E-cigarettes are battery-powered gadgets that produce vaporized nicotine-free and nicotine solutions for users to inhale.
Electronic cigarettes may be far from catching up with traditional cigarettes, but they are more popular than you can imagine.
According to the PSD Center, the approximate number of grownups who vape and do electronic cigarettes will hit 55 million by 2021.
Starting an e-cig business requires preparation and dedication for many reasons. First, being a sector that involves age-restrictions, e-cigs sellers are highly regulated and go through stricter underwriting procedures.
Second, banks consider such businesses risky, so retailers must apply for a high-risk merchant account—instead of the standard account.
And lastly, you must identify the right niche, target it with the right product, and do proper marketing.
All these can mean trouble if you don’t have a clue about where to start.
Pre-considerations for Launching an E-cigarette Business
Planning is key for any aspiring entrepreneur with a soft spot for e-cigarette businesses. Consider the following when venturing into e-cigs.
- Learn your products and plan upfront on what you intend to sell to your audience
- Familiarize yourself with FDA regulations on advertising and selling e-cig products.
- Go through your state tax requirements, as each state sets its own tax rules & regulations.
- Decide on an e-commerce platform to trade your products. Try sites like Shopify, BigCommerce, etc. These platforms are your best bet because they have an integrated online payment gateway and can ease the burden of starting from scratch.
- Plan for fraud and chargeback protection as these two can ruin your financial and reputational bottom line.
You also want to organize a friction-free customer journey that will drive customers to checkout.
E-Cigarette Merchant Account
Traditional banks consider e-cigarette businesses high-risk, which presents a new challenge to the entrepreneur.
Your best bet is a high-risk merchant account, which comes with its own set of struggles, like a higher payment processing fee, stricter regulations, and the danger of termination if you accumulate excess chargebacks or act out of compliance.
The following some high-risk factors that make e-cigarette businesses a no-go-zone for many payment processors.
- The e-commerce model- conducting an e-cig business online exposes a company to fraud and reverse charges.
- E-cig startups fail. Unlike sector giants with the resources to adapt, new businesses struggle to keep up with the industry’s ever-changing regulations. Banks are unwilling to work with newbie businesses who’ll run out of business in a few months.
- Dealing with age-restricted products. Until we find a standard way to verify a customer’s age, e-cig businesses remain responsible for age verification. Banks won’t process payments for age-restricted products because of the financial and reputational risk incurred when a merchant sells to an under-age buyer.
That being said, your best option lies with a high-risk payment processor who understands and onboards electronic cigarette businesses.
The best service providers will help you set up payment processing and start taking payments in a matter of days. They’ll also offer unswerving customer support anytime you need help.