What Does Pre-Order Mean?

A pre-order is the act of ordering a product before it is released, meaning it will be shipped to customers as soon as it is available. Retailers can either charge the buyer in full or have them pay a deposit to reserve the item.

Pre-orders can be beneficial if you’re running a startup that needs funds to manufacture a product or a better gauge of consumer demand.

Everything to Know About Pre-Orders in 2022

Pre-orders are an effective ecommerce tool that can help optimize your business and ensure you never miss out on a potential sale. When done right, they can build hype, allow flexibility in product launches, and increase revenue. In this definitive guide to pre-orders, we break down what does pre-order mean, the pros and cons you need to know before getting started, plus how to run a successful pre-order campaign.

Advantages of Pre-Orders

There are a few key reasons why offering pre-orders could benefit your business. Here are the three most important points to consider:

Limit Risk

Selling physical goods often involves financial risk. When a customer pre-orders a product, the payment collected will guarantee the funding to manufacture or purchase inventory before its release. This method allows for a more accurate gauge of inventory demand and even gives you the leeway to expand your offerings without over-investment. 

Accurately Predict Demand

Pre-orders allow you to gauge the consumer demand for your product, helping inform how much quantity is necessary for fulfillment. Some businesses even offer a limited pre-order to cut back on potential deadstock if customers lack interest. On the flip side, you could discover that interest in your product is much higher than anticipated. The option to pre-order will allow customers to purchase a high-demand product without worrying about it selling out upon release. 

Generate Hype

Pre-orders are a great marketing tactic to build excitement around a product. Customers have the chance to purchase a hyped item before its release, and if you offer a limited number of pre-orders over a set period, this can further grow the product’s appeal. You can help drum up interest by launching social media campaigns and content marketing to boost sales and increase awareness. 

A perfect example of this is the Telfar Shopping Bag, which consistently sells out upon its release. The only sure-fire way of getting your hands on one is through Telfar’s Bag Security Program, a 36-hour event that allows customers to pre-order the bag in any size, color, and quantity. Any bags pre-ordered are custom-made, unlike their usual drops, where only a limited number are available.

Disadvantages of Pre-Orders

While there are plenty of benefits that come with offering pre-orders, there are also some disadvantages that should be considered.

Dependence on the Manufacturer

Typically, pre-orders occur before ordering inventory, or in some instances, while the product is still in production. The manufacturer is ultimately in charge of the product’s turnaround, and in the event of a delay or production issue, you could risk losing and upsetting customers. 

It’s crucial to choose a reputable manufacturer, preferably one you have worked with in the past, to avoid communication and production issues down the line. Finalize the exact date when the product will be released and available for shipment before you set the date in your store. Doing the legwork from the jump will save you a lot of trouble in the long run. 

Limited Production

The scarcity principle refers to a limited supply of goods, resulting in higher demand. While the scarcity principle can create hype around your store and product and is a tactic commonly used in pre-orders, this can leave you with a limited time frame to purchase or create the inventory you need. 

By giving yourself enough time to plan your pre-order campaign, you will avoid advertising products too soon or relying on pre-orders which could cause issues down the road.

Marketplace Incompatibility 

Pre-orders don’t work on most marketplaces, such as Amazon or eBay, because of strict processing and shipping time requirements. Negative feedback and delays could result in the suspension of your account. 

To avoid this, it’s best to use an ecommerce platform such as Shopify, where you can install a Shopify app to facilitate your campaign.

Running a Successful Pre-Order Campaign 

Now that you understand how pre-orders work, it’s time to set up an effective pre-order campaign for your ecommerce business. Here are some insider strategies that will ensure your campaign’s success.

Social Media Marketing

You could have the latest and greatest pre-order product, but if not marketed effectively, no one will come to know about it. Spreading awareness is key, and one of the best ways to reach your consumers is through social media marketing. 

Once you’ve taken the time to research your target audience, create a consistent content schedule that shares product teasers and posts to generate interest. Figure out what platforms work well for your store and hone in on content creation as well as paid advertising. 

If you’re on a tight budget, there are lots of ways to market a product effectively without spending money and taking product photography without using a professional.

Partnering with influencers is another great way to build excitement around your product launch. Not only does it provide visibility, but it helps build trust around your brand. Additionally, you can use the user-generated content on your business’s social media platforms. A study showed that 85 percent of consumers found UGC (user-generated content) more influential than brand-created content, meaning users who have viewed this type of content are 85 percent more likely to shop. 

Scarcity and Incentives

Customers need a reason to pre-order from you rather than wait for the product launch date. Offering a limited-time discount or freebie is a great way to incentivize customers. 

If you want to go a different route, implement the scarcity principle to create urgency and drive demand. By limiting the number of products available for pre-order for a limited time, you evoke the customer’s fear of missing out. A great example of invoking fear of missing out is Sony’s PS5 pre-order campaign. Only current PlayStation owners were able to register for a chance to get an invite to pre-order the PS5. Those invited had a limited window of time before their chance to pre-order expired, leveraging scarcity to the next level. The exclusiveness of this campaign not only drove sales but served as an excellent marketing tactic.

While you don’t have to go to Sony’s extremes to incentivize customers, think outside the box and get creative.

Fulfilment

Order fulfillment can be complicated, especially if you choose to self-fulfill. Due to the nature of pre-orders, you want to make sure that your product is ready on release day. If your demand is manageable and you choose to go the self-fulfill route, be sure to sign a contract with your manufacturers that guarantees a specific quantity of inventory before your release day. That way, when the products arrive, they can be packaged and sent to the customer on release day. Be sure to stay on top of your inventory management to avoid potential issues and consider implementing inventory management software if you haven’t already. 

If demand is higher and you’re looking for a more streamlined process, working with a third-party logistics provider is key to eliminating extra steps and hassle. They will take care of the batch fulfillment process for you, helping increase your orders’ turnaround time. 

Conclusion

When done right, pre-orders can be an effective way to build hype and boost sales.  It also allows businesses to gauge demand, raise funds, and limit financial and capital risk. However, creating an effective campaign comes with potential challenges, and it’s important to plan ahead. 

The four essential elements of running a successful pre-order campaign are choosing the right manufacturer, effective marketing, order fulfillment, and communication. With these key factors under your belt, your campaign can be a profitable strategy for your ecommerce business. 

Have you ever pre-ordered a product or offered pre-orders for your business? What stood out to you most about the process? Let us know in the comments below.