Backorders are a common issue for ecommerce businesses in today’s fast-paced, on-demand world. Few things are more frustrating for customers than placing an order only to discover the product is temporarily unavailable. But what exactly does a backorder mean, and how can businesses manage this situation efficiently?
At GB Micro Logistics, we specialize in third-party logistics and inventory management, and we understand the importance of reducing backorders to maintain customer satisfaction. In this guide, we’ll explain what backorders are, why they happen, and the best practices for handling them to ensure smooth operations and happy customers.
What is a Backorder?
A backorder occurs when a product is sold but is currently out of stock and will be shipped once it is restocked. Many businesses continue to offer items on backorder, allowing customers to make purchases even if the product isn’t available at the time. Once the inventory is replenished, the backordered item is fulfilled and shipped to the customer.
This process enables businesses to maintain sales even when products are temporarily unavailable. However, it’s essential to communicate effectively with customers about the expected delay to manage their expectations and maintain trust.
How Backorders Work in Ecommerce
In a perfect world, businesses would always have enough stock to meet customer demand. Once an order is placed, it should be picked, packed, and shipped right away. However, various factors—such as unexpected demand or supplier delays—can result in stockouts.
When this happens, and a product is unavailable, it can still be listed for sale. Customers who place an order during this time will have their items backordered, meaning their purchase will be shipped once the new stock arrives. While this can help maintain sales, businesses must keep customers informed about delivery timelines and any potential delays.
Backorder vs. Out of Stock: Key Differences
It’s important to understand the difference between a backorder and an out-of-stock item:
- Backorder: The product is temporarily unavailable but is expected to be restocked soon. Customers can still place orders, knowing the item will be shipped at a future date.
- Out of stock: The product is unavailable, and there’s no expected restocking date. It could be out of stock for an extended period, or indefinitely.
Backorders reassure customers that they will eventually receive the product, whereas “out of stock” may signal uncertainty about when, or if, the item will be available again. Managing this distinction properly is crucial for businesses seeking to maintain both sales and customer satisfaction.
Common Causes of Backorders
At GB Micro Logistics, we know that backorders can happen for a variety of reasons—some of which are avoidable, while others are beyond your control. Understanding these causes is the first step in preventing them:
- Unpredictable Demand
Sudden spikes in demand can lead to backorders. These spikes might be caused by seasonal trends, a product going viral, or being featured in the media. For example, a television appearance or social media post from an influencer can significantly increase traffic to your store, resulting in more orders than you have stock to fulfill. - Inaccurate Safety Stock
Safety stock is the buffer inventory a business keeps on hand in case of supply chain disruptions or higher-than-usual demand. If safety stock levels are set too low, a business may quickly run out of inventory, leading to backorders. Managing safety stock effectively is critical to avoid running into these situations. - Supplier or Manufacturer Delays
Delays from your supplier or manufacturer can disrupt your inventory flow. Whether it’s due to a material shortage, production delays, or external factors like holidays, these disruptions can cause you to run out of stock unexpectedly. - Human Error
Mistakes in forecasting, inventory counts, or even listing an out-of-stock product online can lead to accidental overselling, resulting in backorders. Proper inventory management and regular stock checks are essential to avoid this common pitfall. - Warehouse Management Issues
With numerous processes happening in your warehouse, inventory can sometimes be misplaced, damaged, or incorrectly recorded. If these issues aren’t caught early, you could end up selling stock that isn’t actually available. - Long Lead Times
Even with proper inventory planning, long lead times from suppliers can result in stockouts. If replenishment shipments take longer than expected, you may run out of products and have to backorder items before the new stock arrives.
The Pros and Cons of Selling on Backorder
Selling items on backorder can be both a blessing and a challenge. At GB Micro Logistics, we help businesses navigate the upsides and downsides of backorders. Here are some key considerations:
Advantages of Selling on Backorder
- Efficient Use of Storage Space
When an item is on backorder, the incoming stock can be immediately picked and packed, freeing up valuable warehouse space for other products. This can be especially helpful in a busy warehouse environment, where space is at a premium. - Reduced Warehousing Costs
Backorders can temporarily reduce the amount of inventory you need to store. Less stock means lower storage fees, and for businesses with large inventories, this can make a noticeable impact on operating costs. - Increased Product Demand
Seeing that a product is on backorder can actually boost demand. It signals to customers that the product is popular, which can create a sense of urgency. Many customers may still choose to buy the item, even if it means waiting a little longer. - Immediate Cash Flow
Backorders allow businesses to keep sales flowing, bringing in cash immediately even if the product isn’t ready to ship. This can be particularly helpful for maintaining cash flow during stockouts.
Disadvantages of Selling on Backorder
- Loss of Sales
Not every customer is willing to wait. With expectations for fast shipping at an all-time high, some customers may turn to competitors who have the item in stock, leading to missed sales opportunities. - Loss of Customer Trust
Consistent backorders can frustrate customers, particularly if they experience long waits. If a business frequently runs out of stock, customers may stop returning, opting to shop with more reliable competitors instead. - Increased Operational Costs
Backorders often lead to extra work. Whether it’s managing customer communications, expediting shipments, or splitting orders, businesses can find themselves spending more time and resources than usual to fulfill backordered items.
How to Minimize Backorders with GB Micro Logistics
While backorders are sometimes inevitable, there are several ways to reduce their frequency and impact. GB Micro Logistics specializes in helping businesses maintain efficient inventory systems and prevent stockouts. Here’s how:
- Set Up Safety Stock
Having a buffer of safety stock is one of the most effective ways to prevent backorders. By analyzing demand patterns and setting accurate safety stock levels, businesses can cushion against unexpected surges in demand or supply chain delays. - Accurate Reorder Points
Setting reorder points ensures you replenish stock before running out. Reorder points are calculated based on how long it takes to receive new stock and how much inventory is typically sold in that time. This helps avoid delays between stockouts and restocking. - Monitor Popular Products
High-demand items should be monitored more closely than others. Keeping a close eye on stock levels and historical sales data for these products allows you to stay ahead of potential stockouts.
How GB Micro Logistics Helps Businesses Handle Backorders
At GB Micro Logistics, we offer tailored solutions that help businesses minimize and manage backorders effectively. With real-time inventory management and advanced fulfillment technology, we ensure that businesses can stay ahead of stockouts and deliver seamless customer experiences. Here’s how we can help:
- Real-Time Inventory Tracking: Our systems give you real-time visibility into your stock levels, allowing you to proactively manage your inventory and avoid backorders.
- Demand Forecasting: By analyzing historical sales data and industry trends, we help businesses forecast demand more accurately and make smarter inventory decisions.
- Seamless Fulfillment: Our warehousing and fulfillment services ensure that backordered products are packed and shipped as soon as inventory is restocked, minimizing delays.
With GB Micro Logistics, you gain a partner dedicated to optimizing your inventory flow and reducing the risk of lost sales due to backorders.
Backorder Best Practices: Communication and Customer Service
Managing backorders isn’t just about inventory—it’s also about maintaining customer trust. Clear communication can turn a potential frustration into a positive experience. At GB Micro Logistics, we recommend the following best practices for handling backorders:
- Notify Customers in Advance
Transparency is key when managing backorders. Let your customers know upfront that an item is on backorder, and provide them with an estimated delivery date. Clear communication helps manage customer expectations and reduces dissatisfaction. - Provide Accurate Estimated Delivery Dates
Offering a realistic delivery date is crucial. Avoid vague estimates like “soon” or “eventually” and instead provide a specific timeframe for when the product will be available again. Customers are more likely to stay loyal if they know exactly when they can expect their order. - Send Restock Alerts
Collecting customer emails on product pages allows you to notify them when an out-of-stock item is available again. This can help generate excitement around popular products and drive sales once stock is replenished. - Follow Up with Restock Emails
Once you’ve fulfilled backordered purchases, send an email to notify customers that their items have been shipped. You can also re-engage those who signed up for restock alerts, encouraging them to complete their purchase now that the item is back in stock.
Can You Prevent Backorders Entirely?
As much as businesses may want to eliminate backorders altogether, the reality is that they are sometimes inevitable. Even with the best inventory management practices, unexpected supply chain disruptions, surges in demand, or manufacturing delays can still lead to stockouts.
That said, businesses can significantly reduce the frequency and impact of backorders by using the right tools and strategies. At GB Micro Logistics, we help businesses prevent backorders by offering scalable inventory management solutions, real-time tracking, and proactive fulfillment services. While it may not be possible to avoid backorders entirely, taking a proactive approach can minimize their occurrence and maintain a smooth customer experience.
Managing Backorders: What Customers Expect
When it comes to backorders, customer expectations must be carefully managed to prevent dissatisfaction. Here’s what customers typically expect from businesses handling backorders:
- Clear Communication
Customers want to be informed as soon as a product is unavailable. By providing prompt updates about a backorder, including expected delivery dates, businesses can maintain trust and keep customers in the loop. - Reliable Shipping Updates
Once an order is placed, customers expect regular updates on their order status. Providing notifications about when the product will be back in stock and when it has shipped helps reassure customers that their order is being processed. - Transparency on Delays
If delays happen, it’s essential to be upfront. While customers may be disappointed, they’ll appreciate honest communication over being left in the dark. Providing realistic timelines and alternative options (such as cancelling the order) can go a long way in maintaining customer satisfaction.
Partial and Rolling Backorders Explained
Backorders don’t always apply to entire orders—sometimes they can affect only part of an order. Here’s a closer look at partial and rolling backorders:
- Partial Backorders: This occurs when only a portion of the items in an order are unavailable. In this case, businesses can either split the shipment, sending available items right away and backordered items later or hold the entire order until all items are available. Splitting shipments helps get available products to customers faster, though it may increase shipping costs.
- Rolling Backorders: A rolling backorder occurs when the delivery date for the backordered product keeps getting pushed back. This can happen due to continuous supply chain issues or manufacturing delays. For customers, a rolling backorder can be frustrating, especially if they aren’t given clear updates about the changing timeline.
How Long Do Backorders Typically Take?
The length of time it takes to fulfill a backorder can vary widely based on factors such as product availability, supplier lead times, and shipping logistics. In general, most backorders take anywhere from a few days to a couple of weeks to fulfill. However, during times of supply chain disruption or high demand, this timeline can be extended.
At GB Micro Logistics, we understand the importance of minimizing backorder delays. We work closely with suppliers to ensure faster restocking times and keep our clients updated every step of the way to ensure customer satisfaction.
Conclusion
Backorders are an unavoidable part of doing business, especially in ecommerce, but they don’t have to be a source of frustration for your customers—or for your business. By using the right strategies and partnering with an experienced third-party logistics provider like GB Micro Logistics, you can effectively manage backorders, maintain customer trust, and ensure your operations run smoothly even during inventory challenges.
At GB Micro Logistics, we specialize in helping businesses streamline their inventory management and fulfillment processes to reduce the impact of backorders. By providing real-time tracking, proactive communication, and efficient fulfillment solutions, we help businesses of all sizes maintain customer satisfaction even when stockouts occur.
Don’t let backorders slow you down — contact GB Micro Logistics today to learn how we can help you optimize your inventory and fulfillment processes.
