One of the most challenging aspects of wanting to purchase a product that is not yet in stock is the waiting and anticipation. When leveraged effectively, this anticipation can serve as a potent catalyst for purchase decisions.
At the same time, if left untapped, you may end up with customers losing interest and moving on to other stores.
This is where pre-ordering can be a valuable strategy to consider and implement. With that in mind, let us learn what a pre-order is and how it can be used to maximise your sales and revenue.
Understanding Pre-Orders in eCommerce
Have you ever waited for a product so eagerly that you wanted to be among the first ones to order and get your hands on it? Well, that’s what preorders or pre-orders are designed for.
Pre-ordering is a critical option provided by online stores, allowing customers to order products before they are restocked or released.
This is a popular and effective way to boost sales for products popular among customers; however, since pre-ordered products are typically paid for in advance, they come with an availability date associated with them.
In most cases, preorders are offered for products that have not been released and aim to prioritise customers who sign up for them, helping online stores manage the product demand better.
6 Pre-Order Benefits To Consider For Your Online Store
Now that we know what preorders are, it is worth looking at the reasons that make it such a good strategy for your store:
1. Strengthen Demand Forecasting
Accurately gauging customer demand is crucial in ensuring that the needs of both customers and businesses are adequately met.
By analysing the pre-order volumes, you can accurately adjust production levels, refine marketing strategies and optimise inventory levels to align with customer requirements and interests.
You can also implement a data-driven approach to reduce the risk of stockouts while preventing excess inventory. By gauging and forecasting demand accurately, you can estimate sales for pre-ordered products and ensure you don’t overstock them.
2. Improve Cash Flow
When you ask customers to pay in advance while pre-ordering products, you are generating a massive influx of cash even before the product becomes available in the inventory.
Such early revenue generated from pre-orders can help not just cover production costs but also improve your financial liquidity.
As a result, you can reduce any financial strain on your business and draw up more accurate forecasts and resource allocations owing to your access to actual product demand.
When combined, all these pre-order benefits can contribute to streamlined and improved cash flow in the business.
3. Generate Excitement for Products
Grabbing your customer’s attention has become challenging than ever, considering the rise of targeted ads and social selling. To be exact, you have only 8 seconds to steer their buying journey in a specific direction. eCommerce retailers must work harder to attract customers and convince them to buy products.
Starting pre-order sales for specific products can help you build hype around your store, especially when combined with the scarcity principle.
For new product launches, opening it up for pre-order announcements builds anticipation and boosts its visibility and demand even before it is in stock.
4. Create Market Differentiators
While pre-ordering products that are newly launched or just about to launch is quite common, facilitating back orders and pre-ordering while the product is being restocked is less frequent. However, offering pre-orders for these latter situations is rare, making it a unique market differentiator that sets your business apart from your competitors.
Mellow, a smart kitchen appliance company, created a high-tech solution that will help customers navigate their daily lives, and reached out to a bunch of reporters to promote their pre-order campaign for the product. As more reporters and publications picked up the story, Mellow was able to generate over $64,000 in pre-order sales within just three days.
5. Boost Engagement and Satisfaction Among Customers
Customers often have limited control while purchasing a product, but giving them the option to pre-order makes them active participants in the purchasing process and elevates your eCommerce user experience.
When doing so for a product yet to launch, you can expect frequent customer visits and higher engagement on your online store.
What’s more, pre-ordering options can make customers feel like they have guaranteed access to the product and are in the queue to purchase it, boosting satisfaction levels.
6. Increase Revenue and Sales
New products can be tricky to move off the shelves, especially if in a highly competitive niche or if your brand is relatively new.
Plus, most customers are used to getting access to products with a single tap, so if a product is unavailable or out of stock for a long time, they will move on to the next store that sells it.
Pre-orders provide extra buffer time to restock products while locking in more sales before the inventory is replenished with the product.
This strategy helps you prevent potential loss of sales and revenue and generate consistent sales even when the product is temporarily unavailable.
Moreover, you can set the payment method as upfront or pay later and tweak it to align with your cash flow needs, and even resolve any eCommerce mistakes on your online store to boost sales.
How Do Pre-Orders Work?
We have now learned about the primary benefits you can gain from implementing pre-orders in your online store.
If you feel it is the right move for your business, you must be wondering — how does pre-order work? After all, you must get your pre-ordering campaigns right if you truly want to capitalise on the strategy and make the most of it.
With that in mind, let us look at the three steps to be followed in a typical pre-ordering process:
1. Marketing
For your pre-ordering campaign to be fully effective, you must conduct thorough research on the target audience and their preferred payment methods.
You must also take this time to understand the social media channels you should utilise to promote your pre-order advertising campaigns.
Then, you can run the campaign, activate the pre-ordering option for customers in the days leading up to the product launch and promote it on social media platforms to increase traction.
2. Communication
Effective communication plays a pivotal part in ensuring that the pre-orders you have received are properly managed.
You must keep your customers informed about how pre-ordering works, and updated about the status of the products they have pre-ordered, and let them know the estimated shipping and delivery dates as soon as you have the necessary information.
Even if it takes longer than you anticipated, keeping your customers well-informed will help boost transparency and trust in your processes, which your customers will appreciate.
3. Shipping & Delivery
Once you have your pre-ordering campaign and communication strategies in place, you can start focusing on the steps to take once the product is in stock and ready to be dispatched.
If you are dealing with a smaller pre-order volume, you can easily opt for self-fulfilment, but if you are dealing with a larger volume, you may want to seek the help of a third-party logistics (3PL) provider who can take the whole fulfilment process off your plate.
3 Pre-Order Methods You Should Know About
Now that you know how do pre-orders work and how to navigate highly effective pre-ordering campaigns, let us look at the eCommerce pre-order methods that you should know about:
1. Pay Now
The Pay Now method involves collecting payment for a product at the time it is being pre-ordered.
Since it guarantees purchase, this option is the most popular pre-order method and is quite easy to set up as long as you have an effective payment solution implemented on your website.
However, in some countries, selling out-of-stock items is considered illegal, pushing them to opt for the Pay Later option.
2. Order Now, Pay Later
Offered by popular marketplaces and eCommerce platforms, the Order Now, Pay Later option involves pre-ordering the product and deferring the payment till the item is shipped.
This is a great option if you want buyers and sellers to have the option of cancelling their order.
3. Crowdfunding
Pre-orders generally pay for the production and shipping costs incurred by manufacturers; however, in other cases, businesses may opt for crowdfunding to arrange for the necessary finances.
While this option does not come into play for eCommerce businesses, most manufacturers use this option to fund their product development and provide equity or rewards in exchange.
When Should You Not Consider Pre-Orders?
While pre-ordering emerges as a great sales strategy and a proven way to boost the average order value, there are certain situations in which you must not consider pre-orders.
Once you know how do preorders work, you must ensure your business does not face any of the following situations:
1. Incompatible With Online Marketplaces
You must consider pre-orders only when you sell your products on well-known online marketplaces such as Amazon and eBay.
These marketplaces have the necessary infrastructure for processing pre-orders and need you to adhere to certain stringent policies and regulations.
If you are unable to adhere to these policies or find yourself incompatible to their rules, it is best to avoid creating a pre-ordering campaign in the first place.
2. Excessive Dependence on Manufacturers
If you are utilising the pre-ordering option to facilitate the process of manufacturing a product, you need to first ensure that your manufacturer can actually deliver once they receive the funds.
Choosing a reputable manufacturer will help you prevent any issues in the product, but if you are completely at their mercy, enabling a pre-order option may not be the best choice.
Concluding Remarks
While it is not uncommon, pre-ordering is a popular sales strategy implemented by online retailers when they want to sell products that are not yet in their inventory. Whether they are out of stock or yet to launch, pre-ordering ensures you don’t miss out on potential sales revenue and helps you boost engagement and satisfaction among your customers.
Contact us to get professional assistance from an experienced 3PL provider in navigating and fulfilling pre-orders.