The days of catalogue shopping are essentially over – or rather, they have been replaced by online retailing.
These days, home shopping, including mail order, increasingly means one thing: the internet.
According to market researchers Mintel, in 2003, catalogue sales accounted for 53% of the market. By the following year that share had plummeted to 25%. Meanwhile, the share of online sales almost quadrupled, from 9% to 32%.
E-commerce monitor Interactive Media in Retail Group (IMRG) says that online shopping now accounts for 6.3% of total retail spending.
In 2004, Britons parted with £14.5bn over the web, and the increase looks set to continue. November 2005 saw 24 million internet shoppers spend £2.253bn online – an average of £94 each – in the UK alone. It’s certainly big business.
Richard Perks, director of retail research at Mintel, says: “Home shopping retailers must admit that the days of the big book are over and that the great hope of the home shopping industry is, or should be, the internet.
“The internet is still seen by many as an exciting, new and convenient way to shop from home, while catalogues are seen as old fashioned and downmarket.”
Internet is the future
Former home shopping businesses are either steadily going bust or investing heavily in the internet – because it is the future for them.
It is not just the allure of a new medium that has brought shoppers to their computer screens in droves. Fewer people have the time to trudge around High Streets, shopping centres or out-of-town retail sheds in search of the perfect purchase.
For all the hype over the emergence of shopping as a leisure pursuit in itself, people are becoming less inclined to spend their valuable leisure time queuing at the checkouts.
Ordering your groceries, your clothes, your electronic equipment, or your music collection over the internet is now a viable alternative.
Catalogue shopping is effectively dead and to run a mail order business successfully, you need to be part of the online revolution.
One of the benefits of running an online retail business is that it requires very little in the way of initial investment, assuming you are not handling goods yourself.
You do not need an office or shop; all that is required is some high-quality computer equipment, a broadband internet connection, several phone lines – and a large dose of business and computer acumen.
Producing a catalogue (and distributing it to thousands of homes) is a huge cost compared to having a website and using email as a promotional tool.
It would only make sense if you already have deals with publishers/distributors and it is likely to add at least one zero to your start-up costs.
There are more attractions than simply low start-up costs. It is still possible for smaller, more targeted operations to be run part-time, at least in their early stages – allowing the wannabe online entrepreneur to keep his or her day job before abandoning a secure income for the risks of the marketplace.
You don’t even need to get involved in the day-to-day shipping or service provision; it is possible to sell goods through relationships or franchises with manufacturers and warehouses, delivering any items after the sale has been made.
Of course, this doesn’t just apply to merchandise; the largest slice of the internet market is still accounted for by the travel industry, and there are a host of web-based firms making profit out of flight sales or hotel bookings.
The main problems for anyone thinking of entering this sector are the increasing dominance of the corporate players – such as Tesco or Amazon – on the one hand, and the popularity of sites such as eBay on the other.
Finding the right niche is the key
It is nigh impossible for a small start-up to compete with the giants of online retailing, so finding a popular niche is the obvious route.
The key to success in this market is finding the right ‘niche’. It might be an area in which you have particular expertise, for example, a sport or leisure activity, or, if you are already in business – a service in which you already have know-how.
A modicum of nous will help you source goods or suppliers, and – more importantly – give you the enthusiasm to work on the site, the business and its supply chain and make it a success.
America’s National Mail Order Association (NMOA) believes that the success rate for start-ups in the sector is only 20% – a figure it says is mostly attributable to poor preparation and research. Within two to four years, however, thriving businesses can expect to break even, with profit coming a year or so afterwards.
Buying an existing business has its benefits – a quick glance through the company’s accounts will tell you how many sales are being made, and how frequently.
No matter how successful it is, it is worth considering the sector in which it operates. Is there any ‘sector-specific’ knowledge the current owner has which could mean a drop in sales after transfer to you? What are the future prospects for the sector? Are there any major league competitors about to expand into it?
Market research is as invaluable here as in any other type of business – it is only the medium of sale that is changing. And prices must be competitive, as in any market.
Operating a successful internet-based home shopping service could offer more than just profit. Retailers and other corporates remain acquisitive as they seek to increase their web presence – a strategy made even keener by recent poor performances on the High Street.
These tendencies are set to continue. The crystal balls of a majority of retail analysts see continued growth for the sector, with it eating up a bigger and bigger share of the retail pie.
Almost 70% of 25 to 34 year-olds have used the internet to buy something, and, as that generation gets richer, it is expected to drive the biggest change in UK retailing for decades.
