Mail merge requires a data source, containing data such as names and addresses, and a merge document, which contains codes called "fields" that correspond to fields in the data source. When you perform a mail merge, Word creates a copy of the document or label for each record in the data source.
Therefore, before performing a mail merge, you must have a data source of names and addresses to which documents will be sent.
A data source should not look like a series of address labels, with the name on top of the address on top of the city, state and postal code. The list below would not be a valid data source for a mail merge. However it is a directory which could be the product or result of a mail merge.
Instead, the data source needs to be a table, with columns representing categories of information (fields) and rows representing all of the information for one person (records). The data source below is a valid data source.
The data source can be a Word document consisting of a table. But Word is a poor data management tool. Working with databases of any size can be frustrating. You will be better served by using Excel or Access to manage the data.
For contact-related data, Outlook's Contact folders are well suited to serve as a data source. However, it can be difficult to share Outlook Contact folders, so unless you are familiar with how to do so, use Excel worksheets or Access tables to store data that will be shared by several users.