Direct to the consumer; a blend of direct marketing and traditional in-store selling can increase sales

FOR ITS FIRST plunge into marketing in 1978, a company that makes and markets silk clothes ran a color ad in a women's magazine. The ad solicited mail roders for a single item--Royal Silk's $22 blouse.

Three thousand orders came in.

Royal Silk learned first hand the power of direct marketing. Last year, according to a Direct Marketing Association study, at-home mail and phone orders brought in $170 billion to retailers, double the amount of five years before.

Traditional retailers are using the effectiveness of direct marketing techniques, sending out catalogs and even moving into newer technologies using computers, phone lines and videotext-two-way television ordering.

Direct marketing retailers are also trying out stores, confirming a finding in DMA's study that people who order at home will also go into stores, and vice versa, depending on needs.

Royal Silk, after more magazine ads and catalog mailings, found that customers were dropping by its Clifton, N.J., offices to look at merchandise. To satisfy these customers, the firm opened a 15,000-square-foot retail outlet on New York's Fifth Avenue. The store was breaking even in six weeks.

Today the company has four retail outlets, runs nationl magazine ads, mail 14 million catalogs yearly and reaches customers directly through videotex.

About 12 cents of every dollar coming to retailers flows in through the mail. However, direct mails sales are growing so fast--50 percent faster than traditional retail volume--that some industry observers expect direct mail to be pulling in 20 percent of general merchandise sales by 1990.

As Royal Silk Vice President Gerry Pike comments, "Smart retailers will see that and ask why they should be losing 12 percent of the market. And smart catalog people will wonder about losing 88 cents on the dollar." Retailers can gain new sales with direct mail, he says, and catalog or direct mail sellers can add legitimacy to their operations with a retail outlet.

"Retail and direct marketing aren't antagonistic," Pike adds. "They both work and have merit."

Aaron Selber, Jr., president of Selber Brothers. Inc., agrees that direct mail helps retail sales.

"We're doing an increasing amount of direct mail," says Selber, who oversees a chain of seven specialty apparel stores from his Shreveport, La., headquarters. Mailings to charge account customers and rented lists "pique interest" in his stores, he says.

Direct marketing appeals to needs of today's consumers. People are less interested inn going into stores, because of traffic and parking snarls. And with the dramatically increased number of two-income families, shoppers find their time increasing valuable.

Today's consumers expect marketing to focus on their specific desires.

For retailers who find the cost of opening new stores, remodeling current outlets, increasing inventories or training professional salespersons to be increasingly difficult, direct mail matches their needs with the desires of their customers. As Royal Silk's Pike says, the cost of catalog mailings is "cheaper than building stores and opening them."

Retailers can sell products that are in stock that appeal to customers' special desires. Well-written direct mail pieces are effective sellers and can prompt immediate orders or encourage customers to come to a store to see the products.

There are, however, differences between direct mail and in-store retailing. Denver-based direct mail consultant Maxwel Sroge says that people taking phone orders must be able to say more than "What do you need toady?" Answers should be immediately availabe on questions concerning what's in stock, similar substitutes for out-of-stock items, available colors and how those colors match with other items you are offering.

Merchandise choice is also essential. Although some of the new electronic media can be used for mass marketing, direct mail usually appeals to specific market segments. "Choose a category of products you're experienced, in, or a market segment you can serve well," Sroge advises.

Motivating people to mail or call in an order requires an outstanding product or offer, like Royal Silk's one simple silk blouse at a very good price.

Many retailers start by mailing to people who already know them--their charge account customers--and add to that by purchasing lists of past direct mail buyers. Self-mailing ads--simple cards or folders--and stuffers in charge account statements are common examples of direct mail that can both bring in sales and encourage store traffic.

With a microcomputer, retailers can classify their charge customers. The primary classifications usually inclde the time since the most recent purchase, frequency of purchases over time and average amount spent.

DIRECT MAIL should then focus on customers at the top of all three categories, since they are the best prospects. Special offers can be used to urge less frequent buyers into action.

Catalogs are an extension of direct mail. Bloomingdale's started sending catalogs after finding that mailings designed to increase store traffic actually resulted in considerable phone and mail sales.

Bloomingdale's By Mail evolved into a separate profit center, second in dolar volume only to the chain's flagship store in New York.

Unique merchandise, specialized fulfillment and a financial commitment to direct marketing are keys to the success of both Bloomingdale's By Mail and Royal Silk. Such factors are important because the economics of catalog sales are such that money is made not on first-time order but on repeat business.

"The rate of failure is high in direct mail," says consultant Sroge. "Compared with the cost of retailing, it's easy to enter, but most mail order businesses lose money the first three years."

Retailers generally use advertising to increase store traffic, rather than to solicit sales directly. Atlhough some of the electronic media can generate sales, magazine ads with coupons are a more productive medthod.

Magazines offer flexibility. You can choose local or national audiences. Special interest magazines allow you to target your market carefully.

Advertising costs less than direct mail, but also brings in fewer responses. Gerry Pike says that a Royal Silk ad pays for itself when one tenth of 1 percent of the magazine's readers place an order. If the response rate rises to one fifth of 1 percent, Royal Silk makes money. In comparison, Royal Silk catalog mailings require a 2 percent response to break even. Catalogs can, however, sell higher-priced items.

ELECTRONIC SYSTEMS have limited uses. Cable television advertisers, for example, never know how many viewers are actually watching, altough over 40 percent of American households now have basic cable service.

Videotex allows two-way communications and graphics presentation. It links information in a computer to television sets by using phone lines and a decorder.

CompuServe has a videotex service for personal computer owners. An "electronic mall" is part of the CompuServe database, which goes to over 150,000 consumers. "It's a great equalizer," says Product Marketing Manager Mary Vaughn. "A small store can strike out into a national market at low cost."

R.R. Donnelley's Electronistore and Comu-U-Card's The Shopping Machine are designed for use by retailers. Without taking up much space, the machines can offer new product lines or extensions of current lines. Electronistore President William McDonald says the machines should bring in $150 to $300 per day in sales, while taking up 45 square feet of floor space. Electronistore is making its machines available for lease this spring.

Direct marketing can expand a store's merchandise offerings or let the store go beyond its geographic setting to reach new customers. It can collect information on customers, to help retailers choose merchandise and delivery systems meeting different customers' needs.

"If you set yourself apart," Sroge says, "you give people a reason to come to you. The world will always respond to a great merchant."

COPYRIGHT 1985 U.S. Chamber of Commerce
COPYRIGHT 2004 Gale Group