How Mail Order
Changed
America's Shopping Habits

In an age when highways are crowded and shopping centers have gone upscale, more and more people are turning to mail-order and the convenience and bargains it offers.

The current interest in mail-order shopping is hardly new. Mail order has been popular for more than a century, in large measure because direct mail assures low prices nationwide.

In the 1880s, consumers outside major cities depended on local stores with small inventories. Such stores were free to charge whatever the market would bear, and since there was often no other nearby source of goods and supplies, consumers paid high prices for common merchandise.

Not only were local stores expensive, they were inefficient. Because they only served a small number of consumers, they could not place large orders. Without large orders, local stores could not get volume discounts that could mean big savings to consumers.

Enter mail order. Aaron Montgomery Ward started his catalog business in 1872 while Richard Sears mailed his first fliers in the 1880s. For the first time consumers were no longer captive. They could get attractive goods and prices whether they lived in the middle of Manhattan or a remote rural setting.

The contest between mail-order houses and local stores centered on three major issues -- price, inventory and assurances -- the very factors which made mail order houses successful.

On the issue of price, there was little doubt that mail order goods could be competitive.

The postal system allowed direct-mail companies to operate on a national basis. With a customer base that potentially included anyone with a mailbox, catalog companies could order in bulk, obtain huge discounts and then pass the savings on to consumers.

To see how this system worked consider the cost of bicycles. In 1897, according to Made in the USA, a history of American business by Thomas V. DiBacco, bicycles were selling from $75 to $100 -- at least until the public saw the Sears Roebuck catalog. Sears, which sold thousands of units per week, charged $5 to $19.75 depending on the model selected.

Not only did Sears sell bikes, it sold just about everything. In 1897, according to the History of the U.S. Postal Service, "Sears boasted it was selling four suits and a watch every minute, a buggy every ten minutes, and a revolver every two minutes."

Some mailers became so large that rather than buying from a factory at discount, they simply bought suppliers or created their own. In-house suppliers allowed mail-order firms to cut costs even further.

Not only did consumers want low prices, they also wanted variety -- 20 kinds of dresses rather than two. Here again, the enormous volume generated by leading mail order houses made huge inventories not only possible but also practicable.

But price and variety, while important, have only limited value if the goods themselves are shoddy or poorly-made. So the mail-order firms protected consumers with powerful guarantees.

Montgomery Ward was one of the first companies to offer a money-back guarantee, and the Sears Roebuck pledge of "satisfaction guaranteed or your money back" is one of the best-known commitments in American business.

Today the marketplace has changed and so has mail-order marketing. Now firms of every size use mail order and the result has profoundly changed the American marketplace:

• Prices must be competitive regardless of location. If a local merchant cannot supply goods at reasonable costs, then consumers can turn to the national market created by direct mail.

• Because postage rates are the same everywhere, because the cost of a stamp is the same in both Alaska and New York, all sections of the country can compete on an equal footing.

• The economies of scale which work so well in manufacturing are also possible in retailing, especially when a "store" has no geographic boundaries.

  The famous Maine firm of L.L. Bean, for example, shows how a company in a small community can market nationwide through mail-order. (It's worth mentioning that Guy Bean, L.L.'s brother, was the Freeport postmaster at one time.)

• Merchandise which may be "seasonal" and out of stock in one area may be available through catalog companies that serve a national clientele.

• Residents of rural areas can get the same goods as those who live in major urban centers. And with mail order, those who live in country settings need pay no more than individuals who reside in the heart of major metropolitan regions.

• Mail order allows individuals to shop at their leisure, at 10 PM or at 6 AM according to individual needs and desires, a value not to be ignored in an era where two-worker families and single-parent households are common.

• Mail order makes specialization possible. For instance, while there may not be enough demand in one community to support a store that sells only carved wooden ducks, a catalog going to millions of people nationwide can easily support the plants and people who produce such carvings.

• Mail order allows local businesses to compete with huge national corporations. A hardware store, for example, can target consumers in a 1-mile radius with direct mail. Such small mailings may not make sense for a corporate giant, but they can produce excellent results at little cost for a local retailer.

All in all, not bad for an industry that had it's modern beginnings a little more than a century ago with Mr. Ward, Mr. Sears and a few stamps.

Peter G. Miller is an image, marketing, and public relations consultant whose clients include selected national corporations, associations, and web sites. Mr. Miller can be reached at peter@boardroomarts.com