Sometimes, it's difficult being popular. Ask any celebrity on the run from the papparazzi and they'll tell you the same thing; you have to take the highs with the lows and, no, you can't take a selfie.
While companies don't face the exact same pressures as Lindsay Lohan and Paris Hilton, they can still struggle under the pressure of increased demand. One of these pressures is a lack of stock; you might not have enough of a particular product in your warehouse to keep up with demand. Inevitably, this leads to lost sales and impacted profits.
One way to solve this issue is by establishing a strong pre-sales system, capturing customers before they abandon their purchase by allowing them to pre-order. You're happy, the customer's happy; perfect.
But for how many reasons pre-sales is a perfect solution, there are 50 more ways that it can turn into a royal mess. As much as your Magento website is set up to help you succeed, there are also a few pitfalls with its system that will limit your success. So you need to get it right. We know how; that's why we've put together the video at the top of the page.
It's just over 6 mins. If you want to skip to the part that's most relevant for you and save a bit of time, here are the timestamps:
0:00 - introduction to pre-sales
1:10 - why pre-sales are a good idea
2:30 - the problem with Magento pre-sales
3:39 - how Magento pre-sales it should be done
Don't mind video but love reading? Don't worry, we've got you. Head here to download an e-book that's all about the power, the problem and the potential of pre-sales or click on the image at the bottom of the page.
Hate video and really love reading? We've got you covered as well, keep scrolling for the full video transcript.
Introduction to Magento pre-sales
Hi, my name’s Oliver. I’m going to try to give you some insight into how to use Magento to manage a professional pre-sales process. What I’d like to do first of all is to distinguish the difference between running a just-in-time business model and running a pre-sales model to supplement your existing inventory levels.
Running a just-in-time inventory model means that pretty much everything you sell you’re going to be getting from your suppliers on demand with back-to-back purchase orders. This video isn’t for you. What I’m looking to explain now is how you can use products that you know are being delivered to you, on purchase orders from suppliers that are already being shipped, using that guarantee of delivery to supplement your existing inventory and enabling you to increase your volume of sales while ensuring that you continue to keep the same level of customer satisfaction that you have from products that you already have in stock in your warehouse ready to ship today.
Why pre-sales are a good idea
So, why set up a pre-sales process? I think that the main reason our clients set up a pre-sales process, and see success from it, is where they have extremely fast selling lines that makes forecasting consumer demand almost impossible. It could be that you’re a brand bringing a new line to market for the first time, and you’re amazing at creating the hype and getting your Instagram followers excited, but when it comes down to it you have absolutely no idea how many are going to buy. Before you know it, you’ve sold out in a couple of hours.
Then the pressure goes onto your manufacturers; you’re trying to get them to manufacture more and get them to ship to you. And all in the meantime, you have these baying customers who are ready to give you their money for your product. This is where pre-sales can really step in. It allows you to place the order with your supplier, know the quantity that you have to be delivered and then have the product available for sale on your website immediately. Those customers, although they know they’re not going to get that product straight away, they’ve at least guaranteed their order with you. And you’ve taken their money from them, and their commitment versus them shopping elsewhere or going to a competitor which is also launching a similar line or has just released a similar version of their product.
The problem with Magento pre-sales
You’ve decided you’re going to do Magento pre-sales. One of the particular challenges that companies have, with Magento as well as with other e-commerce platforms is that you only get one inventory figure per product out of the box. What this means, is that if you’ve got a warehouse system, or you’re uploading an inventory file from a Google file that you manage internally, and importing that into your Magento front end...it then becomes quite difficult for your merchandisers and your warehouse team to coordinate and make sure that the inventory figure on your website is both what’s actually in your warehouse and what’s coming on purchase orders for specific items. You can see how, with that combination it would be very the two to miscommunicate and for you to end up pre-selling products that you don’t even have coming on purchase orders. In that situation, you’re just dealing with overselling rather than enabling more sales through a proper pre-sales process.
How it should be done
Here’s how we do it at Peoplevox. Step 1 is to create a virtual inventory location that’s distinctly different from your other warehouse locations. What we do is make that location a bulk storage location. What that means, is that when orders are released from the warehouse for picking, usually sent to the mobile app, they won’t release the orders where the items are only available in bulk. Some companies call this non-pickable locations, versus having the inventory in a pickable location. Step 2 is to then register the product that you’re expecting on a purchase order into one of these virtual inventory locations. Usually, we’d assign a reason for that register and we’d make a reason code of product expected on a purchase order or pre-sale item.
The next step is, because the inventory is in a bulk location, that inventory is added to all of the other inventory in the warehouse. The absolute stock figure, sent in real-time from your warehouse system to Magento, will include all of the inventory. So it will have what’s physically in the warehouse, and it will also include what you’re expecting on pre-sale.
Then, the product arrives. And this is the part when we need to be extra diligent, to ensure that we don’t end up with double inventory; where we have the virtual and we have what we’ve received. The first step we recommend is to go into the virtual location for the products that you’re expecting in the warehouse and to remove them from the inventory. Again, using a transaction code or removal reason called ‘removed for pre-sales’. The next step is to actually receive the inventory that you’ve been selling through your pre-sales process. Ideally you’ll be reconciling this in against the purchase order that was placed with the supplier.
Once all of that inventory has been received in, it can be received into a pick location, or a sellable inventory location. And what this means is that as well as the inventory being allocated to those sales orders that you took previously, they’ll also become available for the warehouse team to go out and pick them. Enabling you to pick, pack and ship the product out to the customers who’ve been waiting for the pre-sale items.