Experts confident direct sales are here to stay

Sales and marketing specialists may disagree about much, but on the question of this week's interventions by Bank of Scotland and Direct Holidays, they were of one voice: The direct sales channel is here to stay, and will expand rapidly with e-commerce.

Some products are, of course, easier to sell direct than others. No-one would suggest setting up a website and telesales force to find buyers for ice-cream cones. The chief executive of the Marketing Institute, Mr John Casey, says it is significant that both Bank of Scotland and Direct Holidays - the Scottish company which announced this week that it is setting up a direct sales holiday business here - are service operations as opposed to ones offering physical products.

Underscoring his point, Ryanair and TicketMaster have just opened websites, shifting more of their service businesses away from retail counters, whether in travel agencies or record stores.

Ms Aine Cassidy, chairwoman of the Irish Direct Marketing Association, says financial services companies are now not only selling their products online and by telephone, they are tailoring their investment vehicles for this market, simplifying terms and conditions, and making the advantages of each product clearer.

In the United States, where there is a long tradition of mail order sales, customers do not find it too difficult to switch to telephone or the Internet, but on this side of the Atlantic there is still a hesitancy.

A survey in May, carried out by Amarach consultants, shows just 16 per cent of respondents in the Republic saying they expect that in the future they will do most of their banking on the Internet. Of the 11 per cent of those surveyed who used the Internet, more than two-thirds said they did research online but just one in 20 said they bought goods or services on the Web.

"Here we are into the realm of what influences a person when making a buying decision," says Mr Casey. "And no matter what the product or service, a lot of people have a natural reluctance to buy through mail order or telesales or the Internet. It is only a certain category of customer that is inclined to buy that way without some apprehension."

He says the people most likely to buy direct are those who do their homework about the product or service they want to buy: "In other words, someone who has a very detailed knowledge of fixed rate and variable rate mortgages, and how the products compare to one another and what exactly is on offer, will be able to make a very clear decision about whether a new offer is competitive or not."

Credibility is also key, he adds.

"Without making any value judgment, let's say for the sake of argument the new entrant was the National Bank of North Korea, I don't think they would do a lot of business. Whereas, with the Bank of Scotland, there would be an intuitive understanding that this is a reputable organisation," Mr Casey says.

Age and familiarity with technology also seem to be a factor, he says, with the young and technically-minded being more likely to purchase. But increasingly, he believes, there is an growing category of people willing to use direct sales channels.

"This is the thin end of a wedge that is going to become very broad very quickly. E-commerce is going to boom over the next few years because it is so convenient for the kinds of products it lends itself to," Mr Casey says.

Analysts say the take-up rate for new technologies is now faster than ever. Compare how long it took for businesses to adopt the fax machine and the speed with which they have taken up e-mail.

Another factor that has driven mail order and Internet sales in the United States but still acts as a drag here is taxation. Most direct sellers in the US are not obliged to charge customers sales tax, the US equivalent of VAT. This means the cost of shipping the product is usually "free".

With physical products, it is still relatively easy for European governments to impose customs duties, but with services purchased online taxation becomes complicated. VAT, for example, is supposed to be imposed at the point of sale.