment processor.
If you install your shopping cart or CRM without doing your research first, you might find out later that it’s not compatible with your merchant account and payment gateway. Take WooCommerce, for example. Despite its popularity, the platform isn’t compatible with all payment gateways. Merchants even reported that they had trouble using Stripe.
Another example of incompatibility is the recent news regarding InfusionSoft. They recently announced that they’d no longer be compatible with highly popular NMI gateway. So by finding a merchant account first, you’ll know what shopping cart or CRM is compatible and secure for you.
For example, if you wish to store customer data, this process will make it a lot easier for you. Data may not be tracked correctly if no proper CRM is in place. As a result, your supplement products could fail to convert up to 79% of your leads.
Avoid headaches that could cost you in the long run
Another critical thing to consider if you’re starting a supplement business is to keep chargebacks and fraud low. There’s strategic ways to do this when launching nutra products. For example, review your sales copy. There’s a possibility your Facebook ad could be banned. Also, your Google updates may affect your ranking.
Always be sure that you’re transparent with the way you advertise and design. Misleading content is often a precursor to chargebacks.
You could be hit with high refunds if customers feel like they didn’t get what they paid for. You are not only charged a refund fee, but you could be charged with additional fees on top of returns. These plus other issues with your marketing lead to friendly and chargeback fraud.
You’ve got to make sure that you’re giving a user-friendly experience that makes purchasing online a smooth sail for anyone. If not, customers could easily file for a chargeback, and that may hurt your merchant account in the long run. In fact, you might never even get a warning before receiving a chargeback.
According to Chargebacks911, only 1 in 20 customers will actually call you and complain if there’s an issue with their order. The rest of the 19 customers will go straight to filing a chargeback because of the convenience. So, in reality, merchants will only hear from 4% of dissatisfied customers. The worst part is, false customer claims and invalid disputes are very common.
To reduce chargebacks and refunds, we recommend you use an authentication tool such as 3DS2. Also, if you plan to use anti-fraud software, make sure it’s compatible with your shopping cart or CRM and your payment processor’s platform. Like we mentioned earlier about WooCommerce, if the platforms don’t sync well, your customers will experience a friction-filled shopping experience.
Anti-fraud tools and 3DS2 technology will not only protect you, but will help you increase your profit and minimizing losses. So these can serve as a massive relief for both you and your buyers.
Increase your bottom line with the best payment solution
We’d like you to understand something. No matter how great your supplement products are or how successful your marketing strategy is, without a merchant account, you could be losing sales and more customers. Not having the right payment processor can waste your efforts.
Instead, your supplement business can have an advocate that is on your side and wants to see you succeed with large volumes and transaction amounts.
You may feel like your processing choices are restricted, but finding a provider with a strong track record of success with high-risk merchants is possible. Remember, you may be presented with cheap rates and other attractive terms, but it’s a waste of time if you can’t get approved for payments or your account could be frozen in the future.
Only a few high-risk merchant account providers have a higher success percentage in approving a new merchant account. DirectPayNet can help you whether you are based in the US, UK, Europe, Canada or South America.
So if you’re starting a supplement business, contact the DirectPayNet team today. We will help you prepare for a successful launch.