PRE‐COMMERCED E F I N I T I O N , T R E N D S A N D W H Y Y O U S H O U L D C A R E

WHAT IS PRE‐COMMERCE?

Pre-commerce is a productdevelopment method which allowsnew product ideas/prototypes to bemass produced only when they havereached an initial threshold of buy-infrom investors/consumers.

Taps into upfrontinvestments from

consumers

In terms of either:

CapitalKnowledge

Applies toproducts not yet

at the massproduction stage

PRE‐COMMERCE

QUICK EXAMPLES

Pebble Watch Tesla Model 3 Oculus Rift

That improves the success rate of acrowdfunding/pre-commercecampaign to 99%Where momentum of the collectiveaction takes over

The "magic" number 34%represents a tipping point:TIPPING

POINT

HOW PRE‐COMMERCEDIFFERS FROM OTHERFORMS OF COMMERCE

There is a prevalentviewpoint that sees pre-commerce as a trendwithin social commerce.

The most common tacticwithin social commerceis using BUY BUTTONSon business socialmedia accounts.

SOCIALNETWORKS

+

COMMERCE=

SOCIALCOMMERCE

It’s more accurate to makepre-commerce a category of its ownbecause it involves more than just

the selling mechanisms.

Pre-commerce touches other areas of the business,from product innovation, supply chainmanagement, to marketing and sales.

COMPARISON

MARKETINGSTUNT

While most campaigns on platformslike Kickstarter employ social media totrigger the viral effect, pre-commerceis not a short-term, quick-win kind oftactic.

MOSTMARKETINGSTUNTS AIMTO:

Stir excitement/ debate/curiosity pre-launch

01

Cause a short-term salessurge

Cause a brand uplift (eithershort or long-term)

In a marketing sense, pre-commerce shares purpose #1 and #3

02 03

The underlying thinking is to jump in before the traditional productlife cycle kicks in (pre-commerce sales & profits as dotted lines)

HOW PRE‐COMMERCE LETS YOU GET AHEAD OFCOMPETITION

Pre-commerce is a powerful productdevelopment engine, fuelled by

evolutions in consumer preferencesfor innovative products and

community engagement; as well aslower entry barriers for new product

development.

Consumers increasinglyvalue experiences overphysical goods, whichgives rise to experientialbuying.

Pre-commerce fits inwith this consumerpreferences evolution.

CONSUMEREXPERIENCE

PHYSICALGOODS

Provides a senseof belonging thatgoes beyond the

thrill ofpossession

Injects "status"into the buying

experience

Taps on theincreasing

demand for newtrends and novel

products

PRE‐COMMERCE

MARKETEVALUATION

Pre-commerce allows innovators totest their product-market fit with aMinimum Viable Product (MVP)equivalent.

Since consumers would only backprojects they like, it helps:

Accelerate innovation Ditch waste Tweak offerings along the way

The failure rates of newproducts launchedtraditionally or throughcrowdfunding are similaron the surface.

But the risks could bereduced with pre-commerce. Would yourather pour millions intoa product to learn alesson, or one-hundredthof that amount?

RISKSTRADITIONALLAUNCH 40-80%

CROWDFUNDEDLAUNCH40-90%

Being able to gauge demandbefore mass production allowsfor more accurate financialforecasting and less inventoryrisk.

Innovators can also combine pre-commerce with e-commerce toreap benefits.

SUPPLYCHAIN

A pre-commercefashion startupthat lets women

pre-order fashionstraight off the

runway

Leverages salesdata it collects

from the pre-commercebusiness

Informstraditional retailbuys using harddata rather than

intuition

MODA OPERANDI

QUICKBENEFITRECAP: Focuses on social mechanisms

rather than broadcast

01

Cuts down on themiddlemen, e.g. retailers

Direct feedback frompotential customers

02 03

MARKETINGEFFICIENCY

MARGINEFFICIENCY

PRODUCTEFFICIENCY

HOW PRE‐COMMERCETICKS ALL THE BOXESFOR TESLA

Just one day after the official unveil event, Model 3 pre-orders alreadyoutnumbered Tesla’s previous model deliveries.

In Australia, people linedup to pre-order Model 3“despite not knowingwhat it will look like, howit’ll drive, or even howmuch it’ll cost.”

They might even have towait longer as the left-driving countries will getthe car first. This goesto show experiencetrumps physical goods.

EXPERIENCEBEINGFIRST

EARLYADOPTER

MARKET TESTING

Clearly a lower end model has lured inmore consumers from the “entry-levelluxury” segment as they have shownexplicit interest by giving Tesla moneyin advance.

No new capital required afteraround 6 months of taking pre-orders.

With information about the highdemand, Tesla has put togetherplans to ramp up productioncapacity.

SUPPLYCHAIN

LOCK‐INADVANTAGE

Those who have prepaid are morelikely to go through with the purchaseand less likely to buy something thatcatches their eye in the meantime.

THE STARTUP VS.INCUMBENT DEBATE

FEAR OFCOPYCATS

There is a fear, especially amonglarge corporations, that pre-commerce would reveal theirstrategic plan for everyone tosee.

A potential scenario is wheninformation about new productdevelopment is leaked, whichgives fast followers time to gettheir product to market rightbehind yours.

Pre-commerce actually works outbetter for established brands in this

case. If your idea/prototype isalready out in the marketplace,

supporters will defend your companyagainst copycats.

People are payingfor the experience

rather than thephysical goods.

This goes back tothe experiential

buying trend.

You already havea brand name and

an engaged fanclub.

WHY?

Forward-looking incumbentshave come to accept:

"It’s better to own a bit of adisrupting startup than be theprey of a new business modelfrom an unknown competitor.”

FINALTHOUGHTS

“What separates your brand andcompany from a world of innovative

independent designers is only asemi-permeable membrane.”

T H A N K S   F O R   R E A D I N G

C R E A T E D B Y

Read full blog post at: blog.enabled.com.au/pre-commerce