Going The Distance

For those mail order entrepreneurs who aren't going to let a few tough breaks get them down, one question remains: How exactly do they deal with the marketplace? "It's more difficult for the small-business owner to afford the kind of technology the larger, more established businesses use to cope with the double whammy of cost increases," says Fishman.

According to Sroge, some mail order companies are reducing their catalog dimensions, the quality of the paper stock and the number of pages; most mail order entrepreneurs are pruning their mailing lists and sending only to those customers who actually buy.

But many companies have tried these traditional, more obvious routes and found themselves still struggling. Therefore, mail order entrepreneurs need to adopt more innovative survival tactics.

These include:

• Forming or joining co-ops. "As costs continue to be a factor, small catalogers are going to have to cooperate with each other by forming co-ops," says Sroge. "Print together, mail together, form telemarketing centers together-cooperate any way you can." By joining forces, small companies can mimic the purchasing power of a Land's End or L.L. Bean.

Because of the obvious benefits, John Schulte, chairman of the National Mail Order Association, believes we'll see "more consolidation, mergers, joint ventures and acquisitions. If you have a mailing of, say, 50,000, you'll be able to hook up with another company through a consolidator to qualify for further postal discounts."

The fastest and easiest way to find such consolidators, says Schulte, is to peruse your trusty Yellow Pages. "After you find companies listed under 'Mailing Services,' it's just a matter of finding out which companies do it and what size they'll go down to," says Schulte. "Usually, you're looking at a minimum of 50,000 pieces before a consolidator will even look at you." Other resources for those seeking a match are mail order associations and existing relationships.

• Squeezing suppliers. Sroge suggests putting pressure on your suppliers for everything from merchandise to advertising. "Ask them for better prices, better terms on the purchase of merchandise," he says.

• Downsizing. Like most of the rest of the business world, mail order businesses-even small ones-may have to consider downsizing. "In the past five years, American industry has reanalyzed where it's going," says Sroge. "Small mail order companies are going to have to do the same. It's better to reduce the size of your staff than to go out of business and leave your entire staff jobless. These are difficult decisions, but if they can save your business, they're decisions that have to be made."

• Investigating classification reform. In what the U.S. Postal Service (USPS) has deemed the "most sweeping changes in mail in the last century," the proposed USPS Classification Reform calls for reform and restructuring of first-, second- and third-class mail rates, saving money for those who prepare mail for automated processing.

Though Tom Shimko, vice president of marketing for Pitney Bowes U.S. Mailing Systems, believes virtually every business will be affected one way or another if Classification Reform is implemented this year, a Pitney Bowes study of 1,000 companies revealed 72 percent of businesses responding were unaware of the reform. "With all the issues facing small businesses today, such as cash flow and increasing sales, mail ranked number 40 in terms of priority," says Shimko.

Basically, the reform covers the process of bar-coding mail so it can be handled more quickly and accurately by the USPS. Shimko says the USPS is "shifting all its discounts toward bar-coding mail and away from some of the areas for which they'd previously provided discounts, such as presorting." Fortunately, software, including Pitney Bowes' Addressright system, can make bar-coding classification a viable option even for small companies.

Yet Sroge warns, "The little guy may be left out of the picture. In many cases, small businesses will not be able to qualify for the additional discounts and therefore will be at even more of a disadvantage." In fact, he suggests every mail order entrepreneur write his or her congressperson, as well as the Postal Service and the Small Business Administration, and urge that the reclassification include benefits for small mailing companies.

• Going global. Given the domestic catalog glut, Fishman says, more companies are starting to turn their attention to ripe overseas markets. He notes a current race to go into Japan, as well as substantial expansion by U.S. companies into Canada, the United Kingdom, France, Germany and the Pacific Rim.

• Televising infomercials. The new kid on the mail order block has met with exceptional success, astounding many a marketing pundit. "Five years ago, this was a minuscule media form. Now it's an industry with billions of dollars in sales," says Fishman. "Through one successful infomercial, you can develop a database of half a million names, which would take you 10 years to do using paper media. Infomercials are becoming a major source of revenues for products sold without direct contact with the buyer."

• Expanding into retail outlets. "Many mail order businesses reach the $10 million or $20 million level and start thinking about expansion into retail," says Fishman. "That's a healthy thing to do because it gives [entrepreneurs] the opportunity to switch back and forth between the different channels of distribution according to the conditions of the marketplace."

• Developing plans for innovative positioning and product selection. "Innovative positioning and product selection are still and always will be the name of the game," says Fishman. "You have to create the perception that what you offer is not readily available in anyone else's catalog or retail store."

For example, the computer supply and accessory segment of mail order is growing rapidly, and demand for home improvement and home furnishings catalogs remains strong. Says Fishman, "The products [these catalogers] offer are so important to consumers that these catalogs are able to expand circulation, sales and profitability despite the burdens mail order merchants in other categories can't cope with."

• Selling on the Internet. "Right now, everybody's talking about the Internet," says Sroge. "Some people have made ridiculous estimates of where [purchasing on the Internet] will be in the year 2000. I wouldn't get overenamored with all the new technology, but I would watch it carefully. Seek out the opportunities, do a little experimenting, but don't bet the store on it. It's going to take time, but it will happen."

In the long term, Sroge says, "We need the generation that's now in schools learning on computers to mature and become heads of households. Once [they are] at ease with all the technology and in a position to be major purchasers, [the Internet] will be a savior for the industry. It'll give mail order a whole new burst of life."

This article was originally published in the February 1996 print edition of Entrepreneur with the headline: Going The Distance.