Mail Order Business
A mail-order business is one that receives and fulfills orders for merchandise through the mail. This is a kind of retail business, which is carried on through the post office. The seller receives its orders and dispatches and ‘delivers the goods through the Post office usually by V.P.P. Mail-order business emerged in Europe at the end of the 19th century, but its greatest development was after 1945. In the mid-1970s it was strongest in Great Britain, West Germany, Sweden, and Switzerland and was developing in France and the Netherlands.
The terms “mail-order,” “direct mail,” and “direct marketing” are sometimes used interchangeably; in fact the mail-order category is a subset of the two other categories which include any and all kinds of solicitation by mail, be it of sales or contributions to causes. It is the method of merchandising in which the seller’s offer is made through the mass mailing of a circular or catalog or through an advertisement placed in a newspaper or magazine and in which the buyer places an order by mail.
Most mail-order businesses have been small specialty firms selling by the traditional method, but department stores also do a significant volume of business through their mail-order divisions. It must comply with the regulations of the Federal Trade Commission (FTC) and the U.S. Postal Service (USPS). In addition, mail-order businesses may be subject to applicable state laws, especially concerning the collection of sales tax.
Advantages of mail-order business
- Less capital needs: This business is known as shopping by post. Customers place orders by post. Goods are either received by value payable post (VPP) or by registered parcel. So, it is a direct method of selling products to ultimate buyers.
- A wide market: Modern mail-order house finds no limit to the market range. It can establish branches at different places. The improvement in postal services has widened the market coverage.
- Unusual buying power: Large mail-order houses buy in bulk. Sometimes, they buy an entire lot manufactured by the factories. So, they enjoy economies of large scale buying. Prices are charged less than those of competitors.
- No risk of bad debts: Bad debts can be avoided to a great extent. In mail-order business, a vast majority of the goods are sold for cash. The absence of a credit system simplifies accounting records.
- Efficient use of capital: Capital is efficiently used. After the orders are received, goods are mailed directly to the buyers. middlemen are avoided. So, a huge stock of merchandise is not required. Mail order houses carry a smaller inventory.
Disadvantages of mail-order business
- There is a lack of personal contact between the seller and the buyer.
- There is scope for fraud, inconvenience due to delay, misunderstanding of customers, etc.
- Buyers have to rely wholly upon catalogs to know about the goods. They cannot inspect the goods before buying them.
- After-sale service is not extended to customers.
- Articles requiring demonstration cannot be sold by mail.