What Exactly are Retail Preorders?
Thursday, October 25, 2018

What Exactly are Retail Preorders?

Retail preorders are the sales of an item you do not currently have in inventory. This happens when new products are announced, but not yet released for sale. An example is in the video gaming industry. Often new games will be announced long before they are released to the public. However, the gaming vendor may already want to sell systems to its following. Consequently, retail preorders are accepted and then fulfilled after the new product launch. A retail preorder allows a customer to be the first in line to reserve a particular product. Additionally, it lets the retailer lock in orders for goods. In the same way, it also gives the manufacturer a good demand signal on the number needed for public availability. All this before the product release date.

Who Uses Retail Preorders?

Flower Embroidered Sweater Medium Size Preorder Call to ActionRetail preorders are not specific to an industry sub-sector. Preorders are popular in the video gaming industry. However, other retailers like luxury goods, fashion, footwear, and electronics can also use this feature. Apple has been famous for its use of preorders on its hot new products. It has given them the ability to adjust their production of the different Apple products. Consumers in one region may have a preference for sleek black iPhones, whereas another region may prefer classic white. Preorders allow Apple to determine where to ship different goods, without the guesswork.

 

Related: Distributed Order Management (DOM)

 

Why Allow Preordering?

Retail preorders let you lock in sales. It gives customers the opportunity to reserve the items they want. This while also giving them the pleasure of knowing they will be first to have certain goods. Furthermore, it provides a good estimate on customer demand for the new merchandise. More importantly, this makes planning much easier, for the retailer, the category manager, the merchandiser, the demand planner, and the manufacturer. In addition, with clear demand signals, the retailer can allocate preferred product styles to certain regions. That too helps with the overall efficiency of routing to where the demand will be.

How to Use it?

Your order management technology does have to be equipped to be able to use a feature such as retail preorders. A first step is to ask your vendor if your system has the ability to accept retail preorders. If it does, ask for a demo of how to use it, or how to configure your system to enable it. Then set up the channels where you will allow retail preorders, and enjoy the advantages of preselling.

 

What to Look for?

Offering preorders in your order management system should allow:

  • Regional Scheduling / Release Timing (pre order dates)
  • Bundling of Products
  • Support for Early Adopters (Kickstarter type pre-orders)
  • Scalable and manageable solution

If your current system is not providing these, contact us at OrderDynamics. We will be pleased to discuss the powers of a robust DOM (distributed order management) system. These four elements will be described further in a following post on Order Management Preorders.

 

Read More: 11 Things to Avoid in Order Management Systems

 

Balancing Your Risks

Your preorder is confirmed on a cellphone, notify me call to actionAs a retailer, there are two serious things to consider with retail preorders. First, you will be selling vaporware. You will only be able to sell on the standard product photography or graphics provided. There is little chance of differentiating the product for your retail brand. Done too often, this can erode your retail brand value proposition. In effect, it could give customers the perception that your brand is merely another commodity reseller.

Second, be aware of the time gap between your preorder sale, and product delivery. There is a certain sweet spot that is ideal. This sweet spot will vary with the retail sector, the brand, the style, and the product. Of concern is taking retail preorders that take many months to fulfill. It can create discontent with your customer base. If it erodes your own brand, you may want to consider how long in advance you accept your preorders.

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Final Tips

Always make sure your customer is perfectly clear about the delivery expectations on retail preorders. When possible inform them of the expected delivery dates. Failing to do so, will end up with disgruntled customers. But, done well, it can help your business tremendously, giving you visibility to what is coming.

 

Author: 

Charles Dimov - Director Marketing OrderDynamics

 Charles Dimov is VP of Marketing at OrderDynamics. Charles has 23 years experience in Marketing, Sales and Management across various IT and Technology businesses. Previous roles include Chief of Staff, Director Product Marketing, and Director Sales. Charles has held roles in brand name firms like IBM, Ericsson, HP, ADP, and OrderDynamics.