A Bundle of Tips to Help Start a Mail-Order Business
Question: I want to start a home-based craft business and wondered whether I should try to sell my products by mail. Is it hard and expensive to start a mail-order business?
--Dymphna Ybanez, Riverside
Answer: A mail-order business requires the same kind of research, time and effort that you would put into any other business. Your first challenge is finding an audience that is interested in buying your products. One way to find potential clients is to identify publications--newsletters or magazines--that you know your target audience reads, and then do some test advertising in them for just a few of your best items. If you get a good response to your ads and you take some preliminary orders, that is a good indicator that there is a market for your crafts.
Technology has reduced the cost of operating a mail-order business. If you can do your own photography or hire someone to take professional-quality photos of your products, you can put them on your computer and produce a simple product sheet or catalog yourself. If you want it to be eye-catching, you might find a commercial graphic arts student and have him or her work on it for a reduced fee and turn it into a project for a course. You will need to purchase a mailing list from an established catalog or from a direct-mail firm. You could also set up a Web site where buyers can look at photos of your products before they order or even order online if you have the capital to start out with an e-commerce site.
Mailing costs can be expensive. A postage scale meter or Internet postage account will allow for easier direct-mail production from home. You can get a bulk mail license from your local post office; you then pay a flat rate and send your catalogs out at about half the cost of regular postage. You can hire someone to label and sort your mailings on an as-needed basis or establish a relationship with a direct-mail firm that will send your catalogs and eventually take over fulfillment when the business grows too big for you to do it yourself.
You must establish a written policy as regards damaged goods, returns and exchanges and stick to it. Do not make promises that you cannot keep when it comes to merchandise delivery times. If you make your customers aware of your integrity ahead of time and then follow through, you will give them the confidence to do business with you.
--Frank Stokes, business
consultant, Stokes Pacifique
Associates, Los Angeles
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Q: I just got laid off my job and want to start a catalog business over the Internet. I would like to set up a Web site but do not have a lot of money to work with. Can you direct me to any resources or do-it-yourself products?
--Elise Sewell, Los Angeles
A: There are a number of low-cost and no-cost options for small businesses that want to get started with a Web-based catalog. Many are tailored to small-business owners who are testing the Internet waters and want to know if they can sell their products online without investing a lot of money upfront on designing, operating and marketing their own e-commerce site.
OhGolly.com is one example of a company that offers free starter sites with a gradual upgrade path for companies that want more sophisticated services. Yahoo offers a Web-based store solution, and ICat.com has a low-cost solution that lets you build a Web site with e-commerce.
Do an Internet search on keywords such as “Internet retailing” and “Web storefronts,” and you will find not only advice and guidelines for how to set up your storefront, but also dozens of hosting packages at various prices. Make sure you take the time to investigate several programs and understand what you are getting before you sign up.
--Lawrence J. Magid,
syndicated columnist,
Los Angeles Times
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Q: I want to open a student-run video store on my college campus. The biggest problem I’m facing is in finding distributors to sell me the movies I would rent out. Do you know how I would find them?
--Nathan Lasche, Stanford
A: Your best bet for distributor lists, vendor resources and other information is the Encino-based Video Software Dealers Assn. (https://www.vsda.org and [800] 955-8732), a trade organization for video retailers. You will find many resources there, including a retailer’s tool kit and a message board where you can pose questions and get helpful advice from other video store owners.
Our company, Video Products Distributors, is a nationwide distributor of all categories of videotapes, except for adult tapes (which tend to be distributed by firms specific to that industry). Firms like ours not only supply stores with the latest movie releases, but also sell start-up inventory, consult on size and location and give referrals to companies that sell shelving, checkout software, electronic gates and cash register candy and snack items.
Starting an independent video rental store is much more difficult now than it was a decade ago, because the two major industry players, Blockbuster Inc. and Hollywood Video, now dominate about 50% of the video rental market nationwide with about 7,000 stores between them. These two giants tend to concentrate in high-traffic, urban areas where they establish high-volume stores in the 5,000-to-10,000-square-foot range. Independent stores, of which there are 15,000 to 20,000 nationwide, still operate in smaller markets and rural areas and within specific niches, such as foreign language tapes.
Operating on a college campus, where you have a captive audience, might be a successful niche, especially if you offer some of the art-house and foreign films that would appeal to college students but are not carried by the chain stores. If you were to start with about 1,500 square feet and 2,000 tapes, your inventory cost will be around $8,000 to $10,000. New releases run $10 to $12 a tape, and older films run about $3 to $4. One thing to remember is that much of your actual stock may be window dressing. You might find someone who wants to rent “The Sound of Music,” but we find that industrywide about 80% of actual revenue comes from new releases.
If you can construct your own shelving, you can save some money, or you can get pre-made slat wall paneling that is adjustable to fit your space. A distribution company like ours supplies all of the new releases for your store as well as the promotional materials that you need, such as movie posters and banners. Plan on reinvesting about 25% to 30% of your revenue into new releases, which are the main product that will drive your business.
--Brent Bowers, key accounts
sales manager, Video Products
Distributors, Folsom, Calif.
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If you have a question about how to start or operate a small business, mail it to Karen E. Klein, Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia, CA 91016, or e-mail it to kklein6349@aol.com. Include your name, address and telephone number. This column is designed to answer questions of general interest. It should not be construed as legal advice.
