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Mail order, telephone, post, fax, the internet, interactive television... when it comes to home shopping, consumers are spoilt for choice. For retailers and fulfilment houses, such channel diversification has created many challenges, not least for those operating in the mail order and online sectors.

Last year, internet shopping overtook mail order as the most popular form of home shopping in the UK, according to recent research by Mintel.

"The internet is still seen by many consumers as an exciting, new and convenient way to home shop, while catalogues are often seen as old-fashioned and downmarket," says Richard Perks, director of retail research at Mintel.

But it is not simply consumer convenience that is driving trends in the home-shopping arena. Cost, technological developments, product types and the customer base are equally important.

Enabling consumers to place orders online can dramatically reduce costs per sale, as Nigel Swabey, chief executive of mail order catalogue business Scotts of Stow, explains. His firm boasts both online and retail operations.

"Our online business means we avoid the cost of the inbound order call and the customer effectively keypunches their own order. The variable cost of processing a web order is as low as two per cent of net sales, compared with about six per cent for telephone and mailed orders."

Mail-order providers are keen to develop online arms because their websites are accessible to people who are not on their mailing list and brands can provide more details about their products as space is not an issue.

Keith Jordan, head of fulfilment for distance shopping solutions provider Zendor, says that from a cost perspective, it's worth investigating an online offering.

"It's cheaper than having people sitting in a call centre, waiting for the phone to ring. And the online medium opens up more opportunities to cross- and up-sell to customers."

A multi-channel approach

But should traditional mail-order companies be actively migrating their customers to their online operations? The consensus among experts appears to be no. Simon Weigh, channel manager at Zendor says:"People tend to stick with the channel they are comfortable with. If you try to force them down one route, you are likely to lose them altogether. To extract as much value, you need to make as many channels available as possible."

Toy and game retailer Early Learning Centre ensures its mail order and online operations complement each other. This is because its products have a long shelf-life, remaining both in-store and online for up to six months.

But such an approach will not work for everyone. Clothing company River Island launched its catalogue in 2000, but five years on it has abandoned mail order in favour of a transactional website. Zendor's Weigh, which worked with River Island on both the mail order and online side, says "a paper-based offering became weak as River Island's stock changes every four to six weeks".

Integration is key

Businesses that are pursuing a multi-channel approach are investing heavily in technology that can seamlessly process orders, regardless of whether they are placed by telephone, post or online.

For example, in April, Marks & Spencer asked Amazon to help it integrate its website with its store and telephone operations. M&S says it wants to improve its website's speed, capacity and functionality.

"Getting the interface right is absolutely key. The first time the online order should be seen is when it is printed at the warehouse, ready for picking and packing,"says Andrew Wilson, founder of The Catalogue Consultancy, which specialises in mail order and e-commerce.

Peter Slee, operations director of customer contact and fulfilment centre Spark Response, says: "Integration is the name of the game. Online operations must reflect premised-based details. For example, stock figures displayed on a website must reflect actual stock holdings, in as near to real time as possible."

Many in the field, including Ian Dignum, commercial director at marketing support services company Prolog, says the more integrated the on and offline order-fulfilment process is, the better.

"I don't think any strategy should differentiate between the two," says Dignum. "In the past there might have been a slight delay between the fulfilment of mail versus online orders, but now we use the same platform for both channels. With online orders, you need sophisticated technology as it needs to integrate with your fulfilment provider."

Prolog uses Mailbrain, a multi-channel order-processing and fulfilment software package.

It monitors orders regardless of the channel they come from, generating lists at warehouses and tracking delivery paths.

While integrating mail and online-order operations may be an issue for traditional mail-order companies, Swabey believes they have a massive advantage over pure online players.

"Over the years, we have perfected our order fulfilment systems and as online transactions can be treated as just another channel of sales, orders can be streamed into the processing system very easily," he says.

The Catalogue Consultancy's Wilson believes that standards set by Amazon have pushed service levels for online shopping through the roof. On the other hand, he adds, people are more comfortable using the phone if they have complaints, because companies have proved themselves to be poor at answering email enquiries.

While the extent to which online shopping will overtake traditional mail order is still up for debate, brands are increasingly looking to offer consumers a multi-channel home shopping route.

The Mintel report concluded that the mail-order industry tends to see the internet as a threat, rather than an opportunity, and that although mail-order companies have the logistics and expertise to be able to make the internet the leading home shopping channel over the next decade, they show little sign of having the will to do so.

But with more consumers shopping online, mail-order firms may soon be forced to have a long, hard look at their order and fulfilment capabilities.

CASE STUDY: HOTEL CHOCOLAT

Chocolate retailer Hotel Chocolat, launched 12 years ago as a mail-order service under the brand Choc Express, has been increasing investment in its online operation over the last couple of years. It estimates that online sales can account for up to 40 per cent of revenues. Founder and managing director Angus Thirlwell is passionate about offering his customers a multi-channel approach and as well as mail order and online shopping, Hotel Chocolat has opened its first store in Watford.

"The proportion of sales through the internet has been growing steadily and investment in technology has given us the best payback. When we first launched online sales, orders were being faxed to us and then keyed in.

As our online sales grew, rekeying information in became a joke," says Thirlwell.

Integration of the order and fulfilment processes from the mail and online channels has been the answer. Hotel Chocolat uses an integrated e-commerce and back-office system from multi-channel business provider Elucid. The system was implemented in less than four months, despite the high degree of customisation needed, which involved migrating a sales-order history and customer database of more than 250,000.

Hotel Chocolat also sees the web as the fastest - and quickest - way to order and is keen to promote this to its customers by giving priority to online orders.

"People see the internet as the new kid on the block, so we've made a conscious effort to put it first. But whatever channel the orders come through, they are all integrated. We also have filters in place for orders from countries where there might be fraud issues - and we look at these carefully," explains Thirlwell.

HOME SHOPPING AND DIRECT MAIL TRENDS

Direct mail for home shopping has achieved a very high conversion rate, with four out of five recipients having responded by making a purchase at some time.

The majority of those buying from catalogues spend a relatively small amount - 64 per cent bought items between £1 and £50.

64 per cent of consumers say value for money is the main benefit of buying through direct mail, while 60 per cent say it's convenient.

80 per cent of consumers are either "very" or "quite" satisfied with the products they buy through direct mail.

According to Mintel, 32 per cent of people surveyed have ordered goods online in the last year. In the South, 32 per cent have ordered from catalogues, compared with 26 per cent in the North.

Source: The Direct Mail Information Service (DMIS) survey of 250 consumers and the Mintel report on Home Shopping, a survey of 1,502 adults.