How To Safely Get Into The Mail Order Business

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1993 by Home Business Publications

Mail order is a 44 BILLION DOLLAR YEAR BUSINESS -- so far! It combines the advantages of a wide marketplace with low overhead and high sales volume.

The mail order businessman chooses a product (or line), advertises it, and then fills orders that come in. Often he does not stock the product or pay for it until it is sold.

Mail order dealers range from multi-million dollar corporations to kitchen table operations; some do very well and some do not.

The mail order business has more than its share of charlatants. More complaints are filed about mail order companies than any other kind (undoubtedly because the participants never see each other and regulation of either the buyer or seller is difficult). In 1993, the Better Business Bureau reported over eighty-five thousand complaints nationwide!

Some companies sell mail order kits and schemes, such as envelope stuffing. Too often, their only business is selling worthless plans. Others sell plans that the owner thinks (hopes) will work, but hasn't really tested it thoroughly himself.

A few years ago one fellow sold wine "crystals" that theoretically produced wine in 30 days, but in practice, it made vinegar. One has to wonder sometimes that if these plans are so infallible, why don't they use them themselves get rich themselves?

When deciding about mail order business, rely on your own good judgement instead of a fast-talking (or writing) adman's pitch.

Some factors to consider about a mail order business:

First, the competition is much keener
because you are entering a much broader,
even national market. It isn't like having
the only car wash in town.

Second, postage, advertising and/or
mailing list costs can mount up fast. A
small, one time classified ad in a national
publication can cost $150 and up; display
ads start at about $300 (1).

And third, finding the right product isn't
as easy as one might hope -- even for the
pro's

There are thousands of suppliers and drop shippers that will provide every product imaginable; but there are also thousands of would-be order tycoons offering the same products.

To be successful, you must offer something the others don't. It could be a unique product, your way of presenting the product, a new twist to an old product, something completely new, the best price -- or any combination of these or other innovations.

Finally, you must find the right supplier. In the trade it is critical to deal only with a prime source -- a manufacturer or direct importer (unless you can import yourself). Otherwise you will pay more for your products than your competition ( a no-no). Small ads in the opportunity publication frequently attempt to appear as prime sources when they are not.

Some telltale indications of non-prime sources are: Use of an amateurish name, such as D&D Enterprises; addresses like Rt 2, Box 123, The fact that others offer the same products, and the same wording used in ads with different addresses.

Manufacturers of any size are listed in THOMAS REGISTER in your library and they can be checked out through the Better Business Bureau in their city (get the number from information and call for the address).

While you cannot be absolutely certain who advertises in opportunity magazines, check a trade journal for the subject, where the advertisers usually state whether they are a manufacturer, distributor or importer. But beware of those who import only one or two items and are middlemen for the rest.

Unless you already have a product (something you do or make), look for something that is new, better, cheaper, more desirable or advantages to the buyer than products by your competition.

Look through retail and wholesale advertisements for ideas of possible products and prices. Be careful not to pick something that is on its way OUT.

People who waited to see if the hula hoops would go over ended up investing at the twilight of the boom. Setting a price is a case of adding your total costs to your desired profit margin (which can be five or six your actual wholesale cost). If the final figure is a good price and your product is desirable (and you present it well), you just might have a winner!

Once you have selected a product and done your preliminary price analysis, it is time to tell the world about it. The two main procedures are media advertising and direct mail. Advertisements can be small classified ads in local papers that cost under $3 each to full display ads in national publications costing thousands of dollars each.

Items costing over 2 or 3 dollars are usually advertised in small, relatively inexpensive ads, where "free details" or catalogs are offered. Those who respond are sent full information -- the complete "sell" which may cost a dollar or more for printing and postage.

Large display ads are usually reserved for proven sellers and high priced items where more of a sales presentation can be included. Some of these ads are intended as "impulse" pitches, where a decision to send in money on the spur of the moments is how they survive. People who take the time to think about the deal don't buy.

Direct mailing is sending advertisements (flyers) and usually, cover or sales letters to rented mailing list names. Reputable companies collect and sort names geographically, by income level and by interest, so that is quite possible to get a list of names who have recently purchased products similar to yours, or whose occupation indicates they may be interested.

Specialized mailing lists from reputable mailing list brokers are usually in the $60 to $75 per thousand range. The procedure is to tell the broker what you need and ask for a "test" list. The broker will select samples names from lists of people with demonstrated interest in products like yours.

Buying from small mailing list dealers is tricky and usually not any cheaper. You don't know how they got the names (some advertise under a different name: "Big mails, send your name and a dollar.") You also don't know how many others with similar products have bought the same lists!

For the beginner, a classified ad in small newspaper is suggested. It is cheap and the results come in quickly, compared to a national publication where it may take 6 months to find out how the ad "pulled."

You may have to experiment with the wording in your ad until it starts working. When you are satisfied, try it on one of those state or national small paper plans,, where the ad will appear in hundreds of small papers within 30 days.

When confident of the ad, invest in a national publication or two. An example of an inexpensive classified:

NEW GIDGET DISCOVERY!

More Fun! Free details.

Gidget House,

Box 16-H, Salem, OR 99999

This ad is short, but informative. It will interest only gidget buyers and it promises them something new (whets their appetite).

When their response comes in addressed to Box 16-H (yours is Box 16), you know the response was to the ad in the Herald.

When people respond to your ad you immediately (within 24 hours) send them a two page letter on company letterhead that thanks them for their query, explains your offer and invites them to order in friendly, but business like terms.

Use the flyer to brag -- use testimonials illustrations bold print statements and small sub paragraphs describing the excellence of your product and how it will "solve all their problems" or make them "beautiful, smart or irresistible."

Mention the special, super-savings price sedately in the letter; loud and boisterous in the flyer. Many experienced mail order businesses hire professional layout people to prepare their flyers.

The coupon is separate from the flyer: either detached, or with a "cut here" line. It is ready for the customer to add his name. check the appropriate box and drop in the mail: make it EASY TO ORDER!

Consider using colored paper for flyers -- the price is not much more, but the effect is almost as good as two-color ink (which is expensive). If there is no response to your letter within 10 days or so, send a follow-up. Many mail order dealers will follow-up again a year later. Those who answer your ads (except for nosy competitors) are high quality prospects; so don't let them slip away easily!

For a mailing plan you need the same flyers as above, but an additional form letter for your initial mailing -- to people who did not ask for the information. This letter should be on good quality paper with a quality letterhead (look professional) and should be two pages. The main points belong in the first line of the letter and the postscript -- these are where almost everyone looks, so put your most powerful messages here!

Those who read the entire letter (or skim it) should see that you are offering something that will BENEFIT THEM and that they can get it for a GOOD PRICE if they ACT NOW.

Include the flyer (described above) with this letter as well as follow-up letters to those who answered but haven't yet purchased the product your flyer describes.

If you can afford it, also enclose an addressed envelope that the customer can fill in his name, add a stamp and drop in the mail. What could be easier?

Have two to four follow-up packages prepared to send to those who answer but haven't bought. You know they have an interest in your product or they wouldn't have taken the time to respond. Some send a special price in the 3rd or 4th follow-up that is good for 10 days only, to help spur them to action.

Response rates to mailings vary from zero to about 10% (rare!), depending on the product, presentation, cost and financing arrangements.

Most dealers figure about 2% when they plan their operations. When figuring your costs and desired profit margin, it is necessary to consider that out of a thousand letters mailed out, you will get response from about 20, and that not all of them buy.

To find out how much each response cost, divide the total amount you spent on the mailing (list rental, postage, printing, etc.) by the number of responses.

A beginner should be elated with a mail response of 2% (sales) or 5% (queries). To calculate your sales expenses, divide the cost of the ad by the number of sales you made as a result of it.

Printing and mailing 1,000 letters to a mailing list will run $400 - $500, counting printing, stationery, postage because you are sending the entire sales package to everyone on the list and you know that many will simply throw it in the trash.

When using a rented mailing list, you are paying to use each name only once. You are not allowed to contact any of the names again unless they respond to you. Mailing list companies "salt" their lists with names that report who contacts them and when -- as a precaution against cheaters. Names that respond to your mailings, however, become your "property."

The ad system narrows the scope of your whole works mailings to only those who express an interest in your product, and there is no worry about whom you can and cannot contact by mail.

When you get orders, fill them as fast as possible and get them out! If you stock the item, ship it as soon as you get the money or the check clears (many mailers don't wait for them to clear).

Note that a new federal law now requires banks to clear checks much faster (3-5 working days). If your product is to be drop-shipped,get the order in the same day if possible.

Most dealers have a system where they type out shipping labels with their (not the drop-shipping company) name on the package so it appears to originate from the dealer (even though it may be from their "warehouse" in another state). Some systems include boxes labeled MAIL TODAY, PENDING CLEARANCE, and RUSH.

If you have a business account (and you should), make arrangements to find out as soon as incoming checks clear. Federal law requires you to ship the product or send a letter of explanation within 30 days of receiving an order. Good business practices require much faster action!

To make a profit in the mail order business, you must buy your products and materials at the best possible price an market them as efficiently as possible.

Although it is possible to start with a drop-shipper (order products as you sell them, and have them shipped directly to the customer), you will get much better prices and save a good deal on shipping costs by stocking your own products.

In addition, the drop-shipper charges a single unit shipping charge and a handling charge. Although the customer pays this charge, you must forward all of it to the drop-shipper along with the wholesale price of the item. When you stock your own merchandise, you keep the handling charge and any shipping overrun.

Note that UPS does not indicate the shipping cost on the package. So, use the drop shipper until you find products that are good sellers, then buy those products in quantity (as much as you can afford). Use the drop shipping method for slow movers and to test new items.

When your mailings surpass the 200 per month level, check with the postmaster about bulk rate postage, which can save you about 25%.

Charge your customers a postage and handling (P&H) fee that is a little more than postage, to cover packaging as well (many businesses consider P&H an extra profit).
If you ship C.O.D., get a good deposit because people do change their minds. If they do, you are stuck with postage both ways.

Check around for the best deal on printing -- you may find that using several different ones will be necessary to get the best prices and service because so many of them specialize.

Don't overlook the UPS -- the U.S. Post Office has one of the best deals in the county on custom printed, stamped envelopes!

To ease your advertising budget, become an agent and take a 15% "commission" on your advertising budget -- it's legal! Use (and register a different name and enclose an Insertion Order (ad agency commission order slip) to have the commission credited to your agency.

To help your ad writing ability, cut and save ads that are "interesting" or relate to products you sell. Those that keep showing up are the ones that "pull." refer to them for ideas when writing or altering your own ads, letters and flyers.

The mail order business can be both profitable and rewarding if it is operated intelligently and diligently. Records are imperative -- you must know which ads and publications work in what situations, how many follow-ups to make, when to offer specials, and how much profit you are making (or losing).

You need a comprehensive customer file that will tell you at a glance what action is needed next. This can be done on a computer, written on margins of cards, or on a label attached to the latest correspondence, that clues you to the next step.

For example, 90403G2 might mean (to you) 1989, April 3 (0403), bought a Gidget on second (2) mailing. Of course, you can use any code that makes sense to you. Mail order companies value their customer lists highly, and they sometimes trade names with non-competing firms to increase their mailing list at low cost.

The BIG SECRET to a successful mail order business is more than one product.

The most expensive sale is the first one -- because you had to FIND the customer. Now that you have him, sell him something else! Once you have accumulated a list of buyers for one product, they are good prospects for another product.

They know you, you know them, and you know what they might be interested in!

Make an iron clad rule NEVER send out a letter or package without an offer: don't waste anything! When you ship a gidget, enclose a flier for a "whatsit," and so forth.

If you don't hear from them, send a follow-up to the "whatsit," just like you did for the original product.

Since your expenses are much lower for subsequent products, you have an extra profit incentive to work on subsequent sales.

Some mail order dealers deliberately make NO PROFIT on the initial sale; they want the customer for subsequent sales!

Here is a sample checklist for going into the mail order business:

1. Select a company name and register it with the city or county clerk.

2. Select a lead product and locate a reliable supplier.

3. Get a post office box and permission to use a suffix or department designation.

4. Open a business bank account and arrange to find out about incoming check clearances.

5. Prepare a sales campaign; and ad, letter, flyer, coupon and return envelope and have them printed. Do the same for follow-up correspondence.

6. Place test ads with a means of determine who answers which ad.

7. Send your letter & flyer to responders; keep careful records.

8. Send out follow-ups as needed.

9. Ship the product to customers, record the transaction on their "file" and include a flyer for another product.

10. Add the name to your buyer mailing list.

11. Repeat the ad (if it did well) or revise and try it in another paper. Repeat until you are satisfied with the results.

12. Expand to larger publications and bigger things.

One of the nicest things about the mail order business is that there are so few rules. You can sell merchandise, your grandmother's recipes, books, courses, service or whatever -- as long as you can match products with those who will buy them.

You can stay small or network with others by trading mailing lists and including each other's flyers in your mailings, or even selling each other's products on commission.

Eventually, you might consider including a toll-free telephone number in your ads (hire a service), which may pay many times its cost in extra income. If you really get big, you can hire a company to handle your marketing.

Perhaps the most dangerous mistake beginners make in this business is underestimating the cost of selling.

If you pay $500 to mail out 1,000 advertisements and get a 5% return (50), the cost per response is $10, A $100 ad that pulls 50 queries means a cost per response of $1.

Plan carefully and thoroughly -- so you can enjoy a successful mail order business.

BUSINESS SOURCES

NATIONAL MAIL ORDER ASSOCIATION, 5818 Venice Blvd.,Los Angeles, CA 90019. Association for mail order dealers; publishes trade journal MAIL ORDER DIGEST ($42 yr.).

KLIEN & ASSOCIATES, INC.,23632 Mercantile Rd.,Cleveland, OH 44122. Nationally recognized mailing list broker.

EDITH ROMAN, INC., 875 Avenue of the Americans, New York, NY 10001. Nationally recognized mailing list broker.

AMERICAN DIRECT MARKETING, 2636 Walnut Hill Land #337, Dallas, TX 75229. Nationally recognized mailing list broker.

DINNER & KLIEN, Box 3814, Seattle, WA 93814. Nationally recognized mailing list broker. Offers free booklet: "How to develop Keep and Use Mailing Lists."

SPECIALTY MERCHANDISE CORP.,9401 De Soto Ave.,Chatsworth, CA 91311-4991. Wholesale merchandise, drop shipper, mostly imported items; membership required.

U.S. SMALL BUSINESS ADMINISTRATION, 1441 L Street NW, Washington, DC 20416. *00/368-5855. Publishes NEW PRODUCTS DEVELOPMENT and other information of interest to small businesses including mail order.

U.S. SMALL BUSINESS ADMINISTRATION, Box 30, Denver, CO 8201-0030. Publishes MONTHLY PRODUCTS CIRCULAR; offers misc. publications of interest to small businesses, including mail order.

NATIONAL WAREHOUSE SALES, 529 Colin Blvd.,Buffalo, NY 14216, 800/433-0038. Wholesale tennis shoes, kitchenware, diapers and general merchandise.

NU-DAY SPECIALTY WHOLESALER, Box 607, Britton, SD 57430. Wholesale merchandise; free flyers.

THE WHOLESALE OUTLET, 1 Interstate Highway, Albany, NY 12205. Wholesale brand name electronics, toys, tools, etc.

TOOLS OF FORTUNE, Box 5602, Arlington, TX 76005. Wholesale bibles, books, small appliances, toys, jewelry, luggage, figurines, etc.

MARKETERS FORUM, 160 Eileen Way, Syosset, NY 11791, 800/428-7825. Magazine that specializes in ads from mostly Northeastern wholesalers. Good source for small merchandise at bargain prices ($20 yr).

TWI INC. TELEPHONE WAREHOUSE, Box 12302, Portland, OR 97212, 800/341-1950. Toll free answering service; $10 per month plus usage.

COMM RESPONSE SERVICE, 140 Washington St.,Reno, NV 85903. Toll free answering service.

SUITE 1000, 46000 Park Rd.,Charlotte, NC 28209, 800/438-1242. Toll free answering service.

DISCOUNT BOOKS, INC.,427 Ferry St.,Newark, NJ 07015. Discount & close-out books.

DOVER PUBLICATIONS, INC., 31 East 2nd St.,Mineola, NY 10051. Discount books, clip art, stencils, etc.

QUILL CORPORATION, 100 Schelter Rd.,Lincolnshire, IL 60917-4700, 312/634-4800. Office supplies.

NEBS, 500 Main St.,Groton, MA 04171, 800/225-6380. Office supplies.

IVEY PRINTING, Box 761, Meridan, TX 76665. Letterhead: 400 sheets plus 200 envelopes - $18.

SWEDCO, Box 29, Mooresville, NC 28115. 3 line rubber stamps - $3; business cards - $13 per thousand.

ZPS, Box 581, Libertyville,IL 60048-2556. Business cards (raised print - $11.50 per K) and letterhead stationery. Will print your copy ready logo or design, even whole card.

WALTER DRAKE, 4119 Drake Bldg.,Colorado Springs, CO 80940. Short run business cards ($250 - $3), stationery, etc. Good quality, but no choice of style or color.

USA PRINTING, 160 Washington SE, Ste 30, Albuquerque, NM 87108. Discount booklet and flat printing. Fast service and quality printing.