Growth of Direct Marketing and Electronic Business

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Sales produced through traditional direct-marketing channels (catalogs, direct mail, and telemarketing) have been growing rapidly. Whereas U.S. retail sales grow around 3 percent annually, catalog and direct-mail sales are growing about 7 percent annually. These sales include sales to consumers (53 percent), business-to-business sales (27 percent), and fundraising by charitable institutions (20 percent). Annual catalog and direct-mail sales are estimated at over $318 billion, with per capita direct sales of $630.2

The extraordinary growth of direct marketing is the result of many factors. Market "demassification" has resulted in an ever-increasing number of market niches with distinct preferences. Higher costs of driving, traffic and parking headaches, lack of time, a shortage of retail sales help, and queues at checkout counters all encourage at-home shopping, as do 24-hour toll-free telephone order hotlines and Web sites. Convenient next-day delivery via Federal Express, Airborne, and UPS has made ordering fast and easy. In addition, many chain stores have dropped slower-moving specialty items, creating an opportunity for direct marketers to promote these items directly to interested buyers. Also, direct marketers now have the computer power and the detailed data to cost-effectively single out the best prospects for their products. Increasingly, business marketers have turned to direct mail and telemarketing as an alternative to the rising costs of reaching business markets through the sales force.

Electronic communication is showing explosive growth, with Internet traffic doubling every 100 days. Millions of Web sites are already open for business, with more coming on-line every day. Electronic business is the general term for buyers and sellers using electronic means to research, communicate, and potentially transact with one another. Electronic markets are sponsored Web sites that (1) describe the products and services offered by sellers, and (2) allow buyers to search for information, identify what they need or want, and place orders using a credit card. The product is then delivered physically (to the customer's residence or office) or electronically (software and music can be downloaded to a customer's computer).

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