Advantages and Disadvantages of Mail order business
Advantages or Merits of mail order business
Mail order system offers the following advantages. They are
- Less capital Requirement
- A wide market
- Unusual buying power
- No risks of bad debts
- Efficient use of capital
- Managerial specialization; and
- Consumer convenience.
1. Less capital needs: Mail order business is known as shopping by post. Customers place orders by post. Goods are either received by value payable post (VPP) or by registered parcel. So, it is a direct method of selling products to ultimate buyers. This is a newer type of retail institution soliciting orders for goods by mail without any salesmen. Such an operation makes it possible for the mail order house to carry a smaller stock of merchandise. So, mail order houses enjoy considerable saving in the investment of capital.
2. A wide market: Modern mail order house finds no limit to the market range. It can establish branches at different places. The improvement in postal services has widened the market coverage. Now-a-days the mail order business is carried both nationally and internationally. Adoption of modern mechanical devices to handle orders and prompt supply encourage customers all over the country to buy by mail.
3. Unusual buying power: Large mail order houses buy in bulk. Sometimes, they buy an entire lot manufactured by the factories. So, they enjoy economies of large scale buying. Prices are charged less than those of competitors. Mail order houses owned by the manufacturers themselves are able to sell at competitive prices.
4. No risk of bad debts: Bad debts can be avoided to a great extent. In mail order business, a vast majority of the goods is sold for cash. Absence of credit system simplifies accounting records. The organization is relieved from the botheration of maintaining receivables. Credit is restricted to buyers who have credit worthiness. Moreover, credit is collected only in installments. So, bad debts are eliminated.
5. Efficient use of capital: Capital is efficiently used. After the orders are received, goods are mailed directly to the buyers. middlemen are avoided. So, huge stock of merchandise is not required. Mail order houses carry a smaller inventory. This results in saving in capital investment. As there is rapid turnover of stock, capital is not unnecessarily locked.
6. Managerial specialization: Large mail order houses enjoy managerial specialization. Routine matters are entrusted to subordinates. Matters of crucial importance alone are considered by the top management. It also works to be very economical. The proprietors themselves attend the customers.
7. Consumer convenience: Mail order business ensures convenience to customers. Consumers get their products without going out for shopping. A consumer can leisurely shop from a catalogue from the comforts of his / her house. It saves time as well as energy. Cheap postal facility justifies direct buying. Customers of distant locations find it easy to buy through mail orders.
Disadvantages or Limitations of mail order business
Mail order business suffers from the following limitations:
1. There is lack of personal contact between the seller and the buyer. It cannot meet the unexpected objections raised by customers. It cannot give personal advice and assurance that the goods sold by mail will satisfy the requirements of customers.
2. There is scope for fraud, inconvenience due to delay, misunderstanding of customers, etc.
3. Mail order houses are confronted with the problems of numerous correspondence, customer complaints, damage in transit, return of articles, excessive operating cost, credit policies, etc.
4. In mail order business, wide distribution of catalogues is essential. Colorful catalogues are expensive and are to be printed in advance. Supplementary catalogues will have to be issued to announce price changes and new offers.
5. Buyers have to rely wholly upon catalogues to know about the goods. They cannot inspect the goods before buying them.
6. After sale service is not extended to customers.
7. Sometimes, the mail order houses charge high prices for the articles sold.
8. Articles requiring demonstration cannot be sold by mail.
