Response rates fall in ChinaGUANGZHOU, China - Response rates to direct mail offers in China have fallen sharply this year as the economy cooled off and the Asian economic meltdown began to be felt.
Paul Condrell, a young American who has built up a mail order business in China over the past decade, said that response rates began to drop across the board last fall.
"We weren't sure if it was temporary or what, so we continued to mail aggressively into the beginning of 98, but by then it was obvious that the downturn was not temporary," Condrell said.
He and his wife Stacey manage a dozen or so catalogs that range from sewing patterns to tools, books and stamps. The umbrella company name is US-China Investment Corporation.
"I believe the downturn is about 30 percent Asian crisis related, 30 percent fatigue in the economy, and 40 percent due to nationwide layoffs in state-owned companies and government ministries which has left even those with jobs spooked out of spending.
"We've been mailing conservatively ever since with acceptable results, but no growth. We've been using the slow time to improve operations and marketing plans, improvements which have brought improving response rates, albeit not any higher average order yet," Condrell said.
He did note one big improvement: a post office has opened right next door to his office. "This has helped us improve delivery times drastically and at the same time insure that packages and catalogs arrive in better condition.
"The bags leave from next door and go direct to the city of destination, eliminating one and sometimes two sorting steps out of the process. We've applied for a unique postal code which will help us receive mail faster. Most of our orders still come in by mail."
On the plus side, Condrell pointed to establishment of "800 numbers which work." 800 numbers have been available, he said, but they could only be dialed from China's 8 largest cities, now "they can be dialed from over 90 percent of the country."
On the minus side, this being China, is the fact that "no one understands 800 numbers or believes that they are really toll free. The phone company isn't doing much advertising."
Still, Condrell has been testing his toll free number for several months and plans to roll it out later in August.
The crackdown on direct selling imposed earlier this year - it barred people like Amway from selling door to door, although the ban has lately been eased - has had "no effect on direct mail marketing," Condrell said.
The one exception has been positive. The ban drove some former direct sales companies to consider converting to direct mail.
However, the Chinese government has begun to look at regulations governing direct mail. The Chinese equivalent of our Department of Commerce, is about "to promulgate regulations of mail order companies in Guangzhou, perhaps as a prelude to national regulation."
Condrell has sought to blunt the possible impact of new regulations by sharing the US DMA guidelines on mail order with Chinese authorities. "We should know soon what they will adopt," he said.
He has also published a "How to be a Smart Mail-order customer," a booklet he adapted from the DMA publication of the same name and offered it free in the spring 98 catalog request ads. "The response was encouraging, although it didn't pay for itself."
The Chinese version of the Better Business Bureau - known as the "China Consumer Committee" - has been helpful to the Condrells over the last year. "They allowed us to use their consumer complaint hotline as a mail order complaint hotline.
"We have been publishing the complaint number in our catalogs to reassure customers they have somewhere to go if we don't live up to our word. Sure enough, we've received complaints, but of course they are resolved quickly.
"The problem is that many customers are ready to believe they are being ripped off, so they don't even want to call the company to resolve it, the lack of trust is that deep."
Magazine ads are losing their pull and "have continued to deteriorate in quality." Lower circulations cost more and prospecting by magazine ads "is becoming less and less cost effective."
Lists haven't improved much, Condrell said, largely because of "mutual apprehension among companies in the field. We've tried a number of 'lucky draw' lists with poor results."
Finally, Condrell was critical of USPS efforts to bring US catalogers into China as they did into Japan "with such good results. Unfortunately, China is not Japan, and their plan is fatally flawed."
For one thing, he said, USPS only has access to three cities in China - Shanghai, Guangzhou and Beijing - and for another the cost of mailing parcels, about $15, "dwarfs the realistic average order size of Chinese customers."
Condrell also advised US mailers to mail from China, not from offshore, citing costs - 75 cents to mail a catalog from the US Vs 4 cents within China.
Use of Chinese currency is a must, since the Yuan is not convertible, mandating a presence in China. Catalogs should be in Chinese not in English. Finally, there are no mail order qualified customer lists available.