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​Taking pre-order route creates certainty in a pandemic

Published on: 10-Oct-2020

Instead of slashing prices at the end of the season, fashion designer Gin Lee had an idea to bring the markdown to the start of the season, but with a catch: Customers would have to make a pre-order.

When a customer pre-orders an item online instead of opting to buy ready stock, they need to wait three to five weeks for the item to arrive. She throws in a 15 per cent discount to sweeten the deal.

Ms Lee, who runs her namesake fashion label Ginlee Studio, which she founded with her husband Tamir Niv in 2011, said they had wanted to put this plan into action last year - it was a way to reduce waste and become more sustainable - but held back because they were uncertain whether customers would be receptive.

Then, Covid-19 changed everything.

Ms Lee, referring to the April 7-to-June 1 period when Singapore's economy shut down partially, said: "Come 'circuit breaker', you don't have choice. Everything was being disrupted anyway, so it was the best time to introduce changes."

The label starting taking pre-orders in early May, and pre-orders grew to account for 80 per cent of the label's total orders during the "circuit-breaker" period. (The figure has since gone down to about 30 per cent with the re-opening of the economy.)

Dr Wong King Yin, a marketing lecturer from the Nanyang Technological University, said pre-ordering as a strategy is usually more effective for items that are seasonal, exclusive or of limited production. The pandemic, however, has created a new reason to take the pre-order route because of widespread supply-chain disruptions.

"My experience during lockdown is that for many things, you really need to pre-order because you do need to rush - you need to compete with others for something that is not even that novel, like a birthday cake," she said.

Pre-orders help businesses and consumers create certainty, especially at a time when "product availability is in question" or demand is difficult to estimate, added Dr Wong.

Mooncake sellers like Tai Chong Kok found out first-hand what it is like to guess - wrongly - the likely level of demand. Unexpected long queues for the sweet pastry formed just before the Mid-Autumn Festival, and customers had to be turned away.

Tai Chong Kok's owner Tham Wing Cheong recently told Chinese daily Lianhe Zaobao that he had cut production this year because fewer corporate orders had been made; another issue was that his suppliers had imported less raw ingredients. But on the last weekend before the festival in late September, retail consumers turned up in droves, only to find mooncakes in short supply.

Jochen Wirtz, a marketing professor from the National University of Singapore, believes businesses should always include pre-ordering as an option, because lowering uncertainty helps with planning, and improved planning reduces waste.

It also helps to lock in the customer.

Citing an example, Prof Wirtz said: "If there's flooding and rain and people don't want to go out, those who have done the pre-order would have no choice but to pick it up. If you don't ask for pre-orders, they won't come and pick it up, and you would be left with a lot of inventory."

For Ginlee Studio, the true benefit of setting up pre-orders lies in saving time and manpower, and in cutting waste by about 30 per cent, Ms Lee said.

"The whole movement about sustainability within the industry, we always felt, was a bit contradictory at the end of the day, because when you are a producer of goods, you can't really be sustainable, whether it's biodegradable or recyclable."

Pre-orders have the benefit of letting customers configure their order or dictate exactly what they want, said Dr Wong, who believes this will be the next trend in retail.

"In the future, there'll be more customisations that are more flexible ... and you can make your own requests because we're always talking about co-creation with consumers, so the manufacturer and the consumers can co-create the products together," she said.


Source: The Business Times, 10 Oct 2020

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