Mail order is a form of large retailing in which buying and selling is carried out by post. They contact prospective customers by mail, receive their order by mail and make their deliveries by mail. It involves the use of specially prepared catalogue that presents the retailer’s products both visually and in writing.
Payment is either cash with order, cash on delivery or by instalments. This form of trading is very common in the developed countries of the world which have well developed postal service system.
Features of Mail Order
The distinguishing features of a mail order firm are:
- Shopping by post: Shopping is usually carried out by post.
- Intensive advertising: It requires considerable or intensive advertising. The use of expensive advertisements is because buyer and seller need not see the goods physically nor inspect them.
- Peculiar transaction: It is particularly peculiar with cash on delivery (C.O.D.) transaction and cash with order (CWO) terms of payment.
- Deals on durable goods: It is more suitable in dealing on consumer durable goods only.
- Elimination of middlemen: It is one of the means of by-passing the wholesaler and retailer by the manufacturer.
- Attractive packaging: Packages are usually to customer’s tastes.
- Use of catalogues: It makes use of catalogues.
- Home delivery: Goods are delivered at the buyer’s destination.
- Warehousing services: It maintains large warehouse.
Advantages of Mail Order
- Advert opportunity: There is opportunity for advertising through catalogues.
- Provide credit facilities: They usually provide credit facilities to customers.
- Reduction in bad debt: To the trader, the risk of bad debt is reduced as goods are sold on cash on delivery.
- Availability of postal services: Goods can be sold in both rural and urban areas where there are post offices.
- Provide convenience for customers: Mail business provides convenience for customers who cannot visit the office during opening hours because of the nature of their jobs or the distance involved.
- Direct link with producer: Customers have the opportunity to buy in large quantity directly from the producer which help to reduce price.
- High profit: The operating profit margin is very high.
- Inventory level is minimal: The inventory level is minimal.
- No cost of exhibition: Fixtures and display are not needed.
Disadvantages of Mail Order
- High cost of advertising: The cost of advertising is very high.
- High cost of postage: The cost of postage is very high for the retailers and the buyers.
- Absence of personal contract: There is the absence of personal contact between buyer and seller.
- Catalogue may be misleading: The pictures and descriptions in the catalogue may be misleading.
- Time wasted: Time is wasted while waiting for the goods to arrive.
- Method not suitable for all goods: Not all goods can be sold using this method of selling.
- Absence of physical inspection: There is the absence of physical inspection of the goods before purchase is made.
- Huge capital: It involves large amount of capital.
- High risk of losses: Goods can be lost or damaged in transit.