Introduction to Backorder Best Practices

In eCommerce, backorders represent a critical juncture between demand and supply. They occur when customer demand exceeds current stock levels, allowing purchases to continue with the understanding that fulfillment will happen once inventory is replenished. This concept, while seemingly straightforward, plays a pivotal role in inventory management and customer relations.

In this article, we dive into tips for ecommerce sellers about backorder best practices, equipping you with the insights needed to navigate backorders with confidence.

Why Do Backorders Happen?

A backorder situation arises when a product sells beyond its available inventory but remains in demand, offering customers the opportunity to purchase and await restock. This mechanism is vital for maintaining sales momentum and customer interest during inventory shortages, effectively bridging the gap between supply restock and ongoing demand.

Differentiating Backorders, Out-of-Stock Situations, and Backlogs

It’s crucial to distinguish backorders from related concepts such as out-of-stock situations and backlogs. An out-of-stock status means the product is temporarily unavailable for purchase, halting sales until replenishment. Conversely, a backlog refers to accumulated orders awaiting fulfillment, irrespective of the current stock status. Understanding these distinctions is essential for effective inventory and order management.

Focusing on Direct-to-Consumer (DTC) and Business-to-Business (B2B) Models

Our exploration targets two primary eCommerce models: Direct-to-Consumer (DTC) and Business-to-Business (B2B). Each model encounters unique challenges in backorder management. DTC operations directly engage with the end consumer, requiring a nuanced approach to maintain consumer trust and satisfaction during backorder periods. B2B transactions, which involve sales between businesses, demand a focus on contractual obligations, bulk order management, and strategic communication to navigate backorders effectively.

As we venture into the realm of backorder best practices, our objective is to unveil strategies that not only mitigate the challenges associated with inventory shortages but also leverage these situations to enhance customer experience and operational efficiency. The following sections will detail the foundational knowledge and strategic insights necessary for excelling in backorder management across both DTC and B2B models

photo of inside warehouse 3PL return management

Section 1: Understanding Backorders

Navigating the intricacies of backorders is essential for any eCommerce business aiming to balance customer satisfaction with inventory management. This section delves into the definition and contextual understanding of backorders, distinguishing them from similar concepts like out-of-stock situations and backlogs. Additionally, we will explore the root causes of backorders, focusing on supply chain dynamics and demand forecasting challenges.

Definitions and Context

Backorders: This occurs when a product is sold beyond its available inventory but remains in high demand, allowing customers to place orders that will be fulfilled once stock is replenished. Backorders enable businesses to continue capturing sales even during inventory shortages, maintaining a connection with the customer by promising future fulfillment.

Out-of-Stock: An out-of-stock status means the product is currently unavailable for purchase, halting any potential sales until inventory is restocked. This situation can lead to missed sales opportunities and potential customer dissatisfaction, as the immediate demand cannot be met.

Backlog: A backlog refers to accumulated orders that have been placed but not yet fulfilled, regardless of the product’s stock status. It’s a measure of demand that exceeds the current fulfillment capacity, often resulting from high demand or operational inefficiencies.

Understanding these distinctions between backorder vs. out-of-stock is helpful for effective inventory and order management. While each scenario involves a form of inventory shortage, the strategies for managing them vary significantly.

Causes of Backorders

Backorders are not merely a symptom of inventory mismanagement but often result from a complex interplay of factors within the supply chain. Recognizing these causes is the first step towards developing robust strategies to mitigate their impact.

Supply Chain Dynamics: The global nature of supply chains introduces vulnerabilities, from manufacturing delays to shipping disruptions. Factors such as geopolitical tensions, natural disasters, or labor strikes can unexpectedly extend lead times, making it challenging to maintain optimal inventory levels.

Demand Forecasting Challenges: Accurately predicting customer demand is a perennial challenge for eCommerce businesses. Overestimating demand can lead to excess inventory and increased carrying costs, while underestimating demand can result in frequent backorders. Seasonal trends, market shifts, and consumer behaviors are just a few elements that add complexity to demand forecasting.

Rapid Product Life Cycles: In industries where product life cycles are becoming increasingly shorter, keeping pace with consumer demand without overstocking can be a delicate balancing act. Rapid changes in trends, technology, and consumer preferences can abruptly alter demand patterns, leading to potential backorders.

Quality and Compliance Issues: Occasionally, backorders arise due to quality control failures or compliance issues that halt production. Rectifying these issues can delay inventory replenishment, leading to backorders even when demand forecasts are accurate.

See Difference Between Backordered and Out-of-Stock items.

Check out the comprehensive guide on Backorders vs. Out-of-Stock and see how your brand can best handle these situations.

Section 2: Best Practices in Managing Backorders

Navigating backorder scenarios with finesse requires a comprehensive strategy that prioritizes customer satisfaction, operational efficiency, and clear communication. This section explores best practices that can transform backorders from potential customer service pitfalls into opportunities for enhancing brand loyalty and trust.

Paying Only When Orders Are Filled

Benefits for Cash Flow and Customer Trust: Implementing a policy where customers are charged only when their order is filled can significantly boost customer trust. This approach alleviates the financial discomfort customers might feel about paying upfront for items that are not immediately available, and from a business perspective, it helps maintain healthy cash flow, reducing the risks associated with refunds for prolonged backorders.

Regular Website Updates

Importance of Keeping Customers Informed: Transparency is crucial in backorder management. Regularly updating your website with the latest stock levels, anticipated restock dates, and clear backorder notices helps set accurate customer expectations from the outset. This practice not only aids in managing immediate customer concerns but also reinforces your brand’s commitment to honesty and transparency.

Partial Shipment Options

Enhancing Customer Satisfaction: Offering partial shipments for orders containing both in-stock and backordered items can significantly improve the customer experience. This approach ensures that customers receive available items without unnecessary delay, which can mitigate frustration associated with waiting and maintain a positive perception of your brand.

Creative Consolation Offers

Tailored Offers for DTC and B2B: Providing customers with consolation offers, such as discounts on future purchases or complimentary gifts, can help soften the disappointment of backorders. For DTC scenarios, personalized offers based on the customer’s purchase history can be particularly effective. In B2B arrangements, concessions might include discounts on bulk orders or expedited shipping once the item is back in stock, reinforcing the value of the partnership.

Frequent Inventory Updates

The Role of Technology: Leveraging technology to maintain real-time inventory records is indispensable in backorder management. Automated systems can help track stock levels, predict restocking dates, and trigger alerts for both customers and staff, ensuring that all stakeholders have the most current information at their fingertips.

Evaluating Timeframes for Backordered Items

Setting Realistic Expectations: Accuracy in forecasting restock and delivery times is fundamental. Overly optimistic estimates can lead to customer dissatisfaction and erode trust. It’s essential to provide realistic timeframes, taking into account supply chain variables and allowing for buffer periods to manage unforeseen delays.

Effective Customer Communication

Best Practices: Effective communication strategies include proactive outreach to customers with backorder updates, transparent explanations for delays, and accessible customer service channels. Personalizing communication can also greatly enhance the customer’s experience, making them feel valued and informed.

Providing Accurate ETAs

Importance of Transparency: Transparency in providing accurate Estimated Time of Arrival (ETA) for backordered items is critical. Customers appreciate openness about the challenges and the efforts being made to fulfill their orders, which can significantly impact their patience and brand loyalty.

Utilizing Email Lists for Restock Notifications

Keeping Interested Customers Informed and Engaged: Email lists are a powerful tool for keeping customers who opt-in informed about restock dates and encouraging them to complete their purchases. Tailoring these notifications to reflect customers’ interests and previous interactions with your brand can boost engagement and conversion rates.

Implementing these best practices requires a thoughtful approach that balances operational realities with a commitment to customer satisfaction. By embracing transparency, leveraging technology, and maintaining clear, proactive communication, eCommerce businesses can effectively manage backorders, turning potential challenges into opportunities for building stronger customer relationships.

Section 3: Backorder Management for DTC and B2B

Effective backorder management is not one-size-fits-all; the approach must be tailored to fit the distinct dynamics of Direct-to-Consumer (DTC) and Business-to-Business (B2B) operations. This section explores the strategic differences in managing backorders across these models and underscores the importance of communication, offering insights into effective strategies that can fortify customer trust and streamline operations.

aisle in Walmart store

Strategic Differences

DTC Operations: Direct engagement with consumers requires a nuanced approach to backorder management. DTC businesses must focus on transparency and customer experience, ensuring that consumers remain informed and confident in their decision to wait for backordered items. Strategies may include offering estimated time of arrival (ETA) for products, providing alternatives or upgrades, and using backorders as an opportunity to build a rapport with customers through personalized communication.

B2B Operations: In B2B contexts, backorder management often involves navigating complex supply chains and meeting contractual obligations. The focus shifts towards ensuring continuity in the supply chain and honoring SLAs (Service Level Agreements). Strategies may involve prioritizing orders based on client importance, negotiating timelines, and maintaining open lines of communication with business partners to manage expectations and find mutually beneficial solutions.

image of employees walking through warehouse

Communication Tactics

Clear, proactive communication is the cornerstone of managing backorders effectively. Whether dealing with end consumers or business partners, keeping all parties informed helps mitigate dissatisfaction and fosters a sense of trust.

Importance of Clear, Proactive Communication: Transparency is key. Providing customers or business partners with timely updates about backorder status, changes in ETA, or any resolution efforts demonstrates commitment and professionalism. This proactive approach can significantly impact customer satisfaction and loyalty.

Examples of Effective Communication Strategies

For DTC Models:

  • Personalized Updates: Send personalized emails or messages to customers affected by backorders, detailing the cause, expected resolution time, and any compensatory offers.
  • Transparent Product Pages: Update product pages with clear backorder status, including available quantities and expected restock dates, to manage expectations before purchase.
  • Live Chat Support: Offer immediate assistance through live chat, giving customers a platform to inquire about backordered items and receive real-time updates.

For B2B Models:

  • Dedicated Account Management: Assign account managers to communicate directly with key business clients about backorders, ensuring personalized attention and swift resolution of concerns.
  • Regular Progress Reports: Provide regular updates through reports or newsletters, detailing backorder status, impact analyses, and recovery plans to keep business clients informed.
  • Collaborative Planning: Engage in collaborative planning sessions with clients to discuss potential backorder impacts and develop contingency plans, reinforcing the partnership and shared commitment to overcoming supply chain challenges.

Effective backorder management relies on a strategic blend of operational adjustments and communication excellence. By understanding and addressing the specific needs and expectations of their audience, whether DTC consumers or B2B clients, businesses can navigate the complexities of backorders with confidence and efficiency.

Section 4: Leveraging Technology and 3PLs

In the quest to master backorder management, eCommerce businesses increasingly turn to technology and third-party logistics (3PL) providers. These resources can significantly streamline operations, from inventory management to order fulfillment. This section will explore the role of 3PLs in inventory management and offer key considerations for integrating 3PL services into your eCommerce strategy.

The Role of 3PLs in Inventory Management

Streamlining Backorder Management: Third-party logistics providers specialize in the outsourced management of inventory and shipping, bringing efficiency and expertise to the table. By leveraging their sophisticated inventory management systems, businesses can gain real-time visibility into stock levels, track product movement, and predict future inventory needs with greater accuracy. This enhanced oversight can be particularly beneficial in managing backorders, as it allows for more precise forecasting and quicker adjustments to inventory levels. Furthermore, 3PLs can offer scalable solutions during peak demand periods, ensuring that backorder handling remains smooth and customer satisfaction high.

Key Considerations for 3PL Integration

When selecting and working with a 3PL provider, there are several crucial factors to consider to ensure a successful partnership:

  • Compatibility with Your Business Needs: Assess the 3PL’s experience with businesses of your size and in your sector. Their ability to understand and meet your specific requirements, including handling of backorders, is fundamental.
  • Technology and Integration: The 3PL should offer advanced inventory and warehouse management systems that seamlessly integrate with your existing eCommerce platform. Real-time data exchange is vital for maintaining accurate inventory records and effectively managing backorders.
  • Scalability: Choose a 3PL that can scale operations up or down based on your business’s fluctuating needs. This flexibility is essential for accommodating periods of high demand or expanding your product line.
  • Customer Service and Communication: Effective communication channels between your business, the 3PL, and ultimately, your customers, are crucial. Ensure the 3PL has a solid track record of responsive customer service.

For more detailed insights into selecting and partnering with a 3PL provider, consider checking out our guide on how to choose a 3PL provider.

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Section 5: Actionable Steps and Examples

Equipped with a deep understanding of backorder best practices, it’s time to translate this knowledge into actionable steps. By illustrating hypothetical scenarios, we can see how these strategies might play out in real-world DTC and B2B contexts, offering a blueprint for success in managing backorders.

Actionable Steps

  • Implement a Transparent Backorder Policy: Clearly communicate your backorder policy on your website, including information on how and when customers will be charged, expected wait times, and return policies for backordered items.
  • Use Technology for Real-Time Inventory Management: Invest in an inventory management system that provides real-time data, helping you predict and manage backorders more effectively.
  • Develop a Comprehensive Communication Plan: Outline a plan for regularly updating customers on their order status, including automated emails, SMS updates, and personalized outreach for longer delays.
  • Offer Alternatives and Incentives: For customers affected by backorders, present alternative products or special discounts on future purchases as a gesture of goodwill.
  • Partner with a Reliable 3PL: Choose a 3PL partner that aligns with your business needs, offers scalability, and integrates seamlessly with your operations to enhance fulfillment processes.
woman packaging an order to be fulfilled


DTC Scenario: Imagine an online retailer specializing in high-demand fitness equipment. A popular treadmill model goes on backorder due to unexpected sales volume. The retailer updates the product page with a clear backorder notice, including an estimated restock date. They email customers who have ordered the treadmill, offering a 10% discount on future purchases as a thank you for their patience. For those not willing to wait, the retailer suggests an alternative model with similar features. Through these actions, the retailer maintains transparency, manages customer expectations, and reinforces customer loyalty.

B2B Scenario: A wholesaler supplying construction materials faces a backorder situation with a key product due to a manufacturing delay. They immediately inform their business clients via a dedicated account manager, providing detailed information on the expected delay and discussing potential impacts. The wholesaler offers a discount on the backordered product and suggests similar alternatives available for immediate dispatch. They also leverage their 3PL partnership to expedite shipping for the affected product once it becomes available. This proactive approach helps maintain trust and continuity in their B2B relationships.

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Summary & Key Takeaways: Backorder Best Practices

Navigating the complexities of backorders is a critical aspect of eCommerce that demands attention, strategy, and continuous improvement. Throughout this article, we’ve explored essential practices for managing backorders effectively, from the importance of transparent communication and real-time inventory management to the strategic use of technology and third-party logistics partnerships.

Adopting these best practices can transform the challenge of backorders into an opportunity to enhance customer trust, improve operational efficiency, and ultimately, secure a competitive advantage. Whether operating in the DTC or B2B space, the key lies in proactive management, clear communication, and a customer-centric approach.

By embracing these backorder best practices, your business can turn the tide on backorders, ensuring they become a testament to your brand’s resilience and commitment to customer satisfaction, rather than a point of friction.

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