Add Mail Order Profits to an Existing Business or Start-Up a Mail Order Business
By John Schulte, President and Chairman, National Mail Order Association (NMOA)
Mail Order. These two words that have excited and inspired entrepreneurs for generations. More so perhaps than any other type of home business, mail order conjures up visions of wealth and easy living — offering entrepreneurs a dreamy business model of no commute, no long hours, and the ability to work from anyplace in the world.
Now commonly referred to as Direct Marketing, mail order has a magnetic attraction that draws people to it. The Internet (the newest mail order medium) is drawing people to mail order like never before. Like other types of businesses, mail order has evolved considerably, but still, its advantages are many and disadvan¬tages few. The one thing that has not changed is its share of successes and failures. It is not a quick, easy, effortless road to riches; however, there are countless success stories of people who have not only made a good living selling products and services by mail, but who have amassed fortunes—starting on a kitchen table, in a garage, or spare room. Cabela’s, Sportsman’s Guide, Lillian Vernon, L.L. Bean, Sears, and many others all started from home or as a side line.
There are hundreds, if not thousands of examples, of people just like you that have a thriving mail order operation running right from their home. With the mass availability of low cost technology, starting and running a home-based mail order business has never been easier.
Mail Order’s Share of Sales
Mail order sales continue to outpace total U.S. sales growth, consistently increasing its percent share of total U.S. sales. In the spring of 2008, 45.61% of the total U.S. population made a purchase by mail, phone, or Internet. And that percentage rockets to 73.17% for households with an income of $200,000+.
According to the Statistical Fact Book published by the Direct Marketing Association (DMA), in 2008, marketers — commercial and nonprofit — spent $176.9 billion on direct marketing, which accounted for 52.1% of all ad expenditures in the United States.
Measured against total U.S. sales, these advertising expenditures generated approximately $2.057 trillion in incremental sales. Last year, direct marketing accounted for approximately 10% of total U.S. gross domestic product.
What Is Mail Order?
A mail order business is simply a group of satisfied customers who purchase from you on a regular basis, and that you deal with remotely. As a marketing term, “mail order” could describe any form of advertising or promotional effort that sells products and services at a distance, produces a traceable response, and captures important customer or potential customer information that can be used to further expand sales opportunities. This includes many tools, such as: direct mail, catalogs, infomercials, print advertising and the Internet. All of these tools can be used individually or in conjunction with one another to achieve a desired result. The single characteristic of all mail order marketing is the ability to trigger a direct action, a “measurable action” at the right cost.
How Mail Order Has Grown With The Internet
One of the advantages of mail order has always been the low cost of entry into the business. You don’t need a lot of money to get started. The Internet has once again lowered the cost of entering the mail order business. Now instead of a print catalog, you have an electronic catalog; instead of mailing letters, you email. While you will also need to use off-line media like direct mail and print advertisements, the Internet offers you a low cost “starting point.”
The Internet also creates a global market for the products we sell. While we are reaching out looking for people who need our products, people all over the world are searching for us. It just doesn’t get any better than that.
Mail Order in a Down Economy
While every business is affected by a down economy in some way, mail order has certain advantages that make it easier for the entrepreneur to weather the storm, and actually do better than many other retailers. The mail order operator enjoys low overhead, and the ability to precisely measure advertising efforts and easily eliminate of the non-performing. They have the ability to target narrow markets that others are missing or neglecting.
The Basics On Starting Up A Mail Order Business
The great thing about a mail order business is the simplicity to getting set up. So let’s do a quick outline of getting ready to sell.
Products to Sell
First, you must decide on a category of products you want to sell. It’s nearly impossible to make money selling a single product unless you have exclusive rights to it. If you are like most people, without exclusive rights to a product, you will need to pick a category of products that will sell well together. You don’t want to sell a pet product one week, and woodworking tools the next.
Specialize in one area, so that your current customers will be likely candidates for future products as well. With this in mind, you should start with at least two related products, so when you deliver the first order, you add a flyer for the next product(s) with it.
When choosing a line of mail order products to sell, you should first consider what you already know about, or at least have a keen interest in learning about, so you can become an expert on it. If you don’t know about the products you sell, you will not be a good buyer, and your customers will not stay with you for long. How can you choose, and then sell good golf equipment if you know nothing about golf? You can’t, which is the first mistake to new comers. If you look into it, you will find that many successful mail order companies have started from a hobby.
Important: Stay away from commodity products, unless you have a really good reason people would buy from you. And that will not be price! You must also consider if your potential customers are easy to identify and easy to reach, and if there are enough of them to make money.
Let’s say you are a back yard pond expert, and you have enjoyed raising Koi fish for years and everyone in your neighborhood comes to you for advice on their pond and raising Koi fish. So you have decided you would like to sell pond supplies and high-bred Koi fish. Since you are familiar with the topic, you can easily identify one group of potential customers; they are just like you, people with backyard ponds. Thus, you could easily find out if these potential customers are easy to reach, by looking for magazines, web sites, and blogs about ponds and Koi, cable shows about landscaping and ponds, mailing lists of people that purchased pond equipment, etc. These are the places you could be advertising.
From these sources you could also estimate the market size of potential customers. i.e. subscriber lists, customers of related pond products, mailing list counts, Google searches on the topic, pond trade magazines, and maybe even a pond or Koi owners association. You want to know if there are enough people with ponds, and how much they spend each year on average to keep them. This way you can get an idea if there is enough of a market for you to make the income you need if your idea works. Always remember that repeat mail order sales to your customer list are the key to profits.
Business Name and URL
Once you have chosen your mail order product line, you need to pick your business name and Internet URL. I recommend you putting what you sell in your business name and in your URL. For example, is there any question what “Jake’s Pond and Koi Supplies” sells? Make sure you are checking the availability of URLs as you are coming up with a business name. They don’t have to be the same, just close. Try to use words that describe what you sell in your URL. For example: your business name is, Jake’s Pond and Koi Supplies, your URL could be www.PondsandKoiMadeEasy.com. This is to help optimize your web site for search engines.
Sales Tax ID, Web Site, Online Payment Processor
The next thing you need is your Sales Tax ID Number so you can start searching for wholesale suppliers of the products you want to sell. Almost all manufacturers and distributors will require a Tax ID from you before they give you product details and wholesale pricing. You then need to create a small web site, set up a business checking account, and register with PayPal or a similar processor to accept online payments.
The next thing is to start promoting yourself anyway you can. The best free way is to add informational content to your web site about what you sell. If we use the Ponds and Koi example, you would write all about building a pond and keeping Koi, and each time you mention a product needed, you link to it on your web site for the reader to buy. Search engines pick up on these informational resources and help bring you customers.
Remember that your business is made up of people that have purchased from you, are happy, and will trust you again. The sooner you build up that customer base, the better off you will be. Start local and make sure that everyone you know, knows you’re in business and what you sell. Do everything you can to get in front of groups of people. Community, church, businesses, and charitable and service groups — these people are the closest to you and are the first to trust you with their money.
Solicit testimonials and recommendations from all your customers. Send special offers to your customer list often, no less than once a month. Use classifieds and remnant display ads in magazines. Send out press releases and articles to local media, and national media if you have a good topic of interest. Get good response mailing lists, and use direct mail to reach prime prospects.
Using A Drop-Shipping Service
Using a distributor that is willing to drop ship orders directly to customers will prevent you from having to stock inventory. Drop-shipping arrangements are suitable for people getting started, or with products that are large, have special shipping needs, or are very expensive. As you develop a sense of what sells well, you can begin to stock limited supplies of fast selling items and continue utilizing drop-shipments for slower selling products.
As your business grows, you can carry an inventory of everything you sell. Stocking products can be advantageous for the following reasons: all products can be shipped to your customer together, thus cutting down your shipping expenses. Customers will also receive all their products at one time. Your products are sent out sooner, making for happier customers, and you are able to include promotional materials for other products within the shipment.
When utilizing drop shipments, it can be a good idea to send your customer a note that says the order is being processed and the date he or she can expect it by, or around. It is unnecessary to make your customer aware of the fact that the item is being drop-shipped, although many marketers do make a notation if certain products in their catalog or web site will be sent separately or directly from the factory.
When relying on drop shipments, try to keep as many of your products coming from as few suppliers as possible. If you can use just one supplier when starting out, do it. Let’s say a customer orders three products. If all three come from different sources; your customer will be getting three separate deliveries, you will be contacting three different companies, and you will be tracking three different shipments for one order. You will also pay three shipping charges.
Using Mail Order to Diversify an Existing Business
One of the great things about mail order is that it allows businesses to easily diversify and expand. Every retailer, every kiosk vendor, and anyone that has a store front should be capturing visitors that come in for future promotions. You are missing out on big business if you are not capturing the contact information on every customer that comes into your store. Setting up a customer information capturing device, a drawing, a postcard with each walk in order or simply a guest book, all provide you with enough details to promote new products and offers to current customers.
It doesn’t really matter what kind or type of business you have, the possibilities for adding a mail order component are endless. A good mail order expert or direct marketing consultant can give you plenty of workable ideas. HBM
John Schulte is a Small Business Consultant and Direct Marketing Strategist. He is a 30-year veteran of advertising, marketing, publicity, promotions, and sales. He is an internationally recognized expert in the areas of mail order, direct mail, cataloging, and overall direct marketing. John is one of the few people in the United States that has been certified by a United States Federal Court as a Direct Marketing and Catalog expert, and able to act as an expert witness in federally related corporate disputes. He is also president of the National Mail Order Association and author of Direct Marketing Toolkit for Small and Home Business, a book on how to successfully start and build your own business from scratch. http://www.nmoa.org/directmarketingtoolkit.
Previously published on page 20 in the August 2009 issue of HOME BUSINESS® Magazine, an international publication for the growing and dynamic home-based market. Available on newsstands, in bookstores and chain stores, and via subscriptions ($15.00 for 1 year, six issues). Visit www.homebusinessmag.com
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