If you are any type of craftsman or have an entrepreneurial spirit, you may already know a bit about mail-order businesses. Mail-order businesses take orders from a customer either through the internet or physically and mail the ordered product to its end user. Before the advent of the internet, catalog order forms and phone orders were the only way to request specific products, depending on a customer’s residential area.
Understanding the Mail-Order Businesses
Traditionally, mail-order businesses have been mail-order home-based businesses and small operations, such as that of an artisan soap maker. However, there are many large-scale industries, such as the medical and engineering fields, that operate heavily on mail order for parts, equipment and various other one-use items. Much of the ordering in which these industries take part are large scale and extremely cyclical.
For example, a hospital technician working on defibrillators knows that he needs to replace the batteries on that device after every discharge and that it should be checked every few months to ensure it is maintaining charge. The most efficient technicians know how long it will take for it to need another battery, and they order them in bulk when the time calls for it.
Another example of larger-scale ordering would be found in an engineering firm. Every time a new fabricator comes on board, the company will order tools for it. They also keep up orders for all of their fabricators in regard to tools. These orders are smaller and more staggered, but they still should have a level of predictability to them.
How to Start a Mail-Order Business
If you are thinking of starting your own mail-order business online, you should know precisely what you are getting into. The way that you enter into any business depends on what you want your business to do. If your goal is to start a business selling batteries in large quantities, then you will use different tactics than someone who is making small-batch artisan soaps.
Mail-Order Business Examples
For instance, Small Batch Soaps is a company that makes custom soaps for events and smaller batches of soaps for sale in its online shop. It does not work with wholesale distributors; however, it does work with an assortment of party planners and event coordinators who receive a monthly mailer from Small Batch Soaps via email.
In contrast, Big Battery is a wholesaler of various industrial-use batteries. It works primarily with health care companies that require batteries in large volumes. Its primary client is a national health care network that purchases in large amounts when equipment needs maintenance.
Getting a Business Started
Regardless of the scope and scale of your business, you will need to ensure that your business has all required licenses and can legally operate where you choose to do so. Every state has different regulations for starting a business. Most states have websites that outline exactly what procedures you need to follow when starting a company, and many offer checklists for business owners to ensure that you are not missing steps.
Before you can begin taking orders, you will need to set up a merchant account through a bank that can facilitate your orders. Some smaller businesses use their business email address, while other companies choose to have their business accounts operating as a separate entity. How you decide to take payments and run your account is up to you, but do research before committing to any one option.
Finding Customers and Making Sales
Keeping a database of your customers is extremely important for any business. These customers should be able to ask about past orders, check on the status of their orders and be assured that all of the communication that they have with you includes as personal a touch as possible. Remember that most of your sales will be from repeat customers, and your goal as a businessperson is to make every customer a repeat customer.
You can also place ads in trade publications and newspapers and on websites at which your prospective customers would look. While it is possible to craft your advertisements yourself, you may want to look into hiring a writer or other advertising specialists who can get you the most bang for your buck.
Considering Profit Margins
Regardless of the size of your business, you need to keep a straightforward figure in your head:
Profit = Price Customer Pays - (Cost of Acquiring Product + Cost of Selling Product)
This means that your profit margin is contingent on a balance of your costs against the customers. For companies both small and large, this is how businesses make money. To ensure that you are making the most profit, your focus should be on either manufacturing or acquiring your products as cost effectively as possible.
The two biggest pitfalls in this equation are either overestimating what your customer will pay or underestimating the costs associated with selling your products. You cannot predict what value the customer will see in your products, but you can make an educated guess by examining the market in your area and investigating the prices for which your competitors are selling a product.
Take this information and then, depending on your tolerance for risk, set your prices. Be aware that you can change prices at any time. However, raising your price can leave your customers looking for other options.
Consider Supply and Demand
Another sales principle that you need to keep in mind is supply and demand. If there is not a demand for your product, no one will want to purchase it regardless of your price. As is true with setting your prices, you need to do market research to figure out what is selling.
Be aware that during your market research, you may find out that your intended market is oversaturated. Oversaturation of a market means that there are too many companies doing the same thing, making it difficult for your new company to get its footing in it.
Small-Scale Mail Order Business
Small Batch Soaps is a craftsman business that makes all of its products in house. To get its business off the ground, the owners first attended craft shows, farmers' markets and conventions. With each soap sale, it included a business card that clearly displayed its website and business name and gave specific contact information for orders.
From there, Small Batch Soaps began to contact any party planners and event coordinators in its area to pitch its services. The pitch was tailored to every individual to whom the business spoke, so planning each meeting took significant time to plot. Still, once it made contacts, the larger-scale clients ordered in bulk.
For example, one of the event coordinators orders soaps shaped like babies in an assortment of colors for baby showers. These larger orders have a cut-off date due to the labor time required to fulfill them. To supplement its income between events, Small Batch Soaps sends out a monthly mailing list that describes all of its current stock, informs customers about sales and reminds customers how long custom orders take to ship.
Larger-Scale Mail Order Businesses
After a larger mail order business operation has all of its business structure and legalities sorted, it should begin looking into how it will source its items. Unlike businesses that directly create stock in house, reselling companies will need to secure its stock pipelines. One of the easiest ways to manage this need is to look for wholesalers that can supply you with the products that you want to sell.
Wholesalers are typically intermediary entities that will buy products in high bulk quantities to resell at a higher rate to their customers. These wholesalers will distribute products based upon the order volume and tend to have warehouses in which to store their stock. Typically, they work in conjunction with distributors for the best rates.
Another essential thing to ask as you are looking into wholesalers is whether they sell brochures for their customers. If they do, you can work with a representative to select the products you choose to sell with your company’s name and address on them. However, many of these brochures that you decide to have will be entirely up to you. Some wholesalers suggest 1,000, while others suggest 100 product brochures as a starting point.
Creating a Brochure or Catalog
If you do not have the ability through a wholesaler to set up a brochure, then you should make your own. Because you want to deal with large volumes of very similar products, the brochure is more critical for a large-scale operation than it is for a smaller one. This is particularly true if you intend to cater to massive technical firms that will be ordering in bulk from a brochure.
Once you find the wholesaler(s) that give you the best value for the price, you can choose how you want to manage your customers from there. Sometimes, wholesalers require you to buy in bulk from them. Others allow you to order one single item at a time if you prefer.
Find a wholesaler that works best for your company. If you do not have the space to keep large volumes of stock, you will need to ensure that your wholesaler will sell to you in the quantities you need.
Mail-Order Business Ideas
Unlike a small, artisan company, larger-scale companies cannot gain customers simply by showing up at craft fairs and farmers' markets. You can get into trade shows and specific convention spaces, however. These are excellent places to showcase your goods and speak to interested potential customers.
If you choose to attend a large-scale trade show, then you should have enough brochures to hand out to your prospective customers. To find out about brochure volume, you will have to do research by asking other vendors and contacting the organizers of the trade show or convention you plan on attending.
Be aware that the best shows and conventions require you to apply for a vendor spot, and they typically have a date by which they need your request to be submitted. Do not simply turn up at a convention and expect to be let on the vending floor. You never know how many mail-order business opportunities you might find at a convention.