High Risk Nutraceuticals Merchant Accounts:

Soar Payments, voted the #1 high risk nutra merchant account provider for 2015 and 2016, focuses on serving high risk credit card processing industries, which includes offering High Risk Merchant Accounts for Nutraceuticals for both free trial based and straight sale businesses models.

Our goal is to be the undisputed best nutra merchant account provider. To do that effectively, we need to understand the unique needs of the nutraceutical industry. As part of those efforts for the straight sale and trial nutra industry, we put together the below “nutraceutical merchant account cheat sheet”. It’s designed to give nutra entrepreneurs a single place to get all the information they will need to obtain high risk merchant accounts for nutraceuticals businesses, for both free trial and straight sale nutraceutical businesses, control chargebacks, and succeed accepting credit and debit card payments.

To Get Your Nutraceuticals Sales Merchant Account:Apply Now

Nutraceutical Industry Profile:

  • Global total annual revenue for the nutraceutical industry totals $181.4 Billion (2015), and is projected to reach $204.6 billion by 2017.
  • Domestic (US) total annual revenue for the nutraceutical industry totals $74 Billion (2015), comprising almost 40% of the global market.
  • The industry is growing at an annual rate of approximately 6.3%.
  • Dietary supplements dominate the segment with a 37% market share.

A Note From Our CEO

Jacob - Travel Merchant Account Provider

Adam CarlsonSoar Payments, CEO

It’s a great time to be in nutra.

At least, it can be, according to what a few of our nutraceutical entrepreneurs have told me personally. (One guy I know is doing $10+M in monthly sales just 14 months after opening his doors.)

OK, so its a boom time for nutra, but there are a lot of things that can go wrong with your nutra business’ high risk credit card processing unless you plan ahead. Some big ones are:

  1. Keeping MIDs from overheating with chargebacks
  2. Getting enough processing volume to allow for growth.

The good news is, all of these problems are solve-able. It took me about 15 hours of research, but I put together the below “cheat sheet for nutraceutical credit card processing” for entrepreneurs in the nutraceutical industry.

It’s my sincere hope that you find this article useful (because I put a lot of work into it)… and if you need help with your nutra credit card processing, I’d love to help you with that, too.

Adam-Sig
P.S.If you own a trial or straight sale nutraceutical business, and want affordable and easy high risk credit card processing we can help you (in fact, nutraceuticals are one of our specialties). Click here to begin an online application..

February 8, 2016

Categorization of the Nutraceutical Industry:

SIC Code: Businesses in the nutraceutical industry would generally fall into one of the following two SIC codes,

  • 2834: Pharmaceutical Preparations
  • 2833: Medicinal Chemicals & Botanical Products

See the entire list of SIC codes here.

NAICS Code:: Generally, nutraceuticals use the following NAICS code:

  • 325412: Pharmaceutical Preparation Manufacturing

See the entire list of NAICS codes here.

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Publicly traded & equity backed Nutraceutical companies:

The following corporations are publicly traded in the United States.

  • Nutraceutical International Corp (NASDAQ: NUTR): As of February 8, 2016, Nutraceutical Int’l Corp. has a market cap of $227,160,000 and trades at a forward looking P/E ratio of 13.25x. It sells under the brand names Solaray, KAL, NaturalMax, VegLife, Premier One, Solar Green, Action Labs, and Natural Sport as well as sells under the name Monarch Nutritional Laboratories and Great Basin Botanicals to other providers.
  • MediFast Inc. (NYSE: MED): MediFast has a market cap of $332,700,000 and trades at a forward looking P/E ratio of 15.30x.
  • Herbalife (NYSE: HLF): Herbalife has a market cap of $4.02 billion and trades at a forward looking P/E ratio of 9.34x.
  • USANA Health Sciences Inc. (NYSE: USNA): USANA Health Sciences has a market cap of $1.59 Billion and trades at a forward looking P/E ratio of 14.54x.

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Getting a High Risk Merchant Account for a Nutraceuticals Biz

How do I get a high risk merchant account for nutraceuticals sales?

In theory, this is a basic question, and the answer is pretty basic: just apply with a merchant account provider. And if you were running a bakery, the analysis would stop right there. Unfortunately, for nutraceutical businesses, the process is a little more complex. You need to apply with a high risk merchant account provider that has a bank sponsor relationship that will accept nutraceutical businesses. And because even once you find a merchant account provider with such a relationship, the entire process depends on whether an individual underwriter approves your specific company, it’s often best to look for a few different credit card processors or sponsor banks to apply through.

How do I find a high risk merchant account for a nutraceutical company?

As mentioned, if you owned a low-risk business you’d have plenty of options, including processors sponsored by national banks like Wells Fargo or Chase. Unfortunately, those banks (and thus their processors) won’t touch most nutraceutical businesses because of the regulatory and chargeback issue potential. So, the first step is typically looking for a business that advertises that they want high risk nutra merchant accounts. But even then, because underwriting guidelines change so rapidly, ask the sales person, “Do you write straight sales or free trial nutra merchant accounts?” Then, “For your free trial nutraceutical accounts what term free trial (or how many ‘trial days’) do you accept?” If the sales person can’t answer that relatively quickly, it probably means they don’t write much nutra business, and thus they’re probably going to waste your time.

Does Soar Payments offer nutraceutical merchant accounts?

Yes, at Soar Payments we provide high risk merchant accounts for nutraceuticals businesses ranging from startups doing $20,000 a month in sales with just one account, to guys doing mid-eight figures spread over multiple on-shore and offshore accounts. In either case, the application process is simple, just complete our 5-minute free online application, then we’ll email you a PDF copy which lists all terms and pricing for your electronic signature, and once approved, you can begin processing credit cards. We’ll handle setting up your chargeback management tools, and payment gateway, making the process easy and simple. And if you have any questions, we’re here, just give us a ring.

How do I get a higher processing volume limit?

Most nutraceutical businesses spend their first few months figuring out fulfillment, their ad bidding strategy, etc. But once they’ve got everything figured out, it’s just about scaling. The problem, is that their first high risk merchant account is typically capped at somewhere between $25,000 and $50,000 per month. So, how does a nutra merchant who has “figured it out” and is “ready to scale” actually do it? There is one primary answer:

  • Time: A high risk merchant account is in some ways a line of credit from the processor to you. Just as with any business loan, your previous success enables you to obtain a larger line of credit. Success for your processor is different than just growth, rather it means maintaining a steady chargeback ratio, no wild volume swings, predictable transaction sizes, and a healthy bank account balance. Typically after 3 to 6 months of successful processing you can get your MIDs re-reviewed and obtain a higher limit.

What is an underwriter looking for when reviewing my credit card processing application?

One thing you’ll consistently hear when applying for a merchant account is “that’s up to the underwriter”. An underwriter is the ultimate decision maker in terms of whether you get approved, how much you’re approved for, what your rolling reserve is, etc. The underwriter’s job is to make sure that the business is a good risk for the credit card processor to take on. Specifically, he / she is looking at the likelihood that the processor will lose money on the account. The way a processor loses money, is that there are either high (or unpredictable) numbers of chargebacks that the business isn’t prepared or able to pay (e.g. they’re looking for a low business checking account balance here), or that there is significant regulatory risk because the business might be engaging in fraud or run afoul of either the card brand rules or local or federal laws, or might just be downright shady. So, if you want to make an underwriter happy, make sure that your business looks predictable (a clear refund and privacy policy can help), financially stable (you leave money in the business checking account each month), responsive to customers (you answer the phone), legitimate (you’re disclosing everything), and legal (obvious). You don’t need to hide the fact that you’re a nutra business, in fact, if you do it’ll eventually cause the account to get blown up. Rather, just try to think about how to present yourself as the most stable, organized, and responsible version of yourself that you can.

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Question? Ask Away. We’re Ready to Help.

Rich, Soar Payments, Firearms Merchant Account

Adam CarlsonSoar Payments, CEO

If you’ve got a question about a CRM, payment gateway, chargeback tool, merchant account or anything else related to growing a nutraceutical business, and want some advice, email me your question directly: AdamCarlson@soarpay.com.

Ready to Get Started?

Ready to start accepting payments at your nutra company, Click here to begin a free online application

Reviews of Gateways for Nutraceutical Businesses

Nutra businesses primarily accept payments over the web (aka eCommerce), although some choose to accept payments over the phone (aka MoTO), and some even have storefront distribution (aka Swiped). For the vast majority of our customers, however, card not present transactions (MoTo or eCommerce) are the norm. In these instances, the customers credit card information is actually entered into a payment gateway, which is just a user interface that securely transmits card data to the processor. (A shopping cart, btw is just transmitting to the gateway which is actually sending the data). There are literally hundreds of payment gateways available, but most nutraceutical businesses use one of just a few.

  1. Authorize.net Gateway:
    The most popular payment gateway overall (though not necessarily for nutra) is Authorize.net. Owned by Visa itself, the benefits are that its really easy to use, and due to its popularity, it integrates with most CRMs, software, shopping carts and really anything else you plan to use. The biggest downside, and the reason most nutra businesses go another way, is that it doesn’t scale well. Each Authorize.net account can only be paired with a single MID or Merchant ID. Thus, for large or even mid-sized nutraceutical companies that are trying to manage multiple merchant accounts, Authorize.net is unwieldy.
  2. NMI Gateway:
    The NMI Gateway is a bit of a hassle to setup, but it offers a number of features that other gateways do not, making it the choice for most larger or well established nutraceutical businesses that do a lot of ecommerce or MoTo business. Most important among these, is that NMI provides some of the most robust reporting available. Second, the NMI gateway let’s you set up muliple logins with differing security levels which is great for using chargeback management services like Soar Payments’ Chargeback Alerts Service as well as being able to provide logins to staff members with restricted usage abilities.
  3. Soar Payments Gateway:
    The Soar Payments Gateway is built on the NMI gateway platform with a few unique options created to serve our high risk merchants. The first big difference is that it comes with our chargeback management services built in. Specifically, that means your payment descriptors are registered with a Chargeback Alerts program and representments are pre-integrated with the gateway. In sum, all of the chargeback management tools are all setup for the merchant. The second significant change is that a fraud filter and transaction pre-authorizations are enabled which reduces fraudulent charges. There are a few other technical tweaks we’ve made in order to cater to our high risk merchants as well.
  4. USAePay Gateway:
    Usually the least expensive gateway offered by merchant account providers, it’s a pretty close replica to Authorize.net without quite as robust list of product integrations. For startup nutraceutical companies that don’t plan to grow beyond one merchant account or, say, $50,000 per month in sales, this option can save you a little money. But honestly, the fact that it doesn’t allow you to grow as easily as NMI or the Soar Payments High Risk Gateway means unless you’re really focused on saving $5 per month and $0.01 per transaction, there are better options.

A quick final note, most nutra entrepreneurs buy their payment gateway through one of their merchant account providers. The reason, it’s cheaper. Contacting the payment gateway provider directly usually gets you the retail price, which is typically $0.20 to $0.25 per transaction plus a monthly fee. Whereas your merchant account provider buys it at a discount and can pass that along to the merchant. Plus, if they’re decent guys with some experience in nutra, they’ll help you integrate your gateway with your MID and whatever CRM or other services you’re using.

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CRMs for Nutraceutical Businesses

Customer Relations Management (CRM) software is used by any business that has a large number of customers and customer ID or billing information that needs to be tracked. Nutra businesses are huge consumers of CRMs because they have a large number of clients, and often use a recurring billing or subscription plan that needs to be tracked. As with Payment Gateways, there are dozens of CRM choices, but most nutraceutical businesses use of one of a few CRMs, each of which is reviewed below.

  • Limelight CRM:
    Created “For Marketers, By Marketers”, Limelight is the go-to CRM for a large number of continuity, membership and subscription nutra businesses, as well as some straight sale nutra. The reason it’s so popular is its integration with NMI and some robust call center integration. The biggest downside to LimeLight is that they’re expensive. Everything is done via a custom quote, but a nutra business can expect to pay at least $500 per month, plus a one-time setup fee. Whether or not that fits within your budget is obviously up to you, but it is probably worth doing an intro call just to see why so many nutra businesses end up choosing them.
  • Zoho CRM:
    If LimeLight is the expensive and robust option, Zoho fills the other end of the spectrum. It’s a mass market CRM (meaning not customized or marketed to nutraceutical businesses) and it’s dirt cheap ($12 a month). For that, you get some decent recurring billing management, and the ability to customize your customer tracking, send automatic follow up billing and customer satisfaction emails, and generally a decently organized and customizable database. What you won’t get, is anything customized to nutra or online marketers, nor the ability to manage multiple MIDs. That said, for the price, it’s a good option.
  • Google Sheets:
    If you’re just starting to test the waters and aren’t sure whether your nutra business is even going to make it, penny pinching matters. There’s nothing cheaper than free, which is what Google Sheets is. It’s what it sounds like, a giant excel spreadsheet. But in a pinch it works for say, your first 100 – 150 customers. As soon as you cross that threshold, do yourself a favor and buy a CRM.

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To Get Your Merchant Account for Nutraceuticals Sales:Apply Now

Everything a Nutraceutical Business Needs to Know About Chargebacks

Merchants in the nutraceutical industry have to closely watch their chargeback ratio, because more than anything else, a high chargeback ratio is what gets your merchant account shut down. The following are some frequently asked questions and information about chargebacks specific to the nutra industry.

How do I Calculate my Chargeback Ratio?

Your chargeback ratio is calculated as total monthly number of chargebacks divided by total monthly number of transactions. This is the Transaction Chargeback Ratio which is what Visa and MasterCard track, and thus what your payment processor is watching most closely. There is also a Volume Chargeback Ratio which is the total monthly dollar amount of all chargebacks divided by the total monthly sales volume. In theory, your payment processor will look at this ratio too, but it’s significantly less important. Thus, what matters, is the quantity of chargebacks relative to the quantity of monthly transactions. So, if your nutra business has 100 transactions in a month, and 3 chargebacks are initiated, you have a 3% chargeback ratio for that month. That’s regardless of whether you win, lose, fight or don’t fight those chargebacks.

Why does a high risk payment processor care what my chargeback ratio is?

Visa / MasterCard can fine your payment processor (and their sponsor bank) for continuing to process transactions for a merchant that exceeds the permissible chargeback ratio, 2%. Those fines are generally in the tens of thousands of dollars and they invite the further scrutiny of Visa / MasterCard, thus, there is generally no chance they’re going to let you continue processing if you’re regularly exceeding the chargeback threshold. So keeping your chargeback ratio below 2% is absolutely essential for a nutra business.

Why do nutraceutical businesses get lots of chargebacks?

Nutraceutical businesses typically receive more chargebacks than a typical online business, and certainly more than a retail or card present business. And largely, those chargebacks are what cause a nutra business to need a high risk nutraceuticals merchant account instead of qualifying for a low risk account. Here’s a few reasons why…

  1. Many nutraceutical businesses, particularly startups, believe that by offering a good product, at a fair price, and by being up front with all of their terms, that all of their customers will be happy. That sense lulls them into complacency and then they’re blindsided by chargebacks.
  2. Experienced nutra businesses know about all of the chargeback management tools available, and use them readily. Unfortunately, managing chargebacks isn’t something that a lot of businesses do from the get-go, so they usually find out about them after it’s too late to save the MID.
  3. Many nutra businesses use a membership, continuity or recurring billing model. There is always some percentage of customers who do not fully understand that they will be billed in the future, and when it shows up on their credit card, they initiate a chargeback
  4. Many nutraceutical customers are unsophisticated and do not know to call the customer service number listed in the payment descriptor on their credit card statement,
  5. Some nutra businesses promise or insinuate dramatic results for their product, which when it doesn’t end up working, leaves the customer feeling duped
  6. Many nutra businesses are small businesses without a strong brand name. Thus, dissatisfied customers may not be presented with all of the refund opportunities they would from a larger company, nor have the name recognition of their service provider prompting the customer to contact the merchant directly,
  7. Similarly, many nutraceutical businesses are small businesses, and so do not have a robust customer billing service call center setup to handle dissatisfied customers, thus more dissatisfied customers than necessary turn into chargebacks.

How do I keep my chargeback ratio low?

In a lot of high-chargeback e-commerce industries, the key is to quickly identify stolen credit cards, or bad and fraudulent sales before they happen. While that is certainly important in nutra, it isn’t enough. Rather, you have to make sure that you make it incredibly easy for an unhappy customer to contact you directly as opposed to their issuing bank, and when they do, respond in a friendly and quick way, in many cases with a full refund. And finally, keep your transaction count high enough so that when you do get a spike of chargebacks they don’t throw your chargeback transaction ratio over the limit. Some specific ideas that our nutraceuticals merchants are using are:

  1. Send order confirmation emails: This one is obvious, but when a customer places an order, they should receive an electronic receipt. If you’re using a robust CRM they can handle this for you, if not, you can use your gateway’s functionality. The Soar Payments Gateway is pre-configured for this, and we make sure that the footer lists the appropriate customer service number. For nutra merchants, this receipt should either include or be followed by a shipping notification with a tracking number.
  2. Send customer satisfaction emails: Sure one goal is to find out if the customer likes the product, but another is to time these emails to go out at the same time that the customer is reviewing their credit card statement. The goal being to make contacting your company, as opposed to the issuing bank, to complain or request a refund, the easy option.
  3. Receive and Refund Customer Pre-Chargeback Alerts: There are a number of third-party services that will alert you in a customer calls their issuing bank to begin a chargeback. Typically these services give you a 48-72 hour window to issue a full refund in which case the chargeback will not occur. Our Chargeback Alerts with Integrated Handling works the same way, except that we automatically issue the refund for you according to pre-set rules, removing the hassle for the business owner.
  4. List a Separate Billing Support Hotline, and Answer It: Make sure to use consistent messaging, by stating loudly in all of your documentation that you’re committed to 100% customer satisfaction or the customer can get a full refund. Then provide a dedicated email and phone number, and actually make them responsive. The fear, for a nutraceutical business owner is that by doing so you’re going to increase the number of refunds requested, but the truth is, by burying your head in the sand those same people are just going to redirect and initiate a chargeback.
  5. Full Refunds are a Cost of Doing Business:
    A nutraceutical business has costs, sometimes so high that the marginal profitability of a sale is below 10%. So issuing a full refund means taking a significant loss on the sale. But change your mentality, and that of your company. Build into your budget that you will issue a consistent % of full refunds each month, then it won’t hurt nearly as bad when you do, and staff members won’t feel like they’re letting down the company when they issue a refund, and thus will be more likely to do so rather than unnecessarily trying to fight the customer which ultimately results in a chargeback.
  6. Maintain high transaction counts: Your chargeback ratio is largely determined by the number of monthly transactions, so a nutraceutical business that only has a couple of hundred sales a month is much more vulnerable to a chargeback spike than one with a few thousand. Obviously, you can’t simply will your company to 10x its size for the simple purpose of increased processing stability, but it’s important to keep your transaction count in mind, particularly in months when you know you have chargebacks, as that isn’t the time to shut down sales for a vacation for example.

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Nutraceuticals trade associations and memberships:

The following list of trade associations and memberships groups are specific to the nutraceuticals industry:

  • American Herbal Products Association – Founded in 1992, AHPA was founded to advance the responsible sale of herbal products. The AHPA is made up of more than 350 domestic and foreign companies from growers to online marketers.
  • Consumer Healthcare Products Association (CHPA) was founded over 135 years ago, and acts as a leading industry group for over the counter and dietary supplement segments of the nutra industry. In addition to lobbying, the group keeps members updated on the latest legal and regulatory developments in the industry.
  • Natural Products Association (NPA) boasts more than 1,400 members, ranging from retail to manufacturing to wholesale, and touts itself as the leading lobbying and industry trade group on behalf of the natural products sub-segment of the nutra industry.
  • United Natural Products Alliance (UNPA) has an international membership comprised of forward-looking companies dedicated to providing consumers with natural health products of superior quality, benefit and reliability. Formed in 1991 and based in Utah.

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List of nutraceutical industry events & conferences:

The nutraceutical industry has a number of major annual conferences and events that include substantial content for individuals new to the industry to want to expand their circle of contacts.

  • Innovations in Agriculture: Occurring in February each year in the UAE, presentations and speakers related to agricultural technology as well as product development which is more useful to the nutra industry.
  • Natural Products Expo West: Scheduled for March in California, this event is a mecca for finding innovative nutra products and vendors to improve your business.
  • NY State Food Suppliers Conference: Scheduled for April in New York, this is a food suppliers conference, with only tangential benefit to nutra folks. If you’re nearby great, otherwise, not on topic enough to be worthwhile.
  • Interphex Conference: Scheduled for late April in New York, this conference is ideal for larger nutra marketing folks who want to vertically integrate and learn more about the production / product development side of the business.
  • Ingredient Marketplace Conference: Scheduled for April in Orlando Florida, this conference is ideal for folks that want to learn how to more effectively market their nutra product, and a great place to meet other folks in the aging, probiotics, vitamin, sports nutrition, GMP training, and weight loss sub-niches.
  • HBA Global Conference: Scheduled for June, this conference is focused on the beauty niche, from manufacturers to suppliers to marketers. A pretty massive conference, you can meet anyone whose anyone in the beauty niche.
  • CRN USA Conference: Located in beautiful southern California, this conference put on by the Council for Responsible Nutrition, is laser focused on the supplements / nutra industry with a particular focus on regulatory compliance.

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Nutraceutical Industry Infographics

The following infographics depict interesting data about the nutraceuticals industry in a visual manner. These infographics are posted here under Fair Use rules. That is, the source for each is credited, and you must click on each thumbnail image to view the entire original infographic.

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