5 Realities Of Running An Online Business In A Restricted Sector

Starting an online business is relatively easy. The barriers to entry are low and there are plenty of the off the shelf platforms out there that make creating a web site easy and cheap. Now, making money is a different story. Most sectors of consumer goods are now crowded and owned by large players who already command market share and have millions of dollars to spend on marketing. So good luck trying to sell anything that Amazon, Zappos or Sunglass Hut already sells.

That’s where the focus on super niche sectors come into play. You may not be able to beat Zappos selling athletic shoes, but you can create nice little business if your focus is vintage Nikes from the 1980s that were named for pro basketball players.

But even these niches are getting crowded, which is what leads many prospective online business into areas that have some legal (and societal) restrictions due to the nature of the product. These include adult entertainment, sex toys, anything to do with guns, alcohol, cannabis businesses and smoke shops that sell bongs and vapes online. (You can now purchase firearms like AK 47 and AR-15 rifles – the hunter’s delight, as well as tactical equipment by a single click.)

Restricted business can be lucrative because there is less competition. But if you are going to enter such an arena you need to be aware that you will need to do things a little differently and that your hands will be tied.

Finding A Merchant Service Provider Will Be Very Difficult

One of the key tools for any online business is a merchant services provider. This is what will allow you to accept credit cards and process payments.  If you are selling soup spoons or golf balls or coffee mugs this is as simple as signing up for Stripe or PayPal. But if you sell anything restricted you will learn very quickly after two or three sales that you are in violation of the terms of service of these mainstream providers, and you will be out of business. Before you even start you need to find a merchant service provider who accepts high risk clients in restricted business. And be completely transparent about what you plant to sell. But be wary of services that are offshore or that want to charge you an absurd percentage per transaction (the industry standard is 3% or so). One way to navigate is to find other businesses doing what you seek to do and try to figure out who they use.

Your Advertising Options Will Be Very Limited

Even if what you are selling is technically legal you will find that many of the bigger print publications and online platforms will refuse to take your ads, even if you’re willing to pay them for the effort. While you may be able to launch a Facebook page and an Instragram profile you will not be able to do sponsored or boosted posts. The same will be true of most mainstream publications; you will be relegated to the ‘trade’ publications of your niche (if you’re selling grinders and rolling papers then, sure, you can advertise High Times, but not on CNN.com). As result you will need to seek other methods of marketing your business, including tapping influencers and building your organic SEO through great content and link building campaigns.

You Will Be Subject To A Higher Percentage Of Fraudulent Purchases

Fraud is a prevalent problem for all online business.  Online purchases are considered “card not present” (CNP) transactions, and these account for nearly 70% of all credit card fraud.  When you add to this by selling items that are illicit or taboo in some form, you’re inviting more fraud and more underage attempts to buy what you’re selling. As a result you need to be sure that you have the highest level of fraud protection that your service provider and payment gateway offer.  It is also a good idea to add an additional layer of protection that indemnifies from fraud in case some do make it through the gateway (and they will).

You Will Not Be Able To Sell On Amazon, Etsy Or eBay

Many online retailers forego building their own sites and choose to just focus on selling on one of the bigger platforms. This is a decent business model, though you give away a large percent of every sale for the privilege of listing on these sites. But what they cause in terms of headaches they make up for in volume and traffic. More than 75 percent of American consumers shop at Amazon “most of the time.”  That’s 100s of millions of people potentially having access to your items.  But if you sell anything restricted you can kiss this opportunity. Oh, you can try, and you may last for a few months.  But eventually the bots will catch you, and your account will be suspended, and whatever funds are still there will be held indefinitely, which you agreed to when you signed up to sell in the first place. If you do plan to sell on these platforms study their prohibited items list carefully.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.