Day 131 - Preorders Approaching The 4th Quarter - How Can They Help To Make Christmas More Successful
Hopefully you read the recent update to my post 65 - Christmas Begins In August recently as we approach that 4th quarter where many retailers experience 80% of their annual sales in just one quarter! Yes you read that right 80%! Many in this industry are suggesting that due to Covid this could be the biggest 4th quarter online yet! As you prepare for it you will have no doubt been looking at preparing some new products for the season. For some this will be a busy time making their own products ahead of time, for others it will be an expensive time as they have someone else manufacture products for them before customers pay for those products and they have to guess at volumes to order which affects costs - they want to order enough and yet don't want to be left with excess stock and they need to be able to pay for what they need to order.
Ordering new stock and all the decisions that go with it can be a nightmare and full of risk. Imagine you are selling a calendar of your art or photography - its your first time, what will the demand be like, do you buy 50, 100, 500, 1000? Will they sell? What if you are stuck with lots of them and it wipes out your profit? Do you have the cash to gamble with? Maybe its a book, maybe its not as time critical as a calendar but the financial risk is still there and maybe it is more expensive to manufacture?
Have you considered 'preorder'? Have you seen this elsewhere? You have probably used it to buy new music releases, video games or secure new products that are likely to be very sort after on release from big names such as Apple but you can do the same yourself to quickly raise capital to manufacture a new product as well as to get an indication for likely demand as they are doing.
So how do you go about it? Well it goes against the grain a bit in terms of fast delivery that we have all come to expect. Most people expect delivery in 1-3 days for most products and many people will be put off with 1-2 week or more delivery so you have to work really hard to keep enough stock or convince your customers that it is worth waiting for your special products, however, that isn't the case with preorder. You announce preorder well in advance of when you would usually start shipping that product. In terms of a calendar, for example, you might usually start selling one in mid September but sales don't really pick up until October or November. Well why not launch a preorder for the month of August? Customers will usually wait between 2 weeks and 2 months for a preorder item but stay well within that for best results.
During your preorder you promote your item across all your channels multiple times throughout the period - email, Instagram, Facebook, Twitter, website and more. Set up a preorder page on your website and tell people what they should expect and when if they preorder now. For your calendar example you might expect to manufacture early September and then ship in the middle or end of September. But why will people wait that long? Well one reason is that they don't actually need it quickly (its for Christmas in this instance), another is to 'secure their product'. People want to receive things as soon as they are available not wait for long periods due to high demand. Sell this to them. Then you might offer an extra incentive - you might offer free shipping for preorders, a small discount or some extras such as a few cards for example. I saw one photographer recently that was including a link to a 'making video' which explained how he chose the images for his calendar - a great personal touch but not eating into the profit margin for the calendar.
Whatever you can offer as an incentive use it well to secure your preorders. But then what? Well watch them come in throughout the period and set that money aside for manufacture. At the end of the period decide on how you think this preorder demand will reflect actual demand over the coming months. You could sink the entire funds you raised in the preorder into manufacturing so that you manufacture enough to cover all of those orders plus twice the same amount again (where those orders will then generate 100% profit!) or you might decide to be more cautious and order less or gamble on ordering more using your preorders as a guide. Either way you have already secured finance to cover delivering your preorders as well as manufacture a further batch and if you need even more later you should be able to raise revenue for that from stock you have already secured.
The key to keeping costs down, of course, is ordering stock in sufficient volume and preordering helps you to manage risks associated with that much better. Continue to use caution, particular with time sensitive products such as calendars but using preorder to help with manufacturing by tapping into early demand will really help. Remember though, customers are giving you money up front for purchases that will take some time to deliver. Do not disappoint. Keep to your delivery promises and don't risk damage to your business by promising something that you cannot deliver. Ensure that everything to manufacture is already in place ahead of the preorder so that you simply have to give your supplier details of quantity required to start the manufacturing process at the end of the preorder period. Use preorder sparingly so that you just focus on new products that you can create excitement with and products that require finance that might not otherwise be available for them.
Calendars are a low cost time sensitive example but what if you are just starting out, have sold a few originals but want to manufacture your first giclee print batch? What if you are more established but want to upscale from smaller work to larger work and want to manufacture your first 50 edition giclee print run in A1 paper or even extra large canvas? Can you afford it and can you risk all your spare cash (and studio space) being tied up in these until they are sell or do you use preorder to raise cash and test demand before manufacturing in appropriately sized batches?
Using preorder well you will be able to finance products you might not otherwise be able to manufacture, you will be able to order quantities more accurately and secure volume orders that maximise your profit and you will reduce the risk of being stuck with excess stock.
Do you use preordering? I would love to hear about your experience?