Well, grocery stores do it because really fresh food sells better, and rotten food has to be thrown away. So they have a huge incentive to make sure they don't have certain kinds of "inventory" sitting around too long - produce, dairy, and bakery in particular. With most other things it usually comes down to a different issue, cash flow. Smaller businesses don't have a lot of spare cash, and when your product (ABDL diapers) takes 3-5 weeks to come by boat, plus the week or so of manufacture time since they don't keep your product in stock, that means you're without that cash for over a month. Then after you receive it you spend the next 2-12 weeks selling off that inventory, depending on demand, which can be difficult to predict.
At some point you have enough cash and can place another order, but that means you have to wait until most of your existing inventory is sold before you can reorder. So every time you hit this point in the order cycle, it's a bit of a crunch - inventory is getting low and cash is almost enough to place another order but you have to hold off. Then you finally have the cash and BAM order placed and now you have NO cash, very low inventory, and an agonizing wait for them to make and ship it. If there's a run at this point you're completely helpless - you couldn't have placed the reorder earlier and can't sell product you don't have. (without preorder anyway) This is a much bigger issue when you're trying to increase your stock on hand or adding a new product line because you're suddenly having to lock up some more of your cash flow in inventory. This is why companies will go with "preorders", because they simply don't have enough cash flow to pull it off otherwise. The money you send them in the preorder is helping them to place their order. You might be stubborn and say "I refuse to preorder!" Well, you're just being stubborn, while they simply have no choice. They can't place their order until they have the money to do so, and it's just not going to happen until they get enough preorders to be able to make their order. Being stubborn about it won't "force them to change their ways", they're doing it the only way they can.
You might think this problem would go away after a few months or a year in business, as you make a profit and your cash flow improves, but to survive in the long-term you have to re-invest that money in the business. Look at ABU's new warehouse, or Tykables new line of clothing. Money that could be held onto to improve cash flow gets re-invested into the business to make it more competitive. We've seen all of the big players have this issue - rearz, abu, bambino, tykables, etc. That, and the 5-8 week turnaround time on diapers is a huge factor here that a lot of small businesses don't have to deal with. If you're an electronics retailer, you can place an order with Engram Micro and have your restock here in 3-5 days. Grocers get produce overnight and dry goods in 1-2 days. But even big businesses struggle with this problem. They keep their "liquid cash" as small as possible because their main reserves are locked up in investments, making interest. They only pull money out of their investments when they need to spend a chunk of it on something like a warehouse. The bean counters look at products on the shelf as a loss because that money could be growing in the investment, and if you're a big business that loss scales up fast.
"Finance is so weird!"
- Ultron
