A Case of Fenton’s Inc (MR)

Fenton’s Inc., was a large department store chain located in an East Coast city. Fenton’s had a good reputation for providing quality merchandise and good service. Annual sales exceeded $400 million but were growing only at a moderate rate.

Jane Lamp, manager of marketing research, was asked by the vice president of planning and development to investigate the size and character of the market for merchandise purchased by mail, either through catalogs or through direct mail solicitations. The vice president wondered if Fenton’s could improve its sales growth by developing a successful mail order business. He felt that Fenton’s good reputation might be able to support sizable mail-order sales from its own market area and perhaps even from the surrounding regions.

A review of past research findings from projects carried out by Fenton’s and from numerous secondary sources revealed two important aspects of mail order business. Reportedly, it didn’t have a good reputation. People thought of it as of fashioned, as a way to sell to farmers. Some people didn’t trust the mail order business, believing it to consist of numerous operators whose business practices might often be questionable. Many people considered the mail order business inconvenient due to the uncertainty as to when the merchandise would be delivered or even if it was in stock due to uncertainty as to the condition and quality of the merchandise when it arrived and due to the need to pay in advance in many cases.

The second important aspect of the mail order business was that it was big business – estimates were that mail order sales exceeded $25 billion a year, which amounted to 10-12 percent of all general merchandise sales. Reports also indicated that it was growing and was highly profitable. It was estimated that mail order sales per capita exceeded $100 per year, and that significantly more than half of all adults made purchases through the mail. There was some evidence that as few as 25 percent of all adults accounted for the bulk of all mail order sales. Some of the most popular items being sold by mail, which were also of interest to Fenton’s were shoes and clothing house wares and home furnishings, sporting goods and equipment, books and records and specialty and gourmet foods.

The size and growth of mail order sales appeared related to a number of social and economic changes: people were probably making fewer shopping trips because of the rising cost off gasoline; population had been shifting out of the cities to far suburbs and even to rural areas, where there were fewer shopping facilities and more households had two adults working full time so it wasn’t easy fir them to shop. The growth in mail order sales may have been encouraged also by such developments as the increasing difficulty in obtaining good store personnel, more attractive and more informative catalogs, an improvement in service by a number of mail order businesses, and the ready availability of numerous mailing lists.

Lamp also found that certain factors tended to limit the future growth of mail order sales. Research had shown that, for many shopping was a social experience in which the item purchased was often of secondary importance. To such people, shopping by mail would be an unacceptable substitute. Other shoppers must see and touch the merchandise they’re buying, and often shoppers want the assistance of a sales clerk when making a purchase decision. In addition stores offer supplemental services that shoppers want and that cannot be offered by mail order.

When Lamp reported her findings to the vice president of planning, he was impressed with the size of the mail order market and the fact that it represented 10-12 percent of all general merchandise sales. He even remarked that if Fenton’s could build a mail order business to about 10-12 percent of its retail store sales, it would represent approximately $50 million per year. He then gave Lamp approval to develop specifications for research to identify the extent to which a mail order business would represent an opportunity to Fenton’s; who the target market(s) would be; what products they would purchase by mail; and what characteristics they would like in the mail order service they would patronize. The vice president stressed that the mail order service should be designed to bring in new business and not take business away from Fenton’s regular retail sales. He also indicated that Lamp would have a budget of about $50,000 for the research.

Lamp’s first step was a review of past effort at identifying different types of shoppers. One approach classified all shoppers into four groups: those who find shopping a pleasure; shoppers who are conservative buyers; impulse buyers; and shoppers who find it difficult to get to a store. Lamp judged that shoppers in the first two groups would have little interest in purchasing by mail because either the act of shopping or the need to actually see the product was very important to them. On the other hand, she reasoned, impulse buyers might be good mail order customers if the catalogs and brochures sent to them were eye-catching and attractive. She also felt that the last group – shoppers who find it difficult to get to a store – would be potential mail order customers because both adults were working or they lived far from good shopping facilities, or there was a parent with an infant and other very young children.

Lamp also found a source that classified shoppers according to those who preferred to shop by mail and did so, those who would like to shop by mail but didn’t those who didn’t prefer to shop by mail but did so for one reason or another, and those who preferred not to shop by mail and in fact didn’t. While the first and third groups were important to her research, the second group could be important if the research could identify what it would take to actually get them to shop by mail.

Lamp concluded that there might be five types of shoppers to be identified by the research. Both impulse shoppers and shoppers who had difficulty in getting to a store should be studied to determine their potential as mail order shoppers. In addition, people who did shop by mail, both those who preferred to and those who didn’t would also have to be studied to find out who they were, what they purchased by mail, and what kind of mail order service they preferred. The group that would like to shop by mail didn’t would also have to be studied to determine how it might be motivated to do so.