Pre-orders: How they work and everything you need to know

Whether you’re looking to create buzz, drive sales, or cultivate customer loyalty — or a mix of all three — pre-orders can be a powerful tool for businesses, revolutionizing how merchants interact with customers.

This sales strategy lets eager shoppers secure their favorite products before they hit the shelves, fostering anticipation and exclusivity. For merchants, this strategic approach can help measure market demand, minimize inventory risks, and boost cash flow.

In this guide, learn the basics of pre-orders, how to run a successful pre-order campaign, and why this approach can be a game-changer for e-commerce businesses.

What does pre-order mean?

Pre-order refers to a sales strategy where customers can purchase products before they are officially released or become available for general sale.

In other words, it allows customers to secure and reserve their desired items in advance, even if the products are not yet in stock or ready for immediate delivery.

The result for merchants? Pre-orders can help build excitement, secure sales before a product's release, and provide valuable data for inventory planning.

How do pre-orders work?

When a product is available for pre-order, customers can place their orders and make payments in advance, ensuring they will be among the first to receive the item once it becomes available.

Here are some of the general steps of a pre-order campaign:

• Announce and promote the product: Provide details about the product launch — including features, pricing, and release date — through social media, email newsletters, or dedicated landing pages.
• Open the pre-order window: Create a specific pre-order sales window where customers can place their orders. For instance, a period of two weeks during the month of November. Continue to create buzz and build anticipation by promoting the product’s features and benefits through various marketing channels.
• Don’t forget the FOMO: Create a sense of urgency to encourage customers to place an order instead of waiting for launch day.
• Offer pre-order incentives: Merchants can offer incentives to encourage pre-orders and boost sales, such as discounts, exclusive bonuses, or limited-edition packaging.
• Provide order confirmation: Once a customer places a pre-order, they should receive an order confirmation and an estimated shipping or release date, if available.
• Handle payment: Upon pre-order placement, the customer's payment method can be charged (like any other sale). However, some merchants may choose to simply authorize the payment method to ensure the availability of funds, with the actual payment charged when the product is ready to be shipped or delivered.
• Manage inventory: Merchants can use pre-order data to manage inventory levels, ensuring they have enough stock to fulfill all pre-orders along with extra units for general sales.
• Release the product: Typically, merchants work to deliver pre-ordered items to customers ahead of or by the product’s official release date. Keep in mind that if a merchant sends a pre-ordered item on the release date, it may result in a delay in receiving the product.

Potential pros and cons of pre-orders

Read on to learn the potential advantages and drawbacks to a pre-order sales strategy.

Pros of offering pre-orders

Here are some of the possible benefits you may experience during a pre-order campaign.

• Boost excitement and generate brand awareness: Pre-orders can help generate excitement and anticipation among returning and potential customers. They can also create buzz and drive interest in not only the upcoming product but also the brand overall.
• Build customer relationships: Pre-orders can create an opportunity for businesses to engage with their audience early on. They can gather feedback, answer questions, and build relationships with customers, fostering a sense of loyalty.
• Increase cash flow: Pre-orders may allow businesses to generate revenue before the official release of a product or service. This early influx of funds can help cover production costs, marketing expenses, and more.

Cons of offering pre-orders

On the other hand, there are some downsides to pre-orders. Here are a few examples:

• Supply chain disruptions: Unexpected production or supply chain delays can lead to delayed fulfillment and customer frustration.
• Overpromising and under-delivering: If a business overestimates its capacity to fulfill pre-orders or sets unrealistic release dates, it may struggle to meet customer expectations.
• Cancellation and refund requests: Some customers may change their minds, leading to pre-order cancellations and refund requests. Managing these can be time-consuming and affect cash flow. However, remember that this can occur on any item, not just a pre-order.
• Cash flow management: While pre-orders can generate revenue before the official release, companies may still need to balance the funds received from pre-orders with ongoing expenses and production costs.

How to run a pre-order campaign for a product?

In addition to the steps detailed above, here are some other factors to consider before running a pre-order campaign.