How do I pre-selling physical product that don't exist yet?

18 replies
I have some ideas for physical product, but don't have the money to have them produced.

How can I pre-sell physical product that has not been produced yet?

Note: I did have some prototypes created and have shown them to friends, they liked what they saw. So it seems to be a good idea, just need the money part to get it off the ground.

The problem I run into is that you have to order so many of an item, like 5,000 or 10,000 at say $3.00 each and I would sell them for $15 or $20 each. So I need about $15,000 to $30,000 for the first production run, which I Don't have. There is usually a lead-time of three to four weeks for these kinds of products to be produced, so people would have to wait for the first production run to get their item in the mail.

I will give you some made up examples:
Example #1: A Calendar on collectable Hot Wheels cars.
Example #2: A new Fantasy card game

Some of my thoughts on this:
People would pre-order the first production run at a special discount or receive some special bonus. An example would be 50% off or additional gift.

Start blog on idea or website?

I need some ideas or suggestions

Many thanks, Tony.
#don’t #exist #physical #preselling #product
  • Profile picture of the author Jared Alberghini
    Hi Tony,

    It sounds like this might be what you are looking for to startup with no overhead cost :

    CafePress: Funny t-shirts, unique gifts, and custom t-shirts

    Hope that helps you.

    - Jared


    Join The Future: Telekinetic Marketing

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    • Profile picture of the author Tony6597
      Originally Posted by Jared Alberghini View Post

      Hi Tony,

      It sounds like this might be what you are looking for to startup with no overhead cost :

      CafePress: Funny t-shirts, unique gifts, and custom t-shirts

      Hope that helps you.

      - Jared
      Funny you should mention

      I have done some T-shirt designs on, the only thing is what I want to do is not on their list of items they do. Then they charge a lot of money for a t-shirt, Like $17.00 and I would make $5.00. Most local print shops can do an order of 100 of about $500- $700 depending on the t-shirt.

      As for a business partner, I will have to look into that, only worry is have the idea taken from me. But I should try something with the write legal disclosure.

      Thanks for the suggestions.

      I might just start a pre-sell website for feedback and give may be the first 5,000 a great deal if they order ahead of time, of course there would be a money back guarantee.

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      • Profile picture of the author Killer Joe

        Preselling physical products only works if A:The products are already in production, or B:You have already secured the funding for production. This is true on several fronts, but the most obvious is that you will need to provide a delivery date for the products, and you won't have that until you begin production.

        Now, the following is not legal advice, but I want you to consider the ramifications of what you are proposing. If you believe that you can presell physical products to raise the money for production you are kidding yourself. You are also exposing yourself to major legal problems if you take the money upfront and can't deliver down the road.

        Many credit card companies have policies that frown on this kind of activity, and in fact, prohibit it. So in essence you would need to collect cash, checks, or money orders to make your presell launch work if you are looking for payments in advance. But you would still be risking legal problems such as Mail Fraud here in the US if you used the Postal System for payments sent to you via mail.

        Look at it this way, if you fall short of your sales projections, and can't raise the necessary funds to produce the products you will not only incur the expense of refunding the monies, you will also kill your credibility and whatever good will you may have fostered with your customers.

        As someone who makes money selling physical products on the internet I can assure that you will need the continuing loyalty of your customers to build a sustainable business. Having to find new customers for every sale is a losing proposition.

        One other thing I want to touch on is the mistake that most people make when they launch a new physical product. Basically, they believe that they need to make the product at the largest volume to support the lowest cost. Don't fall into this trap.

        When you approach a vendor be sure your Request For Quote (RFQ) always contains quantities that allow you to test the market without filling your garage with unsold merchandise. Lower quantities will mean a higher cost per unit, but there is a trade-off.

        Generally, you won't sell 100% of a large order, so all the inventory that is leftover needs to be amortized into the products that you have sold to determine your profit. So, for example, if you make 10,000 units at $3.00 each, and only sell 5,000 units, you could have just as easily paid $6.00 each for 5,000 units and skipped the hassle of storing/warehousing the unsold inventory. In fact, your real profit would have been higher in this example with the smaller quantity order.

        Bottom line...go back to the vendors that have given you quotes and give them a RFQ for significantly smaller orders if you haven't done so already. Figure out a reasonable break-even cost and make the first order a small but profitable one.

        What you want to do with this initial forey into physical products is to reach a balance where the retail price you sell at allows you to recoup the cost of manufacturing the products and leave you a little profit at the same time. Remember, all physical products have what is called Non-Recurring Charges, and these include such things as artwork and tooling that once paid for do not need to be paid for again. That means that all future reorders will be cheaper than the initial order placed for production.

        If you find that it costs you $12.00 each to have 100 units made, and those units sell for a total of $2,000.00, you just made $800.00 profit. Continue rolling the entire procedes of each production run into the next order until you reach a point where your cost per unit is low and your volume is up and you will have reached your goal, albeit in a round about way. This, of course, assumes you do not need the sales proceeds to eat, or pay rent, but only to build your business.

        I'm starting to write a book here, so my apologies. Just do this thing right the first time and stop kidding yourself that collecting money upfront will solve the problem. It won't, and you don't deserve the headaches. Adjust your unit numbers until they balance in your favor, or raise working capital.

        Best of luck,

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        • Profile picture of the author Tony6597
          Thank you for all the insight Killer Joe.

          You have made some very important points.

          I will get more quotes on the production cost and lower quantity. The other point you made is important, I need to keep and retain these customers. I think it would be worth my time and money just to make some sample made up, even if it cost me $15 each and I made no profit. I need real world feedback from actual sales of this product, not just hearsay from friends.

          If I can't sell one of these, why have 5,000 of them made? So more market research is needed and unsold product must be considered as well, I don't need a full garage and that is for sure KJ.

          Many thanks; I let you know how things go.

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          • Profile picture of the author kf
            Why don't you license your product to somebody in your market who will then do all the work and give you a percentage?

            They manufacture, distribute and sell your product and you make a bit on each item they manufacture.

            This is completely hands-off for you, and your product is gone. But if you're a fountain of good ideas, then you can move on to the next one rather than worrying about financing, inventory you may not sell and the hassle of distribution. This is truly passive income and how huge money is made if you come up with the right product.

            Just a thought. Physical products are a great example of when *not* being married to your idea can be more lucrative long-term.
            Those who stand for nothing, fall for anything. ~ Alexander Hamilton
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  • Profile picture of the author NormanSP
    Maybe a sponsor or a business partner could be the key. They put some money into production in return for a fee or cut of the profit.
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  • Profile picture of the author dhudiburg
    Before you take any of the risks you have outlined here, you need to 1) validate the idea beyond showing the prototype to a few friends 2) clearly define your target audience and 3) get your marketing and sales funnel in place.

    If you can come up with a digital product that would appeal to the same audience, you would be much better off starting with a non-physical product.

    I wouldn't do *any* physical product without first having a list of prospects (or better yet, customers) to sell it to.
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  • Profile picture of the author Debbie Songster
    As a person who deals in physical product sales, I can tell you Killer Joe is right on the money with that advice.

    Also kf suggests licensing out the product - this is also a good idea but your product won't be "gone"
    Licensing means they can manufacturer / sell your product for a set amount of time.
    It usually involves them paying you a fee upfront plus a % of each product or each product after the first XXX amount.
    The type of details and rules are wide and varied.

    There are licensing organizations out there that can match you with a "buyer"

    Your best bet is to take Killer Joe's advice and start small. Having less product is a good way to test the market with less investment.

    It might be a good idea to you but be a flop on the open market.

    Getting back in the grove after taking a year off following a family tragedy.

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    • Profile picture of the author Tony6597
      I will look into licensing the product. I'm not sure but I think the idea has to be patentable before those kinds of organizations will touch it. I will check into either way, don't want to miss an opportunity here.

      Building a list of interested people would be a good idea, just keep them up to date on development a get feedback.

      "It might be a good idea to you but be a flop on the open market."

      You're right on that Debbie;
      I will do more research before I spend too much time or money on it. If I remember right in the marketing videos I've seen, there was this guy that made a Nutritional Board game, he filled his house with like 2,000 board games $20,000 invested. Only through a product launch was he able to sell a lot a make back his investment, I think using Frank Kern program I think.

      This is a trap I will not fall into, I may rent a small space at a mall for one day to get feedback from people on the product and see what happens
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      • Profile picture of the author rlee69
        Just remember. There is no substitute for real sales. You can do all the market surveys you want and 100 people may say they love it but when I comes to stroking a check things tend to change. Lots of examples of great market response then poor sales. Also don't trust your friends or family. Talk to strangers. If nothing else get people to commit on paper to buy but don't take their money. When you get enough commitments then approach an Investor or manufacturer and try to strike a deal. Just a thought.
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  • Profile picture of the author rlee69
    I agree you have to have your ducks in a row to pre-sell, but its definitely possible to collect money for a product to inject capitol into a business. There are hundreds of success stories of start UPS who did his that. There's even crowdsourcing websites dedicated to his that. The only way you would get in trouble is if you spend all the money and do t deliver the product. You have to be absolutely honest with your customers. If your production only starts after you've made some presales make sure your customers are completely aware of the lag time. Even I its 3-4 months if you create enough of a want your customers will Wait. Put a contingency in your website that refunds are only available after product is received. Most people wont ask for their money back after they get your product. Apple pre sells stuff 3 months out. Not true that you can't estimate a release date before production begins. It's true that you can't foresee all problems but you and your manufacturer can get pretty close. Hope my opinion helps. Just be careful, honest, over estimate and don't spend all the money and your pre sell can work. Check out
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    • Profile picture of the author rlee69
      Get a provisional patent through Nolo. It'll give you 12 months of protection. Then you can pitch a licensing deal to a manufacturer and negotiate them paying for the non provisional patent. 12 months gives time to check out your products market viability to determine if it would be worth 3-5k or more to patent it. If you go to the USPTO website and you can figure out what classification and sub-class your product falls in you can do your own prelim prior art search. Lawyer may find stuff you couldn't but its a good start if your worry is disclosure.
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  • Profile picture of the author Path Theory
    If you have the prototypes made, you could bring your product to Kickstarter. That's always a good way to find out if there is a true market need for what you want to create.

    Spend $50 a week on fb ads to drive traffic to the kickstarter campaign, until you hit your goal amount, or until you realize the product is a flop.

    I've used this method before, and it works well. I've had a couple flops, but I've also had the same amount of successful campaigns.

    Dental Floss Tycoon

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  • Profile picture of the author kk075
    One word for the original poster- Kickstarter.

    While it looks like a nice fundraising site, what it really does is to pre-sell merchandise so you can raise enough money to get your feet off the ground. So do some research, see how others made their campaigns successful, and then just go for it.

    Learn to sell like a pro through Web Synergy's marketing blog.

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    • Profile picture of the author KirkMcD
      Originally Posted by kk075 View Post

      One word for the original poster- Kickstarter.
      You know, the original post was made SEVEN YEARS AGO!!!
      He probably doesn't need a solution anymore.
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      • Profile picture of the author rlee69
        I would have to agree with you. Good point. LMAO!!!
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        • Profile picture of the author rlee69
          I see the date now. Dec 2008. Funny.
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          • Profile picture of the author sellonlinee
            LOL.Was about too ..saw the date
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