What Is Pre-Order in E-commerce? Definition, Benefits & Strategy

Brands constantly search for creative approaches to maximise sales and minimise innovation risks. 

And the best possible strategy for gaining significant traction without creating any product first is pre-orders. 

But what is pre-order in e-commerce exactly, and how can you use this model to scale your brand sustainably? 

The following section covers everything you need to know to help you implement an effective pre-order strategy for your DTC brand.

Understanding Pre-Orders in E-commerce

In e-commerce, a pre-order is a sales model where your customers place and pay for orders before your products are officially released or available for purchase. 

The pre-order strategy is different from the traditional customer purchase journey, where brands usually produce inventory first and then make it live on their website or marketplaces for sales. 

Instead, this model reverses the typical sales cycle by collecting orders before or during launch to build hype or excitement among customers.

Consumers find pre-orders attractive because they ensure product availability before public release.

When is a pre-order strategy most effective?

Pre-orders are most helpful for high-demand items likely to sell out fast upon launch, such as

• New product launches: When introducing a flagship product, collection or a tech upgrade

• Limited edition items: For products with limited production
• High-demand seasonal products: Items with predictable seasonal spikes
• Products requiring significant capital investment: Items with high manufacturing costs

But it’s not suitable for every product or brand situation. For maximum effectiveness, your pre-order product must be unique, something that isn’t already available in the market, and immediately capture attention. 

The goal is to make customers perceive it as a one-time opportunity rather than just another out-of-stock item.

How Pre-Orders Work

Now that you’re clear on what pre-order is pre order, here’s a deeper look at how this sales format works in real life.

The Pre-Order Timeline

A pre-order campaign consists of two basic phases

1. Ordering Phase: The period when customers can place pre-orders. It typically ranges from a few days to several weeks, depending on your product type, audience size, and campaign frequency.
   
   
2. Fulfilment Phase: The timeframe from when the order closes until your customers receive their products. 

Key Components of a Pre-Order Launch Campaign

1. Product Presentation: Clear, detailed product information is essential. Since your customers can't evaluate the item just from the description, you must provide

• High-quality images showing all angles and details
• Proper descriptions of features, dimensions and specifications
• Videos demonstrating the product, when possible
• Size guides for apparel or dimension details for physical goods

2. Transparent Delivery Timelines: Setting realistic expectations about delivery sets the stage for customer satisfaction. To achieve this

• Clearly state the expected shipping date
• Build in buffer time for potential delays
• Communicate any changes to the timeline immediately

3. Pricing Strategy: Most pre-order launches offer incentives to encourage shoppers’ buying intent, through

• Discounted pre-order pricing (typically 10-20% off future retail price)
• Early-bird specials for the first wave of customers
• Exclusive bonuses or add-ons are unavailable after launch

4. Limited Availability: Creating a sense of FOMO or urgency helps drive conversions.

• Set a clear end date for the pre-order window
• Consider offering limited quantities
• Use countdown timers on your website
• Send reminder emails as the deadline approaches

Pre-Order Payment Models

Different payment offerings are used for pre-orders, and choosing the right one is especially important for the Indian market, where payment preferences vary across demographics.

• Full payment upfront: Ask customers to pay the entire amount when placing the pre-order. It provides you with maximum cash flow benefits for your business, but it might create higher customer expectations.
  
  
• Deposit model: Ask customers to pay a portion upfront (typically 25-50%) and the remainder before shipping. This helps address buying-related objections among customers and helps secure their interest.
  
  
• Pay upon shipping: Ask customers to commit to the order, but charge them only post-purchase delivery. 
• UPI integration: As 90% of Gen Z digital shoppers prefer the Unified Payment Interface (UPI) for digital payments. And since Gen Z represents about 40% of e-retail shoppers in India, providing UPI as a payment option for pre-orders should be a no-brainer.
  
  

• Age-based payment preferences: Younger consumers (Gen Z) show distinct payment behaviours compared to older demographics. They prefer quick, convenient payment methods that integrate seamlessly with mobile devices.
  
  
• Cash on Delivery: While digital payments are rising, Cash on Delivery (COD) remains the go-to payment choice for many customers in India, especially in Tier-2+ cities, where 75% of orders use this method. It is a challenge for pre-orders, which require an advance payment.
  
  
• EMI options for higher-value items: For high-ticket products with premium price points, offer Equated Monthly Instalment (EMI) options to make pre-orders more accessible to a broader audience.

Benefits of Offering Pre-Orders

Here's an in-depth look at the most common benefits of using a preorder strategy.

Market Validation and Demand Forecasting

One of the most valuable aspects of pre-orders is that you get to test market response before fully committing to adding a specific product to your inventory. 

Gina Farran, founder of nail-tech startup Glaize, also shares the same thought. She explains, "Because we manufacture everything in-house, we didn't have full visibility on which colours would sell well and which wouldn't. With pre-orders, we can model our production runs based on actual customer orders, which reduces wastage and ensures we use only necessary amounts of raw materials."

This helps you with

• Risk reduction: Gauge actual consumer interest before investing in large inventory quantities
• Production optimisation: Manufacture precisely what's needed based on confirmed orders
• Inventory planning: Avoid both stockouts and excess inventory

Improved Cash Flow Management

As Alan Mosely, founder of SleepaSloth, notes, "Pre-orders help you secure the funding you need to move forward with the manufacturing of your product. Creating a hardware product or device requires a significant amount of capital upfront to create the tools used by your factory to create your product."

For early-stage businesses, pre-orders significantly benefit your finances because they help you in the following areas.

• Upfront revenue: Generate sales income before production costs
• Reduced capital requirements: Use customer payments to fund manufacturing
• Lower inventory carrying costs: Minimise warehouse space and associated expenses

Marketing and Customer Engagement Benefits

Pre-orders create an extended engagement period that helps you build relationships with customers even before they receive the product. 

This phase opens up an opportunity where you can share behind-the-scenes content, product development updates, and create anticipation to keep consumers connected.

Reduced Waste and Sustainable Business Practices

In a time of trends like fast fashion, pre-orders bring a well-required element of sustainability for brands through

• Production efficiency: You manufacture only what's already sold
• Resource optimisation: Use materials based on confirmed demand
• Reduced discounting: Avoid end-of-season sales to clear excess stock
• Lower carbon footprint: Minimise transportation and storage of unsold goods

Challenges of Pre-Orders in E-commerce

As worth it as it sounds, pre-orders come with quite some challenges, as mentioned below.

Managing Customer Expectations

The most common error in any pre-order campaign is promising more than you can deliver. 

To solve this problem of delayed gratification, create proper guidelines on clear communication about delivery timelines, regular updates on production status, and complete transparency regarding any changes.

Supply Chain Considerations

While with pre-order, you hold zero or limited stocks of finished products, you still need to plan raw materials sourcing so that your manufacturers can produce the goods on time.

For this, plan your purchase orders and make sure your manufacturing partners have full visibility of your pre-order schedules.

Financial Management

You'll need to establish clear refund policies, especially for pre-orders, and decide whether to offer discounts.

Additionally, you must also plan for production expenses regardless of having customer payments upfront.

Marketing Approach

Your pre-order campaigns must create a sense of urgency without sounding too manipulative.

Be sure your marketing game plan is spread across email, social media, website, and advertising to ensure maximum order bookings.

Implementing Pre-Orders for Your D2C Brand with Pragma

Here's how you can implement a proper pre-order strategy for your brand. 

Choose the Right Platform Configuration

Use Pragma's 1Checkout to handle your pre-orders effectively, through:

• Rapid checkout experience: Allows customers to complete the purchase in seconds rather than minutes, eliminating friction that might discourage pre-order commitments
• Auto-population of addresses and payment details: Makes the pre-order journey simpler based on just a phone number

• Multiple payment options: Support for UPI, BNPL, cards, netbanking, and other methods that further encourage commitment

Design Clear Pre-Order Business Rules

Create specific guidelines for your pre-order processing.

• Payment structure: Test different models (full payment, deposit, or pay upon shipping) across product categories. 
• Pre-order window: Set specific timeframes rather than open-ended timelines. 
• Delivery timeline: Account for regional variations within India. Use logistics intelligence to account for regional variations within India to add appropriate buffers for deliveries to remote areas.
• Cancellation policy: Create straightforward terms through the returns management system, specifying whether cancellations are allowed and how refunds are processed.

Update Product Pages for Pre-Order Clarity

Be sure your product pages communicate pre-order status

• Add prominent "Pre-Order" badges near product titles using customisable product layout options
• Include shipping information sections with expected dates 
• Create dedicated pre-order FAQs addressing common questions about timing, payment, and modifications

Create Clear Customer Communication Guidelines

With Pragma's WhatsApp Business Suite and Omnichannel CRM, you can

• Send immediate order confirmations that set expectations clearly

• Schedule production update messages at key milestones
• Prepare templates for delay communications in advance
• Adjust communication frequency based on city tiers, with more frequent updates for customers in mature e-retail markets

Avoid RTO Risk 

Pragma's RTO Suite helps minimise potentially risky pre-orders through

• Flag risky orders: Behavioural analysis identifies and flags potentially problematic pre-orders
• Dynamically disable COD: For customers with concerning purchase patterns

• Convert COD to prepaid: Incentivise upfront payment with discounts, seeing 25-35% increases in paid orders

Abandoned Cart Recovery for Pre-Orders

Pre-orders typically see higher abandonment rates due to the delayed gratification factor. But abandoned cart recovery will help you address this using

• Send customised WhatsApp messages to remind customers about their pending pre-orders

• Offer special incentives to complete pre-order purchases

To Wrap It Up

Pre-orders can be a game-changer, especially for young brands, just stepping into the market. 

Because it allows you to test the true market potential of your products without having to deal with mandatory production volume requirements from manufacturers, which might cost you big, especially if you don't have scale.

The above guide explains what a preorder is in all its aspects, so you can get started on your next preorder now.

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FAQs (Frequently Asked Questions on What is Pre-order)

Does pre-order mean pay now?

Pre-order payment options vary. You can choose full upfront payment, a deposit model, or payment upon shipping. Pragma's 1Checkout supports all these models with multiple payment methods.

Can a pre-order sell out?

Yes, pre-orders can have quantity limits based on production capacity. Setting a maximum threshold creates urgency and helps plan inventory better. 

What is pre-order shipping?

Pre-order shipping refers to the planned delivery timeline after the ordering phase ends. It includes manufacturing time plus shipment to customers.