Special Delivery 3 Mail order businesses that can bring you letter-perfect profits.

Direct mail generated $131.2 billion in direct-order sales toconsumers and businesses in 1995, according to the "EconomicImpact: U.S. Direct Marketing Today" report from the DirectMarketing Association (DMA).

When you think of direct mail, you may think just of the stuffthat lands in your mailbox--each day's smorgasbord of catalogsand offers from retailers, bankers, insurers and charities, allwrapped, folded, stapled or stuffed into official-looking envelopesand, sometimes, even sealed in plastic bags. According to the U.S.Postal Service's most recent Household Diary Survey, theaverage American household receives more than seven catalogs eachmonth. The DMA in New York City extrapolated Postal Service volumedata and determined that last year, 13.2 billion catalogs weremailed out, including both consumer and business-to-businessmailings.

Catalogs are a big part of direct mail, surely, but there areother opportunities for entrepreneurs who are interested in being apart of the overall mail industry. Following is advice from fourentrepreneurs who have been on all sides of the mailingbusiness.

Home Office & Postal Services(HOPS)

What could be simpler than running a private mailbox service andpreparing packages for overnight delivery? Plenty, as Ken and LindaKunzman of Carrollton, Texas, discovered as they prepared to openHome Office & Postal Services (HOPS) in May 1993. For onething, they discovered that Carrollton, a Dallas suburb of 92,000people, had 19 other shops--mostly privately owned--doing a lot ofwhat they wanted to do. Undeterred, they resolved to succeed bydoing more. They've tapped into some new areas ofbusiness, like providing computer technical support.

"It's a little family business that draws on ourstrengths," says Ken, who had taken early retirement afteralmost 29 years with IBM. Once their son, Nicholas, started school,Linda wanted to get into a career that would give her theflexibility to set her own hours. While they wanted to patterntheir business after a variety of franchise operations, theKunzmans felt they were too independent to operate under the strictdirection of a franchisor. Once they knew what they wanted to do,the Kunzmans would stop by stores in other areas to talk with theowners about their own start-ups. They found most to be open andwilling to share tips. One woman in particular, a store owner inNorth Dallas, helped reaffirm their decision to go on their owninstead of with a franchise.

"She reminded us that packing boxes and putting mail intoslots is not rocket science," Ken recalls. "And sheadvised us against signing an expensive, 10-year franchiseagreement with someone who would try and tell us that itwas."

It cost the Kunzmans less than $50,000 of their own savings tostart the business. It could have been less, Ken says, but theystarted by buying rather than leasing their equipment--a decisionneither regrets today. When it came to naming the business, theythought "Home Office & Postal Services" wouldimmediately convey what their business was all about.

To implement their decision to offer more than mail boxes andpackaging services, Linda called on her earlier work experiences todevelop a desktop publishing arm of the business, includingstationery and business-card design and resume writing, while Kendrew on his IBM background to take on some computer-consultingwork, under the HOPS umbrella.

"We had to learn to look at our business as a conveniencestore," Ken says, "and we had to form alliances withother businesses and add services to produce the results wewanted."

Linda adds that quality customer service brings homebasedbusiness owners into the store. "They like the advantages ofhaving an address with a `suite' number," she says. TheKunzmans also accept overnight packages for their customers, manyof whom travel and cannot always be home when the packagesarrive.

Know what you're getting into before opening a business,they advise. The Kunzmans feel they helped themselves by joining aprofessional association, Associated Mail & Parcel Centers, inNapa, California, which provides support to its members. "Youcan also visit companies like the one you want to start,"Linda suggests. "Talk with the owners about their businesshighs and lows."

"And don't expect success in six months," Kensays. "Expect success in one or two years. It is a lot ofwork, but the rewards are high."

The Gluten-Free Pantry

When she was diagnosed with celiac disease, an immunity disorderthat requires a strict gluten-free diet, Beth Hillson decided thatit wasn't going to stop her from eating the foods she loved.Although many foods contain gluten, a protein found in such grainsas wheat, rye, oats and barley, Hillson found a way around theproblem by creating her own special baking mixes and othergluten-free foods.

Hillson soon realized the need for a specialty-food catalogafter having a difficult time finding tasty food, besides herpersonal mixes, that was wheat- and gluten-free. Fortunately, herbackground in journalism and marketing, as both a food writer andcooking teacher, provided the ideal platform for her to establishthe Gluten-Free Pantry Inc. It originated as a small project in herbasement in Glastonbury, Connecticut in 1993.

"I do all the designing of the catalog, including therecipes, art, production, etc.," explains Hillson. "Thebeauty of this business is that it balances all my skills. I thinkmy background, as well as my instinct for what our customers need,is what makes this catalog successful."

For anyone interested in starting a specialty-food catalog,there are a few things to consider, besides your background andinstincts, according to Hillson. "You are not going to be bigovernight," she says, "so start conservative and withsmall investments. However, always be open to new ideas, as long asthey remain within the scope of your audience."

To find her audience, Hillson sent out samples of her mixes andinformational pamphlets to five or six support groups thatspecialize in celiac disease. The members prepared the mixes attheir meetings and, pleased with the results, soon became regularcustomers. Using the contacts she had made as a food writer,Hillson garnered a large amount of publicity for Gluten-Free PantryInc. from various food columnists and editors throughout thecountry. Without ever purchasing a mailing list, the company grewrapidly. Currently employing 12 workers, Gluten-Free Pantry Inc.managed to double their revenues in the last year.

In the past three years, Gluten-Free Pantry Inc. has expandedits catalog to include items other than baking mixes, such asvitamins, pasta, bean soups, and ready-made cookies. They alsooffer specialty items, such as heavy-duty mixers, bread slicers andcookbooks. Even during the process of expansion, though, Hillsonconcentrated on only providing products which her special audiencecould not find in the general marketplace.

Hillson also stimulates sales by promoting certain recipes thatuse special ingredients or require cooking utensils that arenormally difficult to find. Whenever she publishes a new recipe,she offers the mixes and utensils to go along with it. "Whenwe published our English Muffin recipe in our newsletter,"Hillson illustrates, "our mix and muffin-ring sales rosetremendously."

During the holiday season, Gluten-Free Pantry Inc. includes anassortment of gift items along with its regular selection ofproducts. "We offer gift-assortment packages and smallappliances that friends and family might want to give theirgluten-free relatives," says Hillson, "such as specialbread-makers that have proven to work well with our recipes andmixes."

Finally, whenever customers orders products from Gluten-FreePantry Inc., they also receive a copy of "The GutReaction," a quarterly, two-page newsletter that offersdetailed coverage on wheat- and gluten-free diets, includingrecipes to make from scratch or with mixes from the catalog, aswell as updated information for the celiac population and noticesabout upcoming changes within the company.

After working in the mail order market for three years, Hillsonhas a few tips for maintaining a successful catalog and clientelebase. "Always remember three things: 1) Stayfocused--don't let your ideas stray from your original purpose;2) Service and responsiveness--always provide a quick turnaroundtime for your customers, and if there is a problem, call them; 3)Quality--don't sell anything that you wouldn't buyyourself."

Advanced Mailing Services

Jeff Burkett might not have succeeded as a mailing-list brokerhad he not found a mentor to guide him through the rough spotsearly on. "I would advise anyone getting into thisbusiness--or any other business--to find a mentor in anoncompetitive market, and put every question you can think of tothat person," Burkett says. That's just what he did beforeopening Advanced Mailing Services Inc., a list brokerage, mailprocessor and databank management company, seven years ago inGreensboro, North Carolina.

Burkett's background as a CPA had included a stint ascontroller at WFMY-TV, at that time owned by Harte-HanksCommunications Inc. of San Antonio, which also owned a direct-mailbusiness in Greensboro. Burkett, in a mix of good and bad timing,was recruited to switch from the TV station to that operationshortly before the company sold the station and, unfortunately,closed the direct-mail operation. Burkett, who had becomeinterested in the mailing business during his short stint there,toyed briefly with the idea of buying the business fromHarte-Hanks, but decided instead to round up financing from localbanks and start his own business.

While his previous experience helped, Burkett says he learnedhow to run his own business from the late Dewey Massey, who owned amailing business in Raleigh, about 70 miles east of Greensboro.Since their companies were far enough apart geographically so asnot to be competitors, Massey agreed to help Burkett get started."I spent two days in his shop and learned more than I couldhave in two years by myself," Burkett says. Their friendshipcontinued up until the time of Massey's death five yearsago.

Burkett says he didn't draw a penny from the business duringits first year. His start-up costs, including leasing 4,500 squarefeet of office space and buying two large pieces of mail-processingequipment, were less than $100,000, most of which came from a bankloan.

While he still does large mailing jobs--such as folding,inserting and applying labels--for clients, he is most excitedabout having tapped into the list business. As a broker, Burkettwill work with a client to determine a market to target with amailing, and then go out and find the best list to reach thattarget. On his own, Burkett has developed two lists of addressesand telephone numbers, one of businesses and the other ofresidences. This information was taken, largely, from phonedirectories around the country, but the resourceful broker willalso go to whatever source necessary--mostly available fromlibraries and trade associations--to meet a client's needs.

"If I've got a paint company that wants to findhomeowners whose houses might need painting," Burkettexplains, "I'll go to the courthouse and get tax listingsthat show the value of a home and its age. I can break thatinformation out by zip code and compile a list of, say, 10-year-oldhomes in a particular area that might need painting." Theprice of lists varies, depending on their source, from 4 to 9 centsper name. His mark-up is a standard 15 percent.

Besides finding a mentor, Burkett says it's critical foranyone interested in the mail business to develop a goodrelationship with the local post office. "They want you tosucceed," he says, "and they want to help you do it rightbecause, when you do, it helps them do a good job."

Where The Bucks Are . . .

Want to get into the direct-marketing business? Maybe you shouldmove to California, which led the nation last year in directmarketing sales ($117.6 billion), according to a new survey by theDirect Marketing Association (DMA--membership includes access totheir library & resource center, online service, publicationsand seminars, and representation in the marketplace, the media, andin government).

That figure represents the value of the jobs, sales, andadvertising expenditures generated through all types of directmarketing. New York was in second place last year, with $77.4billion.

In 1995, direct marketing in America generated $594.4 billion inconsumer sales and another $498.1 billion in business sales. Thestudy also revealed that more than 19 million jobs in 49 industrysegments are attributable to direct marketing nationwide--withCalifornia again taking first place with more than 2.07 milliondirect-marketing-related jobs.

"Direct marketing plays a unique and often hidden role inmany states' economies," says Jonah Gitlitz, DMA'spresident and chief executive officer. "From retail andbusiness services to the pure mail order market, increasingly alltypes of advertisers are relying on direct-marketing methods tomove commerce."

The top 10 states for such enterprises, ranked by totaldirect-marketing sales and jobs, according to the DMA survey,are:

California

$117.6 billion

2 million jobs

New York

$77.4 billion

1.4 million jobs

Texas

$73.2 billion

1.3 million jobs

Florida

$57.1 billion

1 million jobs

Illinois

$54.9 billion

935,000 jobs

Pennsylvania

$50.2 billion

892,000 jobs

Ohio

$47.1 billion

800,000 jobs

Michigan

$39.3 billion

661,000 jobs

New Jersey

$36.3 billion

611,000 jobs

North Carolina

$33.2 billion

584,000 jobs

Contact Sources

Advanced Mailing Services Inc., 6211 Chimney CenterBlvd., Greensboro, NC 27409,

(910) 299-0800.

Gluten-Free Pantry Inc., P.O. Box 840, Glastonbury, CT06033-0840, (860) 633-3826.

Home Office & Postal Services (HOPS), 1060 W.Frankford Rd., #203, Carrollton, TX 75007, (214) 394-0901.