Backorder management on Shopify & best practices

Backorder management on Shopify & best practices

Although online commerce has its peak seasons throughout the year, we see them reach their pinnacle during the holiday season. Before Christmas or summer, many retailers experience a high sales volume, but sports vendors must meet higher demands during sports seasons. This peak has motivated businesses to use backorder management strategies to stay ahead of the curve.

Backorders allow customers to place orders while waiting for the merchandise to arrive. It's a typical retail strategy that works well for maintaining clients, generating hype, and outperforming your competition. However, it has its drawbacks when not executed well.

A backorder might result in late delivery, unsatisfied clients, negative feedback, and angry customers if the process is not well defined and executed by the merchants.

This article will walk through some tips and details on how you can manage your Shopify store's backorders.

What is a backorder?

What are the reasons for backorders?

Why are backorders important?

In what cases is accepting backorders useful?

What are the disadvantages of backorders?

How to manage backorders?

Best practices and Shopify apps for backorders

What is a backorder?

First of all, let’s align on what we understand from backorders. According to Investopedia, a backorder is an order for a good or service that cannot be filled at the current time due to a lack of available supply. 

In the world of e-commerce shop owners, like us, a  backorder is a process of purchasing a product that is presently not available / out of stock but may be purchased by customers when it returns in supply. It's similar to a pre-order in that you anticipate a restock soon, so you allow consumers to place orders while they wait for you to ship.

As a Shopify store owner, you accept the backorders for the products that you know more stock will arrive because you placed a purchase order. 

In other words, back-ordering is a method of taking orders for items that are not presently available. These orders are sitting in the backlog until the product comes in, at which point it is processed and shipped. 

As a retail strategy, backorder enables a retailer to maintain an active presence when a product is out of stock due to high demand or low supply. 

What are the reasons for backorders?

Reasons for backorders are most likely the following:

  • It's easy to make an error in the process of stocktake if you don't have the right technology in place. There may be a stock miscount at the time of stocktake caused by staff error.
  • When the stock doesn't get updated on schedule, it causes additional orders to come in.
  • Goods that have passed their expiration date and haven't been updated in the system. Damaged products result in inflated inventory counts. In addition, due to timing issues, because the expiry date has elapsed, merchants cannot send out actual products in the warehouse to the customers.
  • Backorders are caused by inventory loss or misplacement. As a result, warehouse employees are unable to locate the products in the warehouse when orders arrive.
  • Backorders occur when demand for production increases in the runup to the holiday season, causing the system to be updated less frequently.

Why are backorders important?

Probably no customer would want to see a notification such as "Out of stock" in today's quickly handled environment.

Backorders allow customers to buy from your Shopify store instead of your competitors, resulting in increased sales and fewer customers going to them. It also has several added benefits:

  • Backordering lowers the probability of overstocking goods, which reduces warehousing expenses.
  • Backordering reduces stock waste because goods have less time to become damaged or outdated. 

For example, if you are a merchant selling winter boots on Shopify, you may forecast that the demand will increase during the winter, especially at Christmas time. So, instead of an out-of-stock problem, you may backorder the item so that you’ll not lose your customers to other shoe stores.

In what cases is accepting backorders useful?

If you are selling an item that experiences high demand, backorder is an excellent strategy to use. This is because the time spent waiting for the product will potentially mean an increase in revenue that can not happen without backorders.

Using backorders for organizing pre-launch sales is a good option for businesses to gain early interest in a product. For example, suppose you planned to have the product available for purchase before it is produced. 

In that case, you could use backorders as a way of accumulating revenue while still allowing customers to have access to your pre-launch sales.

Some tech companies take pre-orders for new technologies before they are manufactured and sent to the public, like mobile or electronic devices.

It might also be helpful when a product runs out of stock owing to a lack of preparation or unforeseen demand spikes. The next batch of items is en route, and the merchant has an anticipated arrival date. Customers are aware that the item will be in stock at a given time when they place an order. In addition, if the inventory expense changes, the merchant may adjust pricing.

What are the disadvantages of backorders?

Backorders help you maintain customer relationships, generate hype for your Shopify store, and outperform the competition. 

If the merchant forgets to ship backorders when they are in stock, or the shipping date of the back-ordered items gets delayed, it can harm your image and cause negative reviews.

A lack of communication with clients and poor inventory management is a significant reason for this problem.

For some cases, a poorly managed backorder strategy may cause negative impacts such as; 

  • Backorders might result in unhappy clients.
  • It can be hard to manage backorders, and they could lead to late delivery.
  • Unsatisfied clients may post negative reviews on your Shopify store, which will hurt your store's reputation.
  • Backorders allow customers to place orders while waiting for the merchandise to arrive, leading to late deliveries and negative reviews from unsatisfied clients.

Backorders are a common cause of frustration for merchants. However, backorders are not something scary. In case you can control and track your inventory management, you will succeed and grow your business. 

Let's talk about managing and reversing the negative impacts of backorders.

How to manage backorders? 

If you're struggling with backorders, it's time to rethink your strategy. The key is understanding the psychology of customers and how they perceive things like scarcity and fear of loss. 

There are ways to get around this problem so that sales don't suffer when inventory becomes scarce or demand skyrockets. 

Give these tips a try today;

When using backorder as part of your retail strategy, you need to communicate with customers who place backorders well ahead of any ship date to understand what options they have available at the time of purchase.

If you are accepting backorders, be very clear about what options your customers have at the time.

Allow customers to cancel their orders if it is clear that the items will not ship on the expected date. Allowing cancellations will increase customer satisfaction and make sure they keep coming back for more purchases in the future. If your goods are available again, later on, feel free to contact them with a new release; 

Use shipping estimates for backorders. However, be very clear in your communications that the products will be shipped at the expected date. If you want to honor any shipping estimates, it is crucial to do so only when they are highly likely to fulfill these orders on time.

Setting up an automated email communication

This is an essential aspect of backorder management that every business should have in place. In addition, it would help if you had an automated communication strategy in place so that your customers will know precisely the status of their order and when their orders will be shipped. This kind of communication can help preempt customer service issues and prevent them from turning into negative experiences or bad reviews.

Setting up alerts and notifications

It is essential to have various alerts and notifications in place to ensure you can quickly address any issue with backorder management. For example, many e-commerce platforms allow users to be notified whenever the products are back in stock.

Take a look at Apple. iPhones they've ever released have created a demand so strong that it has resulted in backorders, and people are prepared to wait. 

If your Shopify business uses such a feature, it will be easier for you to fulfill each backorder promptly.

Money-back guarantee

By offering a money-back guarantee, your customers will be confident that they can redeem their purchases and get their money back if the shipping date is delayed significantly. 

Keep track of the level of stock on popular items.

Popular products of your store are likely to be snapped up quickly, so keep an eye on their inventory levels. Of course, nothing in the e-commerce world goes 100 percent according to plan, so stay on top of inventory to help with purchase order decisions.

Backorders can be avoided by forecasting stock availability and implementing comprehensive stock planning based on that prediction. For example, when the inventory count for a product reaches a certain level (reorder point), more stock can be ordered ahead of time.

Best Shopify Practices and Apps to manage backorders

Many businesses discover that Shopify's inventory management system allows real-time inventory visibility across online and offline channels. Yet, merchants still need intelligent forecasting to eliminate the problem of canceling orders due to stock shortages. 

In addition, the issue of limited inventory forecasting across multiple platforms causes dissatisfied clients and superfluous manual procedures to guarantee accurate inventory reporting.

When you sell on Shopify, it is up to you to keep track of when your products will be restocked. As a result, when a customer calls for assistance, your customer care staff can't offer them a promised delivery date.

Because Shopify does not handle backorders, when customers call in to inquire about the status of their backorder, your customer service is unable to offer assistance since they do not know whether it is being routed, picked up, packed, or shipped. 

There is no one-size-fits-all solution for backorder issues. Backorders may be handled in a few various ways, depending on the type and size of your firm.

 The first step is to honestly inform your client that the product is not available right now and is backordered on the shopping page. You can add a simple buffer for back-ordered items as "back-ordered" to inform your customers. 

  • Provide an ETA: Expected Time of Arrival," which is frequently shown as a date. The most effective Shopify stores provide estimated delivery dates into their system. As a result, when the customers place an order, they can see when it will be delivered. It allows you to interact with your consumer and inform them of what to anticipate; you may want to look at how it is here!

            Post an estimated arrival date for your product so that customers are not left waiting.

  •  Setting up a waiting list:  Ask for email addresses on the product page for those who want to be alerted once the item is available again. This scarcity principle (this item is sold out! First in, first out!) has a lot of potentials to build excitement and foster urgency once the product is available again.

But be careful! ​​When a product remains in the backorder for an extended period, it generates the wrong impression in consumers' minds and lowers their trust and credibility of your Shopify store.

Ensuring that your clients are not waiting too long is vital in today's market. So don't leave them hanging; invest in a dependable inventory control solution for Shopify stores to guarantee you can handle backorders with ease! 

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