A Guide to Back Orders

It’s important as a seller to ensure backorders are kept to a minimum to save missing out on a sale and frustrating the buyer who is likely to seek a similar product elsewhere.

Back orders can be a common issue for eCommerce stores but these can be the difference in making a sale and loosing one, or worse still prevent someone returning back to your store altogether.

We cannot put enough emphasis on avoiding backorders whenever you can.  The key to doing this is having excellent inventory management processes as well as staying close to your stock. This will let you know when your running low on certain lines and when you need to reorder a product to prevent it going into back order status.

What is a backorder?

An item only ever goes into back order status when the item is listed to be purchased but is actually out of stock.  This often puts the buyer of in todays world as they don’t want to wait until the product is available again to then be sent out.

It can be common practise for eCommerce businesses to put items on backorder when they’ve ordered the stock but awaiting for it to arrive to their warehouse.

This is where the frustration can come in from the consumer point of view so ensuring you’re keeping your inventory up to date and accurate at all times is the key in giving the consumer what they want and when they want.

 

Is there a difference from out of stock items and back order items?

The main difference between the two is a back order item can still be purchased but if it’s listed, but an out of stock item cannot be sold. This makes a difference as it saves customers requesting a refund or having to wait longer than necessary for their goods.

There are some pros and cons between the two as if someone is willing to wait a little longer than usual then you still get the sale.  It’s a fine balancing act with online customers as most businesses offer a next day delivery service but if it is not communicated how long the customer has to wait for their product then they are left in the dark.

 

Having said that if an item is listed as out of stock this can often mean the customer will decide to look elsewhere, as this means they’re unsure when it will be back in stock.

What other reasons to backorders occur?

Inaccurate stock levels

Failure to check you inventory levels on a consistent basis to ensure they’re accurate will no doubt mean you will end up selling stock that you don’t actually have.  There could be a number of reasons for this the wrong amount was recorded when receiving the stock in, damaged stock not being written off, or worse still  potential theft.

Not checking stock regularly can often mean you have to inform the customer it has gone into backorder after the sale has already been made. This can lead to poor customer reviews and certainly a loss of sale more often than not.  It also will result in more work for your business with applying refunds, sending emails or making phone calls to the end customer.  All of which may reduce the chances of them going back to make a purchase in the future from your store.

High Surges in demand for a certain products

Quite often if you run a promotion on certain products this can lead to increased sales so it is important to ensure you have the correct quantity in stock before doing so. There could be unexpected increase demand via the media we all know what happened during Covid pandemic when people were bulk buying many products in a panic, so having the correct amount listed is paramount to customer satisfaction.

 

Manufacturer’s letting you down

If your supply chain is letting you down this could mean that stock is not arriving when it should which can cause issues with listings especially seasonal products.  If this happens then you’ll be left with no alternative but to put the product into backorder until the stock arrives.

Longer lead times than usual

Similar to the above point if you know a best selling item is running low then you must plan accordingly to ensure replenishment of stock is key to ensure you reduce the chances of having to put into items into back order. Things can be out of the supply chain hands from time to time such as unexpected natural disasters or wars taking place in certain parts of the world.  Nevertheless if all is running smoothly then it is important to ensure you’re planning accordingly weeks or even months in advance to ensure stock is on hand before bestselling items runs out.

The importance of reducing the number of back orders

 

Loss of sales

This day of age more so than ever most businesses offer next day delivery services if a product is in backorder status then you can’t offer this service. It is very likely that the consumer will go to a competitor if they have the item in stock and can also offer a next day delivery service.  Worse still they may stick with the competitor for any future purchases so you have missed out not just on one sale but on potential repeat business also.

 

Poor customer experience

Online businesses thrive on positive reviews therefore the more times people are shopping on your store and you often have backorders the greater the chance you’ll receive poor reviews.   This won’t only stifle repeat business but may put off any new customers as they will not trust your brand if reviews are poor.

 

Increased demand on customer services

If someone makes a purchase to then find out it is in backorder you will have a greater demand on customer service team weather it will be to offer refunds or to send multiple emails explaining that the product can not be sent as it is not available.

Keeping your website and inventory up to date will reduce the chances of this happening and then give you more time to focus on other important aspects of your business.

Ideas on how to reduce number of backorders

 

Have multiple suppliers

Having more options available on where to source stock can ensure that you are able to get it sooner if your usual preferred supplier has delays. This gives you the insurance policy to fall back on should you need to.

 

Effective forecasting

Looking at historical data can provide you with an more accurate forecast on when sales may spike and how much stock you need to reduce the chances of stock going into backorder. This is easier for businesses that have been trading for over 12 months or more to get a monthly analysis.  For any new businesses out there you may have to do some home work and see when your likely to get spikes will depend on what your selling. The likes of BBQs will not be high during Autumn or Winter months but definitely more so in Spring and Summer seasons.

 

Over order on best selling items

If you are putting certain items on backorder more than other items this will be a good signal to order more of these types of products. Your cashflow may be an issue here as your initial outlay will be more but if your guaranteed they will sell them in the end it’s worthwhile exploring.  Just factor in your increased storage costs also before doing getting the balance right is key in keeping your cash flow where you need it to be.

Consider outsourcing to a 3PL

If you’re doing things inhouse then the demands can be difficult doing your pick, packing, distributing the items and dealing with customer queries as and when they occur can put a big strain on you and your business as it grows

 

Finding the correct 3PL partner can help you grow remember these are the professionals in this field so they will have better technology and infrastructure to help manage your inventory and ever increasing sales to a better standard.

 

The best 3PLs out there will send you daily trackers with an overview of your account and can set up automated emails like low stock reports that alert you as and when stock is running low on certain SKUs.

At MCF we have other methods that reduce to risk of backorders on behalf of our many clients and it starts with the inbound process.  Here we will require an Advance Shipping Notification (ASN) similar to a packing list so we can oversee expected v received ensuring the stock being booked in are the correct quantities.

Full stock counts as well as pick to zero checks, can also help stay on top of your inventory levels. A pick to zero is any locations with 10 or less items in are checked to see if the amount in there is accurate, all of which reduces the chances of backorders occurring.