We love pre-orders. Really, we do. It’s not because we get paid before the product is delivered. In fact, that’s not an issue in the retail world at all. Whatever scary stories retailers may tell you, an important one to remember is that reputable manufacturers don’t charge for a product until it is delivered. And most offer 30/60/90 day interest free payment options for established customers.

No, we love pre-orders because they tell us how much stuff we need to order. We hate sitting on huge inventories. They tie up money and occupy space. In general, we want to have just enough inventory to get us through the month and place a new order when what we have is running low. Based on prior experience we know that (as an example) if 10 items of a new release of a particular line are pre-ordered, then we’ll sell an additional 10 the month after the release and 5 more the following month, before the demand is reduced to a trickle. That’s just an example. These trends tend to be different for different product lines. So with 10 pre-orders we’ll order 30 pieces, knowing that we’re good for three to four months, unless there’s an unexpected run on the product. That has happened to us. Some collectibles were so wildly popular out of the gate that our conservative estimates would get blown out of the water and what we thought would last us three or four months was gone in two weeks and we were left scrambling for more pieces, which sometimes can take two or three months to arrive!

This happened to us at a 2011 conference where we were told that only about 20% of the attendees would be interested in obtaining a conference embroidered patch and that it’s really not a popular item. We ordered just enough to cover 20% of the attendees and on the first day of the conference – in the first few hours – our entire supply was gone. The demand was phenomenal. There were attendees mad that we ran out, there was gouging by those who managed to get a patch, but were willing to part with it for the right price. There were accusations of theft. The shortage nearly caused a riot. Looking back, we could have easily sold a patch or two to 50% or 60% of the attendees. A missed opportunity based on someone else’s advice rather than our own experience.

On the other hand, a retailer’s nightmare is having inventory that no one wants. In 2007 a conference that was being held in Denver came to us to help them with merchandising. We love working with conferences because their attendees are a captive audience. We work with our vendors to get good prices on private label merchandise and in turn offer it to the attendees at a good price. Yes, the product liability stays with the merchant. Very few conferences actually buy the merchandise outright or make any guarantees.

From our experience, no one wants a $10 shot glass with the conference logo on it, but $5 shot glasses tend to do pretty well. We base what we order on organizer requests and on past history. One of the items that the conference planners wanted was a stuffed toy buffalo (really, a North American bison) wearing a conference logoed vest. They assured us that historically about 50% of the attendees would pick up a convention mascot to take home as a conference keepsake or as a toy for their kids or as a gift for an associate who could not make the conference.

We had several planning meetings with the designers at Stuffed Animal House and placed an order to cover just about 60% of the attendees. Two weeks before the conference we received several boxes of the North American bison, smartly dressed in his embroidered conference vest. Billy the Bison, as the conference committee named him, was just too cute for words. Everyone who saw him immediately fell in love with him. Except for the conference attendees. Billy’s sales were less than 1/3 of what was predicted by the conference staff, leaving us with a whole herd of stylish stuffed animals.

The good news is that the vest comes off and we could sell a GQ buffalo representing a conference long gone by or, alternatively, a naturally naked buffalo. There is a market for 8” plush naked buffaloes, but it’s not overwhelming. We have a huge inventory sitting on our shelves. If these buffalo could roam, we could probably repopulate the West.

So yes, we love pre-orders. They are not always on the money, but to date we’ve identified no better way to make sure that we are ready to meet our customers’ demand.

 

[whohit]2014-03-31 Planning Order Quantities[/whohit]