Pretail

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Pretail (also referred to as pre-tail, pre-retail, pre-launch, or pre-commerce) is a sub-category of e-commerce and online retail for introducing new products, services, and brands to market by pre-launching online, from creating an interest waitlist of signups before launch to collecting reservations or pre-orders in limited quantity before release, realization, or commercial availability. [1] Pretail allows new product ideas/prototypes to be mass produced only when they have reached an initial threshold of buy-in from investors/consumers.  [2] Pretail includes pre-sale commerce, pre-order retailers, pre-launch marketing services, incubation marketplaces,  crowdfunding communities, and demand chain management systems.

Contents

Pretail results in marketing efficiency, margin efficiency (cutting down on the middlemen like physical retailers or distributors), and product efficiency (getting direct feedback from potential customers fosters innovation and eliminates guesswork). [2]

Retailers today are increasingly pretailing to test, promote, and monetize consumer demand in the initial phase of the new commerce pipeline as first introduced in a 2012 Forbes article. [2] Some examples are: Tesla’s model 3 pre-order or VR gaming headset Oculus Rift funded through Kickstarter. Consumers engaging in pretail are known as an early adopter, fan, backer, supporter, or presumer (pre-launch consumer).

Growth

Pretail demand is growing in consumer retail: electronics, movies, music, video games, books, fashion, software apps, connected devices, cars, toys, cosmetics, art, events, etc. [3] This trend is being driven by companies to enhance new product development, better organize product releases, lower market risk, and increase early fan adoption. [4] Large companies such as Amazon and Apple are pre-tailing new products to measure demand, manage supply chain market dynamics, and monetize fandom anticipation.

Entrepreneurs and small companies are embracing crowdfunding platforms such as Kickstarter and Indiegogo before product realization to fund manufacturing, test product-market fit, test market demand, pricing and take pre-orders to build a demand and fandom community. [2] Consumer involvement with products and services pre-launch is becoming mainstream according to industry experts on consumer behavior trends. [5]

Differencies with other forms of commerce

Pretail is related to a wide variety of business areas: from product innovation (concept & ideation) and supply chain management to marketing and sales. The aim of pretail is to build customer awareness and get sufficient financing to start product development. Pretail is future-oriented and is usually implemented using crowdfunding platforms, controlled media channels, mass media, and social networks. [2]

Pretail as a competitive advantage

Evolution of consumer preferences

The tendency of consumers to increasingly value the experience associated with a process of purchasing gives rise to experiential buying - creating a memorable buying experience. Pretail provides a sense of belongingness that customers perceive as important. Crowdfunding platforms make consumers feel that they are part of a community that consists of people who are interested in the particular product or service. Consumers thus consider the product as "the first", "the newest", "the one that I helped launch". Pretail is gaining popularity as it satisfies the demand for novel products which are of high consumers` interest nowadays. [6]

Market evaluation tool

Pretail allows innovators to test their product-market fit with a Minimum Viable Product (MVP) equivalent. Thanks to pretailing risks associated with launching a product - financing and manufacturing are thus reduced. In addition to this, more people can invest in the project or participate to the project as salesmen. By testing the demand for the project entrepreneurs can lower perceived and actual risks associated with launching a product and starting a company. By using pretail model companies can match supply and demand trends before they actually start producing a product. It is the framework that serves for connecting increasingly demanding consumers and entrepreneurs. However, using pretail model for launching does not guarantee success of the product or enterprise, not all pretailers become e-tailers. Some services and products never take off, while others receive strong indications of market demand, receive large volumes of pre-orders, and raise the capital needed for starting manufacturing. Those kinds of services or products are the ones that succeed to become e-tailers. [6]

Supply chain and finance

Product development costs are pushed down, more and more people can start their own business, create goods, and provide services to broader audiences. By being able to measure demand before mass production is started allows companies to forecast financing needed and develop inventory policy more accurately. [6]

Successful examples

Opal Nugget Ice Maker

Opal Nugget Ice Maker is a specialized ice maker which collected more than $2.7 million on the Indiegogo.

This ice maker freezes water in a special way. Rather than freezing the water directly, the ice maker scrapes flakes away from the cylinder, and through that process creates a lot of chewable ice nuggets. This type of ice making is often used in upscale cocktail bars or fast-food chains. However, machines used there are usually big and expensive. That is the reason why this project collected such a substantial amount of money. [7]

Oculus Virtual Reality Headset

Oculus Headset is a virtual reality set that was initially started by Palmer Luckey as a side project. In 2014 the company was acquired by Facebook for $2 billion. One of the reasons for this acquisition was the apparent public interest in this type of technology which was shown two years earlier when the campaign on Kickstarter managed to raise a total of $2.4 million when the project was still in the prototype stage. [8]

Glowforge Laser Marker, Engraver and Cutter

Glowforge laser marker, engraver and laser cutter has a successful and unique pretail story[ citation needed ]. Unlike many other projects, it attracted a substantial amount of capital without big platforms such as Kickstarter or Indiegogo. With a team of only 14 people, the company went from an unknown startup to a popular enterprise that raised $28 million during its self-run campaign.

Glowforge has been awarded three Make Editor’s Choice Awards at the World Maker Faire event in New York. [9]

See also

Related Research Articles

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<span class="mw-page-title-main">Retail</span> Sale of goods and services

Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and then sells in smaller quantities to consumers for a profit. Retailers are the final link in the supply chain from producers to consumers.

<span class="mw-page-title-main">The Warehouse Group</span> New Zealand retail group

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<span class="mw-page-title-main">Online shopping</span> Form of electronic commerce

Online shopping is a form of electronic commerce which allows consumers to directly buy goods or services from a seller over the Internet using a web browser or a mobile app. Consumers find a product of interest by visiting the website of the retailer directly or by searching among alternative vendors using a shopping search engine, which displays the same product's availability and pricing at different e-retailers. As of 2020, customers can shop online using a range of different computers and devices, including desktop computers, laptops, tablet computers and smartphones.

A pre-order is an order placed for an item that has not yet been released. The idea for pre-orders came because people found it hard to get popular items in stores because of their popularity. Companies then had the idea to allow customers to reserve their personal copy before its release, which has been a huge success.

B2B e-commerce, short for business-to-business electronic commerce, is the sale of goods or services between businesses via an online sales portal. In general, it is used to improve the efficiency and effectiveness of a company's sales efforts. Instead of receiving orders using human assets manually – by telephone or e-mail – orders are received digitally, reducing overhead costs.

<span class="mw-page-title-main">Pop-up retail</span> Retail tactic of opening shops for short periods

Pop-up retail, also known as pop-up store or flash retailing, is a trend of opening short-term sales spaces that last for days to weeks before closing down, often to catch onto a fad or scheduled event.

PledgeMusic was an online direct-to-fan music platform, launched in August 2009. It was started to facilitate musicians looking to pre-sell, market, and distribute projects; such as recordings and concerts. It bore similarities to other artist payment platforms as ArtistShare, Kickstarter, Indiegogo, Patreon, RocketHub and Sellaband.

<span class="mw-page-title-main">Indiegogo</span> American crowdfunding website

Indiegogo is an American crowdfunding website founded in 2008 by Danae Ringelmann, Slava Rubin, and Eric Schell. Its headquarters are in San Francisco, California. The site is one of the first sites to offer crowd funding. Indiegogo allows people to solicit funds for an idea, charity, or start-up business. Indiegogo charges a 5% fee on contributions. This charge is in addition to Stripe credit card processing charges of 3% + $0.30 per transaction. Fifteen million people visit the site each month.

Recommerce or reverse commerce is the selling of previously owned, new or used products, mainly electronic devices or media such as books, through physical or online distribution channels to buyers who repair, if necessary, then reuse, recycle or resell them.

Grommet is an online marketplace and product discovery platform for consumer products from maker culture, inventors, entrepreneurs, and small businesses. It was founded in 2008 by CEO Jules Pieri and Chief Discovery Officer Joanne Domeniconi after careers at Continuum, Keds, Playskool, and Stride Rite. They find and review products and select certain ones to be promoted on their website. They present a new product every weekday with an editorial and video story. Members of the website then give feedback on the product. Many of their products were initially funded on the crowdfunding platforms IndieGogo or Kickstarter. The Grommet sees itself as a next step after crowdfunding success to help new businesses get launched.

Crowdfunding is the practice of funding a project or venture by raising money from a large number of people, typically via the internet. Crowdfunding is a form of crowdsourcing and alternative finance. In 2015, over US$34 billion was raised worldwide by crowdfunding.

Bonaverde was a Berlin-based company known for developing a roast-grind-brew coffeemaker. Founded by Hans Stier in 2013, the company first received widespread notice for its highly successful crowdfunding. Despite significant controversy over its fund raising strategy and lack of communication with crowdfunding contributors, the product received recognition for its combination of coffee and Internet of Things technology, including a Dealerscope 2018 IMPACT Award.

<span class="mw-page-title-main">Neptune (company)</span> Canadian consumer electronics company

Neptune Computer Inc., commonly known as Neptune, is a Canadian privately held consumer electronics and wearable technology company, founded in 2013 by Simon Tian in Montreal, Quebec, and currently based in Toronto. The company has raised around $7 million from private investors, and over $2 million from crowdfunding sources like Kickstarter and Indiegogo.

Crowd Supply is a crowdfunding platform based in Portland, Oregon. The platform has claimed "over twice the success rate of Kickstarter and Indiegogo", and partners with creators who use it, providing mentorship resembling a business incubator.

The disruptive effect of e-commerce on the global retail industry has been referred to as the Amazon Effect: the term refers to Amazon.com's dominant role in the e-commerce market place and its leading role in driving the disruptive impact on the retail market and its supply chain.

Robomart is an American technology company headquartered in Santa Monica, California that builds autonomous smart shops for cafes, ice cream parlors, and quick-service restaurants. The company’s white label platform gives retailers the option to expand their footprint at a significantly lower cost than traditional brick-and-mortar real-estate.

<span class="mw-page-title-main">Everykey</span> Universal Digital Smart Key

Everykey designs and builds a patented universal smart key that can unlock devices and log into online accounts on those devices. The idea began as an entrepreneurship class project at Case Western Reserve University.

<span class="mw-page-title-main">Impact of the COVID-19 pandemic on the fashion industry</span>

The COVID-19 pandemic affects the global fashion industry as governments close down manufacturing plants, and through store closures, and event cancellations to attempt to slow the spread of the virus. The COVID-19 pandemic has had a major impact on fashion brands worldwide. At the same time, the fashion industry faces challenges in consumer demand. New opportunities are also presenting themselves as fashion brands shift to making fashionable COVID-19 face masks. Domenico de Sole, chairman of Tom Ford International, remarked that "I have seen a lot of difficult situations in my long career and this has been the most devastating event, not just for fashion and luxury, but all industries."

References

  1. ↑ Pretail Lexicon, Financial Times .
  2. 1 2 3 4 5 Hartley, Scott. "Pre-Tail, E-Tail, to Retail: The New Commerce Pipeline", Forbes , September 7th, 2012.
  3. ↑ Trend briefing report, "Pretail: Why consumers now love to shop at the concept stage", Trendwatching.com, June 2013
  4. ↑ Gansky, Lisa. "The Rise of Pre-Commerce: The sharing economy and crowdfunding have fundamentally altered the way we develop products", FastCompany , April 25th, 2013
  5. ↑ Trend briefing report, "Presumers: The product, the story, the status: why consumer involvement with products and services pre-launch is set to go mainstream", Trendwatching.com, November 2013
  6. 1 2 3 Dao, Linh (2016-11-29). "Why You Should Care About Pre-Commerce Now". Medium. Retrieved 2020-06-09.
  7. ↑ Morris, Chris (2016-09-22). "The all-time biggest wins on Indiegogo". CNBC. Retrieved 2020-06-09.
  8. ↑ Robinson, Ryan. "5 Crowdfunded Side Projects That Became Million-dollar Companies". Forbes. Retrieved 2020-06-09.
  9. ↑ Hurst, Samantha (2015-10-24). "Glowforge 3D Laser Printer Successfully Secures Nearly $28M During Self-Running Crowdfunding Initiative". Crowdfund Insider. Retrieved 2020-06-09.
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