In the world of vitamins and supplements, iHerb is the quiet giant. Based in Pasadena, the company grossed $1 billion last year and recently celebrated its 23rd anniversary. Its journey has not come without challenges, however. Despite its success, iHerb is not widely known in the U.S.; international sales account for the lion’s share of its revenue. Steve Cho, iHerb’s chief business officer, cites strong word of mouth—along with a generous trial and return policy—for the company’s overseas success. Now, he’s looking to replicate that success closer to home.
Here, Cho discusses the company’s strategy to break through in the U.S. market, the messaging required to do so, and the steps it is taking to reach its next revenue milestone: $2 billion.
Does iHerb manufacture its own branded supplements, or is it all third-party companies?
We have about 200 products that are house brands or what we call iHerb exclusives. A vast majority of our 30,000 products are partnerships with other brands that we have a long-running relationship with and that have a longer history in developing their products.
What is the most effective way to message the scope of your product line?
We’re the only global e-commerce company that’s focused on health and wellness. Many of our customers associate iHerb as a brand that can deliver on quality and authenticity. We have many customers who trust and love our brand in Russia, Japan, Korea, Saudi Arabia, and even China. They’ve been customers for a very long time, and they refer their friends and family. Word of mouth has been really behind our silent growth to a $1 billion company in this space.
How has iHerb’s relationship with your customers evolved?
Our success requires that consumers try new products, and the feedback from our customers is that they want to be able to try these products before they identify ones they love. We’ve invested a lot in being able to offer trial-size products or even full-size regular products at trial pricing. That’s a very important part of the experience for changing customer behavior. We go beyond many of our competitors with our return policy. And where products cost more to return because of international shipping, we just simply refund the customer. We don’t have a physical store, where they can come in and see and use the product, but we are providing dramatic discounts at a very affordable price so customers [can easily try our products].
The company has enjoyed tremendous growth internationally, but here in the U.S. it’s been more challenging. Why? Is it competition, or is it because the market is more mature here?
There have been a lot of advancements [in the industry], which equates to a lot of choice for consumers, both online and offline. We have a higher bar to meet in the U.S. because consumers have access to more information and are more educated about health and wellness than in other markets. We’ve grown much faster in international markets as consumers become more informed about health, wellness, and what they put into their body. Also, many customers outside of the U.S. don’t have access to as many choices.
Product shipping is a major expenditure for any company. Is iHerb doing anything innovative to help streamline that process and reduce costs?
In the logistics world, we are learning to understand how multiple systems can seamlessly integrate. Things like tracking and being able to declare imported products via manifest to customs is tremendously important. It’s surprising to see that many of these required steps are still manual. So we’re working with our carrier partners, who are also realizing that demand for cross-border commerce is increasing, so that we are able to track packages through multiple carrier systems overseas.
Given the diversity of your customer base, do you see any global trends that are applicable to the U.S. market?
November has become a very big shopping month, not just for us, but for the whole industry. There are things like Singles Day, which was big in China and now all of Asia. (Singles Day is a retail holiday for young Chinese consumers who celebrate being single.) In the U.S., there’s Black Friday and Cyber Monday, and all of those events are becoming more global in nature. So we’re celebrating the whole month by having a daily deal highlighting trial products at 40% off.
The company makes a point of promoting third-party testing. How do you go about selecting the products to test? And do other companies agree to it because of the deep relationships you have with them?
Each brand has direct relationships, outside of iHerb, for selling these products to customers. They adhere to the general policies and regulations around validating their products. At iHerb, we’re finding that the supplement industry has grown so fast that the FDA is working hard to meet the massive consumer demand. The iTested program is not a requirement for all of our products. We started that last year, and we want to use it as a consumer-facing program and expand it to more products. We are investing more in getting involved, validating, and ultimately providing more transparency with information for consumers in order to help them with their buying decisions.
Given how fast the supplement market is changing, are you able to implement a five-year plan for iHerb?
We’ve seen fast growth in the beauty category. Consumers are loyal about their beauty brands and products, and we’re in a good position because consumers are looking for elements that are aligned with iHerb—such as ensuring quality and authenticity. Beauty—and what I see as a larger opportunity, called self-care—is a big part of our growth strategy in the next five years. In fact, we just launched our very first e-commerce store, Love Letter, dedicated to beauty and self care.
You can certainly make the case that a lot of things in health, wellness, and beauty are interconnected.
It absolutely is, and if you look at our site, we have a shared cart. We thought long and hard about what it means to have a dedicated beauty and self-care store, but they were so naturally aligned that it was important for us to have the ability for customers to buy from both iHerb and Love Letter. We’re seeing many of our purchases on the first day combine products from both. Beauty and self-care are a major part of getting to $2 billion in the very near future and beyond.
To learn more on iHerb supplements and vitamins, including Love Letter, click here.