Want to start a F&B business but have limited capital? If you're facing capital constraints, you can try growing your business with a pre-order system.
The pre-order system is one way to win the market, especially knowing that the pre-order system can be done with minimal capital.
So how do you start a business with a pre-order system? Let's check out the following review.
How Pre-Order Works
Pre-order or PO is a sales system widely used in online buying and selling transactions.
This marketing strategy has proven quite effective in increasing business sales.
Pre-Order is a purchasing system where you order products that are not yet available to be owned at an agreed-upon time.
So, consumers pay in advance, and then the ordered items are ready to be shipped.
According to Cashlez, pre-order refers to a sales system that records customer orders first.
So, the products ordered by customers are not available directly but must be ordered and require a certain period to be delivered to customers.
Although PO items take a while, customers must still make an upfront payment as a deposit.
Before implementing the pre-order system in your business, you need to understand how this buying and selling system works so you can have a clearer picture later.
Also read How to Save Operational Costs for F&B Business
Here's a review of how the pre-order system works:
- Start by marketing the product.
- Offer it at an attractive price.
- Show the value of the product being sold.
- Include a detailed product description.
- Create an ordering process.
- Ensure consumers understand when the product is estimated to be completed.
- Record every incoming order.
- Use payment methods that make it easy for consumers.
- Immediately process consumer orders on time.
- Not only actively making offers, but you should also communicate the progress of the production process to make consumers feel secure.
- After the production process is complete, the product is ready to be shipped.
Advantages of the Pre-Order System
Developing a business with a pre-order system certainly has its advantages and disadvantages compared to selling ready-to-sell goods.
Here are the advantages of selling products using the PO system:
1. Creating hype or customer enthusiasm
You can market goods with the PO system by offering limited deals or certain discounts.
This way, of course, excitement arises, and consumers compete to order so they don't run out of stock.
Especially if the marketed goods are special editions or limited editions.
With the PO system, you can create a sense of urgency in the minds of customers so that they are more interested in making a purchase as soon as possible.
2. Guaranteed sales and income
The next advantage is more guaranteed sales and income.
Because new products will be made and shipped after customers pay the price of the goods and shipping costs at the beginning of the order.
Well, the money that has come in or accumulated is definitely business income.
So, every item produced with the PO system generates real profit.
3. Predicting product demand
With the pre-order system, you can predict the demand for a product. You can measure customer interest.
From PO orders, you can find out how much interest customers have in the products offered. Once you know their interest, you can estimate future production.
The next marketing strategy can be improved to be more in line with the desires and expectations of consumers.
4. Merchandise sold out
With the pre-order system, inventory management becomes better because it can be said that almost all merchandise is sold out.
If there are leftovers, you can manage and maintain the quantity of stock according to incoming demand.
That way, you can reduce the risk of buying excess goods or stock that can cause losses.
5. Small risk of loss
Because it is paid in advance, using the pre-order system to sell a product can also help your business minimize the risk of loss.
Because you only produce goods that have been ordered and paid for.
So, you don't need to spend money to buy raw materials and pay production costs that may not yield a commensurate profit.
Different from mass production business and making it as inventory.
Also read How to Mitigate Funding Risks in F&B Business
6. Increasing brand awareness
The benefit of selling products with the PO system next is that it can help you increase brand awareness.
Because indirectly you use the pre-order system as a marketing strategy that creates urgency in the minds of customers.
Your product will be discussed more by the community.
You know, if your product has caught the attention of consumers, it can attract more people to buy it.
If that happens, your product can reach a wider audience, both offline and online.
Brand awareness will also rise.
Disadvantages of Selling with the Pre-Order System
Every system certainly has its advantages and disadvantages. Well, here are some disadvantages of the pre-order system in a business:
1. Limited production capacity
Because the PO system is carried out in businesses that are just starting, so they have limited production funds. Because,
They only have production costs according to the number of orders, which causes production capacity to be limited.
So, when you only rely on income from upfront payments, your business can be overwhelmed in meeting demand.
2. Dependence on the factory
Selling with the PO system makes you tend to depend on the factory that does the production.
When selling goods, you have to ask the factory to produce the required number of products.
If there are production problems at the factory that cause delivery delays, you also can't do much to overcome them.
You can only wait for the factory to resolve it because it is also not possible for you to cancel production and use another factory because it will take more time and cost.
3. Damaging business image if goods are not as expected
In addition to delays, goods that do not meet customer expectations can certainly cause damage to the image of the business you are building.
4. Mismatch in production quantity
Although the PO system can minimize the risk of loss, you may also experience a mismatch in the number of productions with the number of sales that come in.
So, there is a possibility that the number of products sold with the pre-order system will not really correlate with the number of sales.
Make sure the number of goods produced and the number of sales or income received are balanced or the same.
5. Making customers wait too long
If consumers have decided to buy products sold with the PO system, then they must be willing to spend a long waiting time.
Because PO goods will only be produced if the production quota is met and all customers make payments.
6. Potential to disappoint customers
Customers may be disappointed to buy pre-order products but the products they have been waiting for do not meet expectations.
Because, during the offer, customers can only see examples or illustrations of products in the form of images or videos.
Indeed, consumers cannot know the product in real so the catalog with the received goods may have discrepancies.
How about it, are you interested in applying the pre-order system to your business?