Feb 21, 2021 - 09:41 PM
In general, the return rate for online goods ranges between 15-40% with supplements being higher in the range.
You should strive to keep it at about 12% which is a more acceptable rate. That said, except for protein powders, most supplements have an 80%+ profit margin so you can still have a profitable business even with a high refund rate. The typical bottle of pills sold for $30 costs less than $3 to make.
But it is better to invest in high quality ingredients and have a lower margin so that you make money on the repeat sales and don’t have to keep finding new customers. There is a saying: Don’t be in the sales business, be in the reorder business!
And now is as good time as any to get in the supplements business!
People are using supplements a lot, and with the pandemic last year, a lot of people who weren't already shopping online started doing so. Between 2014 and 2019, online vitamin and supplements sales have grown by 18% and there are no signs of this slowing down.
Image credit: Slice Intelligence
Despite the sunny forecasts, there are scammers as within every other market who will try to get the most at your expense. There are also unscrupulous suppliers who make false claims that will land you in trouble if the results you preach don't materialize for the users.
Supplements and pills promoting weight loss are among the most returned items online and as such present the greatest risk to fund and accept payment for because most financial institutions won't want to have anything to do with them.
White labelling will make it that you are the one taking all the credit and therefore all the risk involved with a product and so you need to make sure that the quality is good because your credibility is on the line. If a supplement reacts negatively with someone, you are the one to whom they will come expecting answers and repatriation.
Image Credit: Nathan Dumlao, UnsplashSupplements and Nutraceuticals Also Have Higher Chargeback Rates
In addition to refund rates, the other thing you will have to contend with is higher than average chargeback rates. This is especially true of weight loss and diet supplements, which makes it harder to get a merchant account. And if/when you do get one, the rates will be less favorable than for other product categories.
Each retailer will have an individual chargeback rate calculated by dividing the total monthly number of chargebacks by total monthly number of transactions. This gives you a transaction chargeback ratio. If your chargeback ratio is too high, you could lose your merchant account.
If you don't have the capital to take at least 2% chargeback, then you may have an extremely hard time surviving in this industry.
Finally, get some help to mitigate Chargebacks from providers like EMB to make sure that your chargeback rates are as low as is possible by having someone keep an eye out for fraud and loose ends.
Many small e-commerce sellers find themselves offering free trials to entice customers but you have to be wary as this can introduce losses when coupled with other factors like chargebacks and returns.