In this post I'll explain what pre-orders are all about, why we run them and what they mean for the company.
At the time of writing, we have pre-orders open. That means we're selling a product that isn't in stock yet. Pre-order products are typically either still in production, ready to ship, in transit or being shelved at the warehouse. Right now, some of our pre-order products have just arrived at the warehouse, so they'll be on their way to customers early next week.
Financing
One of the biggest reasons for running pre-orders is financing. When we sell products as early as possible, the money from pre-orders can be used to cover part of a garment's production costs. After all, a significant share of a garment's production costs is incurred before the garment is even finished.
The first cost is design, which includes not only salaries but also the cost of making yarns and fabrics, prototypes, and producing and shipping samples, and so on. Some of these costs can be cut significantly with AI, as discussed in the previous blog post, "Will AI make our clothes in the future?"
The second cost is the actual production: cutting, sewing and packing. Our European manufacturing partners charge us for these in different ways. Some want everything paid up front, some only part of it, and some don't even invoice us until the garments are finished and ready to ship.
A pre-order product keeps you waiting
We mark every pre-order product as clearly as we can. We put it in the product name, in bold in the first lines of the product description, and in a separate notice at checkout. This matters a great deal, because the customer needs to know they'll be waiting longer for the product than the usual few days.
When the product will actually reach the customer is stated in the product description. For example, the Lipstick sweatshirt we're currently selling is promised to ship in weeks 35–36, and next week is week 35. I know the products have already arrived at the warehouse, so they'll go out to customers early in the week.
Mistakes and problems
We had problems with our pre-orders in the spring. The very first problem was self-inflicted: we promised customers something we couldn't deliver, namely delivery times that were too fast. In plain English, we assumed the products would reach us much earlier than they eventually did. A lot has improved since then: we now have better communication with the factories about completion dates. We'd also rather promise a date we can definitely keep than the best-case date on which the products could be in stock. On top of that, we've got the process running more smoothly with our logistics partner, so products head out into the world faster than before.
Not every product goes on pre-order
We don't put every product on pre-order. For example, the new berets that arrived at the warehouse went straight into the online store as soon as they appeared on the warehouse shelves. The idea is that the pre-order products form a nice collection together, or that the product itself is Papu at its most unique, or that it's being made in very small quantities.
Pre-orders as an environmental act
Pre-orders tell us how popular a product is. The first few days of sales show us how well a pre-order product is going to sell. If sales are weak, we can reduce the production quantity and use the same fabric for some other product later. If sales are wild, the whole batch of fabric can be made into the same product in one go. Sometimes, of course, the production quantity is already known when the pre-order opens, especially for products made in exceptionally small numbers, for example because there's very little fabric. One such extremely limited product was this spring's wool coats (take a look here), of which, at the time of writing, we have only two left in stock, both in size M.
In the future, our goal is to make the production process efficient enough that we could sell at least some products purely on a pre-order basis. In other words, a model where the number of pre-orders becomes the production order placed with the factory. In that case, the pre-order would only be open for, say, a week. At the moment, though, the process is too slow, and the wait for a pre-ordered product would be months rather than weeks. But I wonder whether you'd still be interested in a product like that: one you might have to wait a few months for, but when it arrived, you'd know you were very unlikely ever to run into someone else wearing it?
Smaller production runs
We've also negotiated smaller production quantities with our manufacturers. In its best years, Papu's sales were many times what they are today, and production volumes were enormous too. Now, after Papu's fresh start, we've negotiated smaller quantities all the way from the yarns and fabrics. You could see this in the spring with the Paris Stripes products, which sold out quickly and won't be restocked, because all the materials were used up. Of course, more material could be made, but personally I think it's more important that every Paris Stripes garment has the exclusivity that comes with a limited run. We'll surely make something similar later on, but I suspect the Paris Stripes colours will have changed by then. Hopefully our designers Annmari and Pauliina aren't cursing as they read these statements of mine.
Smaller production runs also mean that sizes sometimes sell out during a pre-order. We have an automatic sniffer dog (= AI) that takes a product off sale if it's close to the maximum quantity that can be made in the first place.
Better housekeeping
Because Papu has already been through one bankruptcy, I try to avoid making the same mistakes. Pre-orders are one way of doing that, because a pre-sold garment doesn't incur storage costs either. Every unsold garment is a cost for us, as it takes up shelf space. On the other hand, we can't operate without stock, because there has to be something to sell for customers to buy. Pre-orders are therefore a form of risk management that stops products from piling up in the warehouse, because every unsold garment is also money we need to make the next garments. That's why practically every clothing store has a separate outlet section for selling off, at a lower price, the garments that are down to their last few pieces. The last pieces usually sell slowly, because only a few sizes are left and fewer customers fit them.
That's all my musings for this time. Thank you for reading this far.
– Tuomo, Papu's CEO
