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Offering Preorders: Selling items you don’t have (yet)

BY Vera Lim 9 Nov, "15

Can you sell items you don’t have yet? The answer is yes. By opening preorders, you’ll be allowing customers to purchase the product before it’s ready to ship (and in the case of sought-after luxury goods, even before it’s been manufactured). Opening preorders lets your customers get the products they want through advance reservations, without having to worry about these selling out. As a retailer, the best thing about preorders is that they guarantee a certain amount of sales and revenue, as you’d have already sold the goods before they’re even made available.

Why do preorders?

Every industry has room for preorders, from luxury designer goods to video games, and everything in between. For popular retailers (like Apple), the sales for sought-after products and new releases can quickly go from zero to peak demand upon launch. Part of the reason for Apple opening preorders (now with a seven-day lead time from the ordering to the in-store pick-up), is to allow Apple to tailor production and shipments for different locations according to local preferences.

Preorders also contribute to accurate forecasts, as by gauging the level of demand, you’ll be better equipped to plan initial shipments and/or production runs. You’ll know exactly what customers want and how much will be needed to meet the demand for a newly released product.

Which brings me to my next point…

Make the most of seasonal trends

Every wondered why fashion weeks always seem to take place almost a year ahead of the corresponding season? I mean, this year’s summer is barely over and we’re all already gauging the hottest trends for next summer.Fashion samples

Photo by AHLN

It all boils down to the long lead times needed. If you’re a fashion designer, you’ll need time to sketch out your interpretations of next year’s Spring/Summer trends and produce samples for S/S trade shows that take place in the middle of winter. Once you’ve accumulated orders for your designs, it’s time to get everything ready for summer! So that’s plenty of time to get everything shipshape and avoiding anxious retailers freaking out and breathing down your neck, insisting they need this now Now NOW!

I’ve heard of flip flop companies doing door-to-door wholesaling of their products in winter (which is funny for its incongruity), but stop to think about it and it makes perfect sense. Collecting preorders for flip flops six months in advance means companies can plan their production and ordering schedule to minimize the need to spend on storage.

As a retailer, you don’t want to be receiving shipments of gauzy summer dresses in the dead of winter -- that means you’ll have to dedicate warehouse space for inventory that won’t move for another few months -- which is pretty impractical (not to mention costly!). So when placing preorders for next season, you’ll want to set the arrival date of your purchase orders to just before the seasons change. We live in a time of fast fashion, where new collections are released every few weeks, so you’ll want your products to come just in time to make the most of these limited sales periods.

Risks of running preorders

Preordering sounds like a great deal for retailers - first collect payments from customers, then place purchase orders your suppliers. This way, retailers will be able to enjoy maximum gain with minimal investment… right?

In theory that’s true, but...

  1. Running your business with only preorders results in weaker branding.

    After all, when you’re running your business with stock photos from the supplier, you lose out the opportunity to create your own visual identity. I mean, just think about it: Many established brands do customized photo shoots for their lookbooks, staging these in a manner that reflects the brand’s own aesthetics.

    If you’re going to use stock photos that countless other retailers are using to hawk identical products, nothing sets you apart. And customers who are interested in the product will only care about where sells it for the cheapest.

  2. Beware lengthy turnaround times

    If it takes too long to produce the item you’ve put up for preorders, you probably shouldn’t offer it unless you’re selling designer goods (like an Hermes Birkin). As a retailer, making preorders for next season’s clothes makes perfect sense for the reasons outlined above. However, your customers can’t wait to receive their new products, and asking them to wait months before their purchases arrive and are shipped out to them is a surefire way to get them upset.

When running preorders, always make it very, very clear to your customers that whatever they’re purchasing is on preorder. Put these under a tab marked ‘Preorders’, tell them the likely arrival dates, and always keep your customers up to date and informed so they’ll be able to rest at ease knowing their purchases are being watched over by you!

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See Also:

What is Backordering?
How to optimise inventory turnover: 9 tips
Which Sales Channel is Most Profitable for your Brand?

     
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