A backorder occurs when a customer places an order for a product that is temporarily out of stock but is still available for purchase. The product will be shipped to the customer once it is restocked, ensuring the order is fulfilled at a later date.
Backorders arise when demand for a product exceeds its current inventory. Instead of losing sales opportunities, businesses offer customers the option to place orders that will be fulfilled once the stock is replenished.
Key aspects of backorders include:
For example, if an ecommerce store runs out of a popular product, customers can place a backorder, ensuring they secure the item when it becomes available again.
Why do backorders happen?
Backorders occur when demand exceeds supply due to unexpected sales surges, supply chain disruptions, or production delays.
What does it mean when an item is on backorder?
When an item is on backorder, it means that the item is not currently in stock, but the company has accepted orders for it. The customer has chosen to wait for the item to become available rather than cancelling the order.
How does a company manage backorders?
Companies manage backorders by communicating with customers about the expected wait time and offering them the option to remain on backorder, switch to a different product, or cancel the order.
Are backorders good or bad for a business?
Backorders can be a sign of strong demand, which is positive. However, they can also lead to customer dissatisfaction if not managed properly, which can be negative for a business.
