Start Your Own Mail Order Business 6 tips to understanding the industry and clientele.

This article has been excerpted from Start Your Own Mail Order Business by Rich Mintzer, available from SmallBizBooks.com.

Before venturing into some of the mail order details, you need to look at the big picture, which means understanding that you are in the business of selling to consumers, whether it is people in their homes or their places of business. Therefore, some basic sales principles apply, including:

Supply and Demand: It's as basic as a sales principle gets. If no one wants what you are offering, you will not succeed in sales. You therefore, need to know if there is a market for your product(s) or services. Years ago, much of the mail order business was directed at getting products into the hands of people living in rural areas where such goods were not as readily available. By meeting the demand for such items, mail order flourished in this manner. Today, however, there are few rural areas in which you won't find at least a strip mall selling most of the popular conveniences. The demand for your product or services, therefore, comes from a wider scope of the population, and you need to seek out whether there is such a market and where it can be found. This means finding not only fishermen who will like your new fishing products, but also fishermen who are not already receiving catalogs from three other such mail order businesses that have beaten you to the punch. Demand means areas or markets that are underserved. A glut of companies selling the same type of items will reduce or eliminate the demand.

Lower Costs Mean Higher Profits: Again, it's very simple. You need to focus on products or services that will be cost-effective. This means spending a reasonable amount to purchase (or manufacture) the product(s) and market/advertise them, leaving you with a decent profit. It's all about profit margin and punching numbers is crucial before you start any type of sales business. In the world of mail order, this also means factoring packaging and shipping costs into your equation. While you may love glass vases, if the cost of wrapping them for shipping is greatly diminishing your profit margin, then perhaps this isn't the mail order product for you.

Return Customers Typically Account For 80 Percent of Sales: If you are in sales, you will soon learn that your steady customers are your bread and butter. It costs much more money to acquire new customers than it does to keep regular customers coming back. Therefore, you don't want to be the equivalent of the music industry's "one-hit wonder," debuting with one great product, after which you sink into mail order oblivion. Instead, you want to constantly present new offerings after your customers have purchased your initial product or service. For example, if you plan to start with a no-spill coffee mug for car cafe latte aficionados, you'll want to follow up with a no-splootch jelly doughnut. Or how about a fast-food lap tray? Whatever you choose, you'll want a new item that will entice the same customers who bought your first product. Preparing your marketing for product No. 2, while product number one is selling, is crucial for ongoing success. Remember, repeat customers are the ones who make your business a success. So much so, in fact, that experts insist you don't make any money at all off your first sale--that it's the return customer who secures your profits. As you'll soon see, a lot of time, effort and money goes into finding those initial customers. To lose them after a single purchase is bad business.

You Can't Sell What You Don't Have: Whether your inventory is sitting in your home, a retail location, a warehouse or a drop shipping location, you need to be aware of what you physically do and do not have in inventory (or have access to) before you can make a sale. In some cases, you will also need to know what you can and cannot sell legally based on federal or state laws. You will also need to know about interstate sales, especially in the mail order business. Finding suppliers that you can count on is a major step in establishing any type of sales business. Learn as much as you can about a vendor before ordering from them. Don't be lured by great prices if the reputation of the vendor is shady--do your research. By joining organizations, you can find out which vendors are winners and which ones may sell you down the river.

Don't Spread Yourself Too Thin: Specialization has made it very hard in today's marketplace to try to be a one-stop shop for all possible goods. For this reason you see fewer large department stores and more successful specialty shops that home in on specific products. Smaller specialty shops are typically run by experts in their fields. The late mail order consultant Maxwell Sroge of Maxwell Sroge Co. Inc. said, "If it wasn't for the improved techniques in target marketing. The increases in paper and postage costs would have destroyed the industry a long time ago."

These paper and postage cost increases--which have made printing and mailing catalogs more and more expensive as the years roll by--were responsible, at least in part, for the downfall of two of mail order's most time-honored icons, the Sears and the Montgomery Ward catalogs. Yet while these two pioneering icons went the way of the Roman Empire, other mail order marketers prospered. Why? They began to specialize and honed a target market, offering select groups of products to select clientele. Instead of spending vast sums of money on the mass distribution of booster-chair-size catalogs, they pared down printing and postage costs by sending out smaller catalogs with carefully selected merchandise directed to those potential consumers who were most likely to buy their particular products. The result? They made more profit per dollar spent than the bigger guys, and they're still around. Finding a niche is typically the way to position yourself in a highly competitive market.

Stay In Your Area of Familiarity: Keep in mind that establishing a niche does not mean that you sell only one item, but you do build on one theme, or keep your products in the same family. For example, a golf pro shop isn't going to do well selling dog food because customers who walk in wanting to buy tees and clubs aren't likely to buy kibble. The mail order customer who sends in for your first product, a hummingbird feeder, probably won't buy your next offering if it's something unrelated such as neon neckties. But if your next product is a home for unwed sparrows or a bat house, then you'll have that customer hooked.