Mail Order Houses: Meaning, Advantages, and Disadvantages

What are Mail Order Houses?

Some goods are made in a specific location, but their customers live far away from the place of their production. With the help of middlemen, these products can be made available to customers. However, to make the transaction more easy, short, and without the involvement of middlemen, Mail Order Houses are used. Under this system, the goods are purchased by the customer directly by mail. The goods are introduced to consumers with the help of advertisements and then interested customers place their mail orders, and the postal service delivers the goods to their homes. All transactions for sale and purchase, including payments, are made through the mail.

In simple terms, Mail order houses represent that form of retailing in which business transactions are conducted through postal communication, without any personal contract with the buyers.

Features of Mail Order Houses

The following are the features of mail order houses:

1. Trading through Mail: The order is placed and the goods are only received via mail, thus there is no face-to-face interaction between the buyer and the seller. These orders are delivered via value-paying post.

2. Trading in Cash: The customer is required to make prompt cash payments under this system upon receiving the goods. If the buyer doesn't make payment, the postal service returns the items to the seller. 

3. Trade without a Store: The seller can manage his business via mail so there is no need to establish a store in the marketplace. The work can be carried through godowns and workshops. The seller can create awareness among the buyers with the help of advertising.

4. Less Capital Required: A business can be started with a small amount of capital under this system as there is no need to invest in shops, stock of goods, and furniture.

5. Effective Advertisement: Mail order houses adopt modern advertisement methods to undertake their business without personal contact between the sellers and buyers. 

6. Wide Market: This type of trade has a very large market. The trade is not limited to a single country as the orders are received and completed through the mail.

7. Elimination of Middlemen: There is no need for middlemen in this business, like the multiple shops. Customers can purchase products directly from manufacturers.

Procedure of Mail Order Houses

1. Preparation of Mailing List:

Retailers in this industry must be more active. The seller has to directly inform the customers about himself and his products. By doing so, the seller compiles a list of potential buyers. The seller collects the information (names and addresses of the customers) with the help of documents like telephone directories, business directories, yearbooks, membership lists for various clubs, and public records.

2. Approaching Customers:

In this business, the business needs to make frequent and effective trading. In mail order houses, potential buyers are approached by the sellers through advertisements in newspapers or magazines, circulars, catalogues, samples, and invoices. Advertisements include all necessary details about the product like price, features, and terms of delivery.

3. Receiving Orders:

Interested customers send their orders through mail. Orders are recorded in the Orders Received Book. 

4. Dispatch of Goods:

Once an order is received, the seller arranges for the delivery of the goods. Goods are carefully checked to make sure they are delivered in compliance with the buyer's requirements. Provisions are made for the preparation of goods. They are packed appropriately, and a package is delivered to the post office.

5. Payments for Goods:

There are three ways to get the payment:

• In some cases, clients may be asked to pay in full in advance.
• Products may be supplied via Value Payable Post (VPP), in which they deliver goods to customers via postal service but only after full payment has been received.
• A bank may be used to send products, but the bank is allowed to deliver the product only when the customer has made the complete payment.

Suitability of Goods for Mail Order Business

Businessmen cannot sell all kinds of goods through mail order business. The characteristics of goods suitable for the Mail Order Business are as follows:

• The goods should be standardised and graded. 
• The goods should not be perishable.
• The goods should not be bulky as it would be difficult to handle them.
• The goods should be available in large quantity throughout the year.
• The goods can be easily transported at low cost.
• The goods should be capable of easy description.
• The goods should have ready demand in the market.

Some of the examples of goods traded through Mail Order Business are Beauty Products, Health Products, Office Supplies, Clothing, etc.

Advantages of Mail Order Houses

The following are the advantages of mail order houses:

1. Capital Requirement is Limited: There is no investment required for shops, furniture, or stock, as the business can be started with a small initial investment. Money is generally received along with the order in this retail trading method. If it is not received in advance, it's received along with the delivery of the items. Hence, little capital is needed to run this kind of business.

2. Elimination of Middlemen: Since the buyer and seller are in direct communication, middlemen are not required. It saves the amount of commission due to middlemen being saved for the sellers. 

3. No Fear of Bad Debts: Generally, the business has to face the problem of bad debts. But, there is no possibility of losses due to bad debts in this type of retail trade because all sales are made in cash. 

4. Wide Reach: The work is not limited to any one state or city. There is no set geographic boundary for the market, which may encompass the entire nation or even some other countries. This results in increased sales. This company can reach a large market because it can deliver goods to any location with postal service.

5. Convenience: In the mail order house system, the goods are delivered to the customer's door. Customers benefit greatly from this because they no longer need to visit the shop, which is very convenient. This saves time and money for the customers to visit the shop and purchase the goods.

Disadvantages of Mail Order Houses

This system also suffers from disadvantages which are explained below:

1. Lack of Personal Contact: There are greater possibilities of misunderstanding between the buyers and sellers as there is no personal contact between the two. The buyers cannot inspect the goods before purchase, and sellers cannot offer personalised services to the customers.

2. High Promotion Cost: The mail order houses business depends on advertisement to promote the products and to create awareness among the customers. The business must spend a lot of money on advertisements and other promotion methods to inform and convince potential customers to purchase their products.

3. No After-Sales Service: Since buyers and sellers are typically geographically separated and do not interact personally, there are no post-sale services offered in this industry.

4. Lack of Credit Facility: This system is based on cash sales. Customers with limited resources who wish to purchase items on credit remain deprived of these services. For this reason, the overall sales decrease.

5. No Quick Delivery of Goods: There is no speedy delivery of products to customers because it takes a considerable time to receive and process orders sent via mail. Customers who need products quickly, avoid using the mail order houses system.

6. Possibility of Abuse: Advertising is essential for mail-order businesses. Due to false claims and promises in the advertising, there are higher chances of being taken advantage of in mail order businesses. The goods provided may not be as described. There is no way to return the goods once they have been sold, even if they turn out to be defective.

7. Dependence on Postal Services: The availability of effective postal services is essential to mail order businesses' success. However, India's lack of postal infrastructure in many regions means that this type of business has limited prospects here.