Inc Query: How to Cure Those Mail-Order Blues
There's more than one way to build a catalog business -- or to deal with an unresponsive buyer.
For all the tumult in the economy during the past year, it's still the nitty-gritty practical questions that keep most entrepreneurs awake at night, and for good reason. As experienced businesspeople often remind us, you build a successful company not by having one great idea but by doing a thousand little things right. This month we look at the challenges of taking a mail-order business to the next level and dealing with buyers who have commitment problems.
Lost in Space
I am a fledgling neckwear designer, and I've finally gotten all my ducks in a row -- great silk designers, a great subcontractor, and so on. Feeling that I was ready to go out into the market, I contacted a local menswear chain (five stores) and persuaded the buyer to take a look. I sent him tie samples, fabric swatches, photos, the whole nine yards. Well, he loved them -- or so he said. Two months ago he assured me he was going to place an order. Since then I've called him repeatedly, and he always tells me he's about to fax the order, but he never does.
I'm not an aggressive salesperson, and I'm trying not to be impatient, but I'm having second thoughts about doing business with someone whose word doesn't mean anything. Should I keep pestering him? Should I try to get my samples back? Or should I forget about it? --Pam
We decided to put your question to a number of wise people we've come to rely on for solid business advice. Their responses demonstrate that even the experts can disagree -- and that there's more than one way to skin a buyer.
"I don't believe it's very helpful to get tied up in your shorts," says Bill Samuels Jr., president of Maker's Mark, which he grew into a $50-million business. "Yes, you're pissed off. I probably would be, too, but my advice is to get over it. Buyers come and go. Maybe the next one will be just enough embarrassed by what happened to give you that 1% edge over your competitors. Anyway, don't waste time trying to get your samples back from this guy. Forget about it and move on."
"I'd bill him for the ties with a tongue-in-cheek note," says veteran entrepreneur and Street Smarts columnist Norm Brodsky. "Say something like, 'I'm sure you loved my ties so much, you're probably wearing them, but as a small-business person, I have to get paid for my services. If you are not satisfied with the ties for any reason, you can always return them. Otherwise please send me a check."
"You need to move on, but you ought to learn from the experience," says Jack Stack, president and CEO of SRC Holdings Corp. and author of The Great Game of Business. "Maybe the next time you should make a bigger sample lot and allow the store to sell the ties on consignment while you wait for an order. Then you'd have a good reason for going back periodically -- you have to check the inventory. The buyer couldn't hide, and you wouldn't be kept waiting for an answer."
"Have you tried whining?" asks serial entrepreneur Sam Kaplan of Central Chase Associates LLC, in New York City. "It's greatly underrated. I'd just call the guy and say, 'I've tried everything. I don't know what else I can do. I'm feeling bad. I really want this order. What can I do to get it?"
"Your problem stems from dealing with only one person, the buyer, who's a tactical guy," says marketing maven Max Carey, founder of Atlanta-based Corporate Resource Development Inc. and CEO of EmCrit, in Morristown, N.J., a developer of communications platforms for fast-growth companies. "You should always try to sell to a strategic person as well. Retailers buy ties because they need things on their racks, but they also need to differentiate themselves and get more people into the store. You probably wouldn't have this problem if you'd shown the chain's owner or CEO how your products could help them achieve their strategic goals. In the future you should arrange to make your presentation to both the buyer and the person who is handling strategy. As for this situation, I'd bring the issue to a head. Go see the guy and find out what's going on. It may just be the economy."
I am the third-generation owner of a small mail-order operation specializing in baby gifts and related products. We have steady sales and a cornerstone product that we've been selling for more than 50 years. That product accounts for about 90% of our sales.
Right now I'm at a crossroads. For eight years I've tried everything I can think of to beef up our catalog. It's important, the direct-mail experts have told me, because we can't be considered a real catalog until we get to 48 pages. We've been able to grow from 16 to 32 pages in the past three years, but it's been a struggle. Most of the items we add don't sell well, and we just wind up with increased inventory costs.
The experts also tell me I have to increase our average order, but that's been tough as well. We have a lot of repeat customers who love our company and use us whenever they need a baby gift. We have a problem finding new customers, however. Whenever I mail to an outside list, the results are disastrous. What should I do? --Henry
"To begin with, don't listen so much to direct-mail experts," says Chuck Sussman, who, with his wife, Greta, spent years in the mail-order business and also owned a list brokerage before starting Pretty Neat Industries, an Inc 500 company. "In a niche market a 32-page catalog is not a problem. What's important is to make it a keeper. Most people will look at a catalog and throw it away if they don't need the stuff right now. I would suggest putting a banner across the front of your catalog saying something like: 'Save this special catalog. You never know when or where the next baby will arrive.' It's cute, and it will get people to keep the catalog around.
"As for the average-order issue, that is a constant refrain in books on mail order, and it's baloney. Why should you worry about the average-order size if you're making a profit? One of our best products was a deodorizer that we sold for $2.98, plus 30?r shipping and handling. We sold 2 million to 2.5 million bottles, and we made a nice profit. Why? Because the cost of the product was almost nothing. Also, postage was cheaper back then. I think we spent a total of 35? the product, the stamp, and the envelope.
"So the key is not the size of the order. Much more important are your markup on the items and the cost of processing each order. If you have a $10 processing cost, you're going to lose money on most orders. You need to pick efficiently, pack efficiently, handle inventory efficiently, and so on.
"Understand, I'm not saying you shouldn't try to increase your average order. You'll make more money if you do because your basic overhead cost will remain constant. There are different ways to do it. You could, for example, offer twofer specials, which were very successful for us. Twofers are great because they don't increase your processing costs. You just pull two items out of a bin instead of one.
"You say you have repeat customers. You should cherish them. Maybe send them a special offer now and then. The trick is to get more of them. If direct mail isn't working for you, try placing space ads in publications targeted to your market. Use the ads to build your list. People who buy from your space ads are much better customers than any name on someone else's list. To begin with, you know that they're mail-order buyers, which is half the battle.
"One other thing I'd suggest, and we found this was a real money maker: include an offer with each order you ship. You might have a flyer that says 'Special offer. One time only.' The point is that every order you ship is an opportunity to sell, and you shouldn't waste it."
HAVING TROUBLE SLEEPING LATELY?
Could you use some advice from an experienced entrepreneur who's been where you are and figured out what works and what doesn't? Send your questions to IncQuery@inc.com. Editor-at-large Bo Burlingham, aided and abetted by Norm Brodsky, will find the best people around to answer them. And if you don't like their answers -- well, you can tell us that, too.
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