Mail-Order Business

A VARIETY OF CATALOGS

Catalogs come in three major categories: business-to-business, consumer catalogs, and catalog showrooms. Business-to-business catalogs provide merchandise to be used in the course of business, including everything from office supplies to computers. In industrial settings, business-to-business catalogs are used to sell everything from heavy machinery to hand tools. Business-to-business catalogs are mailed to individuals at their place of business, with most purchases being made on behalf of the business.

Consumer catalogs are mailed to consumers at home and come in a variety of forms: independent catalog houses sell only from a catalog; retailers use catalog to generate store traffic, to sell goods directly, and catalogs intended to do both. Manufacturers' catalogs feature only products by a single producer. Catalogs distributed by museums or in the context of a major exhibition are a variant. Some catalogs are used by credit card companies to stimulate credit purchasing.

Catalog showrooms combine retail and with catalog marketing. A catalog showroom is essentially a retail outlet. The catalog, usually quite large, serves primarily to build traffic in the showroom. The trend in catalog showrooms has been to de-emphasize the mail order aspect of the catalog and present the showroom as a retail outlet with the added benefit of being able to place catalog orders from the showroom.

ISSUES OF STARTING A CATALOG BUSINESS

It might be said of mail-order and catalog sales is that "the product is the message," but paradoxically, the reverse is true as well: "the message is the product." In other words a catalog business must be some kind of innovative fusion between uniqueness of the products offered and the manner in which they are presented. Quite successful catalog ventures have been launched largely on message alone: the catalog has a mode of presentation that a segment of the buying public finds irresistible. Many gardening and seed catalogs, many clothing catalogs, have such an aura. The pleasure of using the catalog and contemplating what it offers is part of the experience. It draws the prospective buyer in. Prolonged attention to the catalog produces sales. Conversely, if the product line is genuinely unique featuring desirable but hard-to-get items, the presentation is much less important. A good example of such products are difficult-to-find electronic components or out-of-print and rare books. Uniqueness is sometimes achieved by having an incredible variety of all manner of products: the sheer wealth draws people in and holds the attention. In other cases the uniqueness arises from the source of the products or their unusual context—a feature of museum catalogs.

Another important consideration before startup is the cost of this particular channel of distribution. Catalogs are quite expensive to print and mail. A careful study of the costs and mechanics of mail- or web-based marketing should be undertaken. Aside from high catalog costs, catalog sales are a form of direct marketing which require the acquisition of mailing lists (usually priced for one-time use only), purchasing mailing services from letter shops, and the payment of postage based on weight. Response rates tend to be low (around 1 percent) and/or are proportional to the cost of the item sent out. A catalog likely to be studied for an hour because it is very attractive will produce a higher response—but will also cost a good deal more to make. The business may need sufficient funding to survive quite some time while the sales build.

The prospective mail-order business may wish to sell its own product or be a merchant for others. In the latter case the business should make every effort to purchase the goods directly from the manufacturers themselves in order to avoid intermediate transfer commissions. But experts note that in some instances—such as scenarios where an offered product dramatically exceeds estimated sales—it may be necessary to deal with secondary sources in order to meet customer orders.

Some mail-order businesses arrange for their suppliers to ship the goods themselves. Under this system, mail-order outfits accept paid orders on behalf of the manufacturer then pay the manufacturer to mail the product directly to the customer. Some mail-order houses shy from this arrangement; such systems eliminate most inventory costs, they also compromise the independence of the mail-order house and its ability to ensure quality service. If a manufacturer proves incompetent or engages in questionable business tactics—such as using the addresses supplied by the mail-order business to compile its own mailing list, thus cutting the mail-order house out of the action down the road—a mail-order enterprise can find its very existence threatened.

REGULATIONS

A mail-order or other type of catalog business must comply with the regulations of the Federal Trade Commission (FTC) and the U.S. Postal Service (USPS). The business may also be subject to applicable state laws, especially concerning the collection of sales tax.

The FTC has issued several directives, guidelines, and advisory opinions concerning mail-order businesses. These and other relevant regulations are published in the Code of Federal Regulations (CFR), Title 16, Chapters 1 and 2, which is available in most large libraries or directly from the FTC. Among the most important of these FTC rules is the Mail-Order Merchandise Rule. This regulation, also known as the 30-Day Rule, is designed to protect consumers from unexpected delays in receiving merchandise ordered through the mail. It allows the customer to cancel any order not received within the time period advertised or, if none is stated, 30 days of order. According to the rule, in those instances in which shipment of goods is delayed, a customer must be notified within 15 days of placing his or her order. Moreover, if shipment is delayed past the agreed-upon delivery date (or 30 days), then the business must send a postage-paid return notice notifying the buyer that he or she may terminate the order for a full refund, which must be received within seven business days.

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