Backorders vs. out of stock: key differences
You might be wondering what sets backorders apart from out-of-stock situations. While they might seem similar at first glance, there are some key differences that every e-commerce manager needs to understand.
When an item is out of stock, it means that there is no inventory available to fulfill orders. If a customer tries to buy that item, they’ll be met with an “out of stock” message and won’t be able to complete the purchase.
This can be very frustrating for customers, especially if they had their heart set on a particular product. It can lead to lost sales, decreased customer loyalty, and even negative reviews or social media backlash.
Backorders, on the other hand, allow businesses to keep accepting customer orders even when inventory runs dry.
Instead of turning customers away, you’re essentially asking them to reserve their spot in line for when the product becomes available again.
This helps to maintain cash flow and keeps customers invested in your brand, even during times of low inventory.
Managing backorders becomes easier when you efficiently manage vendor relationships, ensuring a steady supply chain and timely restocking.
You need to be transparent with customers about the expected timeline for fulfillment and keep them updated throughout the process.
You also need to have a solid plan in place for restocking inventory and working with suppliers to ensure that you can deliver on your promises.
To put this into perspective, let’s revisit our camera lens example.
If you had simply marked the lens as “out of stock” after the initial inventory sold out, you would have missed out on many potential sales.
Customers who were keen to purchase the product would have been left frustrated and disappointed, and some may have even turned to competitors to find something similar.
By accommodating backorders, you can maintain customer loyalty to your brand. This process also allows you to gather valuable data about demand levels, which can guide your inventory planning and forecasting going forward.
The key takeaway here is that backorders can be a powerful tool for navigating inventory management challenges in an e-commerce business. By understanding the difference between backorders and out-of-stock situations, and by developing strategies for managing backorders effectively, you can turn potential disappointments into opportunities for growth and customer retention.
But this is just the start.
In the following sections, we’ll explore proven strategies for reducing backorders, handling them effectively when they do occur, and leveraging technology to streamline the process.