Catalog and Mail-Order Services
SIC 5961
NAICS 454113
The catalog and mail-order industry, also known as non-store retailing or home shopping, sells products and services through television, catalog, online services, and direct mail. Certain firms have sizable mail-order operations in addition to other activities, such as manufacturing finished goods or store retailing, and may also be discussed under those categories.
Catalog and mail-order houses encompass companies that market products through all non-store retail channels, including catalogs, mail, radio, computer, and television. The three major non-store retailing markets, in descending order of size, are consumer, business, and charity.
Providing customers with a means to shop directly from their homes and offices, catalog and mail-order services continue to play a role in the retail industry. Although the glory days of the paper-based catalog may have gone, the globalization of the marketplace and decreases in the time consumers have for shopping have breathed new life into the industry. Coupled with the growing acceptance and use of the Internet by consumers, changes are being seen as traditional catalog providers have supplemented their sales channels with the Internet. The growth of television around the world and into new, developing markets has also brought with it the use of this medium as a sales tool. Home shopping television networks are proving highly successful, and are spreading around the globe.
Although large retailers, such as the United States' J.C. Penney Company, typically maintain an inventory warehouse, most industry participants keep little, if any, inventory on hand. When a customer orders a product the retailer contacts a wholesale supplier that ships the item to the retailer or directly to the customer—an arrangement referred to as just-in-time inventory. Because they refrain from traditional retail purchasing, manufacturing, and inventory management activities, many non-store retailers are essentially marketing companies. Some catalog companies, for instance, simply assemble a group of complimentary products manufactured by other firms and market those items in a catalog. Similarly, many direct-mail and broadcast-media retailers essentially act as middlemen, selling products that are manufactured and stored by wholesalers.
The benefits of non-store retailing are numerous. In the case of catalog and direct-mail marketing, retailers enjoy more efficient access to markets. Indeed, tailored customer lists allow companies to carefully target select segments of the market. Besides advantages associated with segmented marketing, mail-order retailers typically enjoy reduced fixed costs that would otherwise be incurred by operating a retail store or using face-to-face or telemarketing sales techniques. Expenses in the areas of rent, inventory, and payroll, are all reduced in the catalog and mail-order industry. Furthermore, mail-order companies have access to much larger geographic markets than do many retail establishments.
A chief drawback of non-store retailing, however, can be high advertising costs. The expense of producing and delivering catalogs, fulfilling orders, and serving customers, often leaves retailers with slim profit margins (or losses if response to a promotional effort is poor). Retailers often expect only 0.5 percent to 3 percent of recipients of advertising to actually respond to a solicitation by mail. The problem is compounded in many regions, particularly Europe, by high postal rates and restrictions on mail advertisements that increase mailing costs. High shipping expenses are also a drawback, particularly for large or heavy goods like appliances and furniture.
Because of high mail and shipping costs, cross-border sales by catalog and mail-order houses remain limited. Nevertheless, some firms have successfully entered world markets. Sales between the United States and the European Union, for instance, increased throughout the 1990s on the strength of increasingly uniform markets. The 2002 adoption of the single united currency, the euro, was expected to increase sales even more dramatically. The most exportable mail-order products in the 1990s, in order of revenue size, were information, education, and collectible products. Several U.S. firms successfully marketed specialty American products in Asian countries. Overseas mail-order firms also enjoyed increased success in the United States. Firms that instituted successful exporting ventures to the U.S. market in the 1990s included Aer Rianta, Bertelsmann AG, Jelmoli, Moore Ltd., Patrimonium, Quelle, and Otto Versand.
The International Direct Mail Advisory Council, created by the Universal Postal Union, a division of the United Nations, promotes cooperation between the public and private sectors to advance the mail-order industry worldwide. The organization conducts studies on the direct-mailing conditions throughout the world and established an advisory council made up of mail-order companies. The council's immediate goals included standardizing addresses and mailing customs.
A Venetian book merchant, Aldus Manutius, provided one of the first mail-order services in 1498, selling Greek and Latin books through a catalog. Later, American Benjamin Franklin is credited for starting the modern mail-order industry in 1744 with a direct-mail offer in the United States. He produced a mail-order catalog bearing this promise: "Those persons who live remote, by sending their orders and money to said B. Franklin, may depend on the same justice as if present." Mail-order techniques were well-suited to the fragmented North American population. In 1863, in fact, the U.S. Congress authorized the issuance of a discount stamp for mailers of "printed matter and manuscripts," known as second-class mail. It also issued a third-class stamp for "bulk mailers." Several large U.S. companies pioneered mass mail-order techniques, relying heavily on direct mail to promote their businesses. Sears, Roebuck and Co., which introduced innovative mail-order catalogs in the early 1900s, became one of the most effective practitioners of direct marketing.
Three of the largest mail-order houses that gained prominence in the early 1900s were Sears, Montgomery Ward (founded in 1872), and Spiegel (founded in 1865). Similar but smaller organizations emerged in other parts of the world. In Japan, for example, department stores like Mitsukoshi and Takashimaya began marketing to rural customers through catalogs in the late nineteenth century. These and other industry pioneers usually offered general merchandise at low prices. They often manufactured their own products and counted on large-scale advertising to generate high sales volumes. Such operations continued to experience moderate sales growth throughout the mid-1900s and even started to gain appeal in Germany, the United Kingdom, and a few other nations. Growth in Japan, though, was squelched until 1972 by a government edict that restricted direct advertising. In the 1980s a variety of technological, demographic, and financial developments converged to cause explosive growth in catalog and mail-order sales.
Technological advances that catapulted many competitors to success in the 1980s included computers and software that increased marketing efficiency and improved customer service. Computer systems that became popular during the early 1980s allowed competitors to manage and manipulate large amounts of consumer data. They were also used to track and manage inventory more effectively. When a customer ordered a product, the mail-order house could electronically alert its warehouse, or its supplier, and quickly ship the product. Inexpensive desktop computer systems allowed small, specialty non-store retailers to more easily compete with larger firms on a national scale.
Other factors contributed to the increased profitability of the industry as well. Credit card systems eased payment problems, for instance. Some analysts contend that the non-store retail industry benefited most from pivotal demographic changes that developed over the course of the 1980s. One of the most important shifts was the rise in the percentage of working women, elderly people, and dual-income households in the United States, Japan, and Europe. Those market groups vastly increased their level of mail-order buying during the decade.
Worldwide consumer catalog and mail-order sales alone stood at US$176 billion in 1996, up from US$150 billion in 1993, according to Direct Marketing. Germany represented the largest market for catalog shopping, while the United States led in overall mail-order and catalog sales, according to an Advertising Age report. Although the growth rates slowed in more mature markets such as the United States, Germany, and Japan, in the mid- to late 1990s they remained steady. Emerging economies, however, experienced far more dramatic increases in mail-order sales growth. Chile's sales shot up by 300 percent in 1996, while India's rose by 20 percent, and the Czech Republic's by 25 percent.
The high-growth consumer products of the mid- to late 1990s included animal care merchandise, books, computer hardware and software, wine and liquor, and gardening products. In the business sector, they...
To continue reading
Request your trial