Example of a Backorder
Sephora, a top beauty retailer, uses backorders to manage inventory and meet customer demand for popular products. For example, when a new skincare line was released and quickly sold out, Sephora let customers place backorders for out-of-stock items.
This way, customers would get the products once they were restocked. This approach helped Sephora keep customers happy and continue making sales even when they had low stock.
How Does Backorder Work?
Ideally, a business should always have enough stock to meet customer demand. When a customer orders a product, the business will pick, pack, and ship it right away. However, sometimes a business can run out of stock for certain items.
In this case, they will order more from their supplier or manufacturer. While waiting for the new stock to arrive, the product
remains listed on the business’s website.
If a customer orders the product while it’s out of stock, that order is considered a backorder. This means the product isn’t available right now, but it will be shipped to the customer once the new stock arrives. The customer just needs to wait until the shipment comes in.
Backorder Vs. Out of Stock
Now that you understand “What does backorder mean?” you might confuse it with the product being out of stock. However, they are different. When a product is “out of stock,” it means there are no items available. There’s also no set date for when more will come in. “Backordered,” on the other hand, means the item is currently unavailable but is expected to arrive on a certain date.
In other words, being backordered means you will get the product eventually, though it might take some time. Being out of stock, however, might mean the product is gone for good, or the seller can’t say when it will be available again.
Backorder Vs. Pre Order
Many people mix up advanced bookings or pre-orders with backorders. They are different concepts. A backorder happens when a customer orders a product that’s out of stock. The business promises to ship the product once it’s available again. Backorders are added to a list of orders to be fulfilled later. Following is a simple way to understand it:
Inventory = Orders – Customers
This means inventory is the total number of orders minus the orders that have been fulfilled. When a product is out of stock, and a customer orders it, the inventory level drops, but the number of orders increases, creating a backorder.
A preorder is when a customer orders a product before it’s officially available. The product is reserved for the customer and shipped when it’s released. Customers who preorder benefit because their orders are fulfilled first. Here’s how it works:
Orders = Inventory + Customers
This means the total number of orders equals the inventory plus the number of preorders. When a customer preorders, the inventory level stays the same, but the number of orders goes up, creating a preorder.
Ending Note
Now that you know “What does backorder mean?” you must understand that it doesn’t work for every business. People can buy the same product from another seller instead of waiting for you to restock. Therefore, you need a 3PL company to manage your inventory effectively.
Contact our warehouse and logistics specialists at Spark Hive. Our skilled staff makes order fulfillment a breeze for e-commerce businesses. Dial (346) 508-4237 to reach out.