Make backorder work for you

Not available, out of stock, currently unavailable - these words top the list of irate customers’ concerns. When you get angry or irritated customers, you lose business. How to prevent lost sales and at the same time, keep customers happy and loyal?
Maybe, asking them to wait a little bit will help?

Backorder (or “out-of-stock”) is a signal of demand overwhelming over supply. Backorder can happen if the customer order can not be fulfilled, as the item is not yet available.

Sometimes, retailers use backorder (which is a bit similar to a pre-order*) as a tricky tool to sell items that are not yet in stock. Everyone knows how loyal fans place orders for their “best smartphones in the world” long before they are available in stores. However, this method shall be carefully watched and analyzed.

*pre-order is a process of selling goods with guaranteed prepayments made and a set delivery date, while backorder does not require a necessary prepayment and can be delivered asap or at any time retailer can.

Stock level

Let’s start from backorder basics.

Here are some recommendations that will help you effectively fight the negative effects of the out-of-stock situations and to effectively use backorders to keep healthy relationships with your customers.

Recommendation 1. Remember, that backorder will not guarantee 100% sale

Mastering backorders is not an easy task, in fact, it is much more difficult than it seems at first sight. Backordering requires very detailed planning (we will talk about it later), but even if you plan all your supply chain elements, sometimes customers can decide to cancel their orders.

Or, on the contrary, you may fail to ship their orders in time or face an unexpected delay, making customers unhappy and unsatisfied. It is the unhappy customers who bring you lost sales and lost profits. So, here comes the recommendation 2.

Recommendation 2. Plan

Inventory management is a complex net of operations, from sales forecasting to real-time demand tracking and reorder point planning. It requires a structured and strategic approach, manageable by a team of qualified inventory managers and logistic operators, or an automated software. Speaking of backorders, managing inventory that is not yet available on your shelves, especially across several sales platforms can be chaotic.

So, we would recommend delegating such complex operations as reordering, calculating reorder points, overseeing logistics and supplier relationship to professional automated inventory management systems.

Recommendation 3. Communicate

When your customer pays you money for a product which is not yet available, he may think of buying “a pig in the poke”. Do not let the customers think so.

First, communicate all product delivery stages to the customer - again, smart CRMs and inventory control systems will help you to make it. Update the customer on all delivery terms and timing.

In case you experience troubles in logistics or unexpected delays, do not be afraid to reach your customers and tell them the truth. Offer them some compliments, alternatives, free delivery or free samples to solve the problem and ensure they will not cancel the order leaving you with a bunch of excess goods.

Recommendation 4. Work with reliable suppliers

Keeping a database of reliable and trusted suppliers is an essential element of any retail business. Especially for backordering, which if properly managed, can save costs spent on excess inventory.

To run your suppliers database you may use spreadsheets, and manually fix all operations and transactions so that you can analyze each supplier professionalism, timeliness and reliability.

Online cloud-based inventory management systems can offer technological solutions that will track all transactions and analyze each supplier in real-time. Automated supplier control will guarantee reduced time and personnel effort.

Find out what you need to do to properly organize your inventory

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hard work on inventory