Q: I would like to start a mail order business, but I can't seem to find the answers to the questions I have. I guess I need a mentor to ask those questions of. I'm starting on a shoestring, but I have the drive to succeed. Do you have any advice?
A: There are several books out there about operating a mail order business, including one from us at Entrepreneur called How to Start a Mail Order Business. You can check it out on SmallBizBooks.com(see the "Resource Guide" box) or by calling (800) 421-2300 and requesting guide #1015.
That said, I'd like to talk to you about mail order in general. Several years back, mail order was a great start-up business. There was a relatively low cost of entry to market and a large demand from consumers for mail order shopping. Many entrepreneurs were inspired by the success stories of mail order legends like Lillian Vernon, who started her mail order empire in 1951 by taking out a $495 ad in Seventeen magazine selling purses, and Richard Thalheimer, who launched The Sharper Image with a small ad in a runner's magazine selling watches he imported from the Far East. Yes, those stories are inspiring, but I would caution you (and other aspiring mail order entrepreneurs) that it would be hard to duplicate those efforts today.
Now let me tell you why. For starters, the market itself has changed. There are many more mail order companies today than there were 10 or 15 years ago, so the competition is fierce. Many of these are mail order or retail giants. But not even they have been successful. The granddaddy of mail order, Sears, ceased its mail order operations years ago due to increased costs and decreased orders.
Mail order once flourished in part because it was a good way to reach customers who weren't served by retail outlets. But the landscape has shifted in the past decade, as some retailers have gone into markets they previously ignored, and others like Kmart, Target and Wal-Mart have expanded their product lines and now offer their own versions of the latest fashions.
In addition to more outlets serving far-flung customers, many of today's consumers are served by online retailers. Although not the megahit many predicted they would be, e-commerce sites are proliferating worldwide. Selling products online can actually be less expensive than selling via mail order catalog. This leads to another reason that mail order is no longer one of the best industries to get into: Paper, printing and mailing costs have skyrocketed. In an attempt to keep the cost of first-class mail reasonable, the U.S. Postal Service has significantly increased the cost of third-class mail--the class mail order companies use.
Perhaps one of the hardest (and most expensive) aspects of mail order is finding customers. Who will you mail to? How will you find them? Remember, as an industry, mail order has a 98 percent failure rate--which means if you mail 1,000 catalogs, you are doing extremely well if you get orders from 20 of them. But you've paid for the names, printing and postage on the 998 that ended up in the trash.
If I haven't discouraged you (and I'm not trying to be negative, just realistic) the key to a successful mail order business today is specialization. Don't try to compete with the general catalogers like JCPenney and Spiegel. You need to offer unique items not easily obtained through established catalogs or retail outlets. This same rule applies to establishing an e-commerce site. I would also recommend you start with one or two items and target your audience through ads placed in relevant publications.
Once you build on that success, you can expand to offer more items in a catalog. You can find out more from trade associations, and you can get valuable industry insights from Maxwell Sroge Publishing Inc., a long-time industry specialist. Good luck!
Rieva Lesonsky is a small-business expert and a senior vice president and editorial director at Entrepreneur Media Inc.
The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.