According to Statista, in 2024, the eCommerce market is expected to reach a substantial US$3,567.00 billion, and the number of users is projected to amount to 2.5 billion by 2028. This signals significant opportunities for growth and success in the world of online retail. As more competitors join the market, competition increases, and so do opportunities. In this situation, managing resources right is highly important. As a Shopify store owner, managing backorders is one of the smart strategies to handle this.

In this blog, we will go over backorder management for your Shopify store and explore the best practices. You will learn the difference between backorder, out of stock, and preorder product terms, grasp why backorders are essential, and discover the best practices for managing your inventory efficiently on Shopify. Let's start our journey by understanding what backorder is.

What is the Meaning of Backorder?

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.

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In the world of eCommerce shop owners, a  backorder is a process of purchasing a product that is presently not available but may be purchased by customers when it returns in supply. It's similar to a preorder 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.

Backorder, Out of Stock, and Preorder Products: What is the Difference?

What is the difference? For a business owner, it's crucial to understand the difference between backorders, preorders and out of stock items.

Out of stock: Similar to backorder, out of stock is when a product is currently unavailable due to depleted inventory. Customers cannot make immediate purchases and may need to wait until the item is restocked. For instance, a customer wants to buy a specific item, but it's temporarily unavailable due to high demand. In such situations, the product is out of stock, and customers must wait for restocking.

Backorder: Backorder occurs when a customer places an order for a product that is currently out of stock or unavailable. The customer is willing to wait for the product to be restocked or become available again. For example, a customer orders a popular item that is temporarily sold out. The merchant accepts the order and promises to deliver the product once it is back in stock.

Preorder: Preorder refers to the process of allowing customers to place orders for products that have not been released or made available to the public yet. Customers purchase in advance, and the product is shipped to them when it becomes officially released. An upcoming book or video game is available for preorder before its official release date. Customers place orders, and the product is delivered to them on or after the release date.

📌 For more information, you can read Ultimate Guide: Backorder & Preorders.

Why are Backorders Important?

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

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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:

1. Customer Retention: By offering backorders, businesses can retain customers who are willing to wait for a product that is temporarily out of stock. This prevents customers from seeking alternatives from competitors.
2. Revenue Generation: Backorders allow businesses to continue accepting orders for products that are temporarily unavailable. This helps maintain a steady stream of revenue, even when certain items are out of stock.
3. Preventing Lost Sales: Without backorders, customers might abandon their purchase if a desired product is unavailable. Backorders enable businesses to capture these sales by allowing customers to secure the item, even if it takes some time to restock.
4. Managing Seasonal Demand: During periods of high demand, such as holidays or special promotions, backorders help businesses handle increased order volumes without the need to turn customers away.
5. Optimizing Inventory Levels: By allowing backorders, businesses can better manage inventory levels. Rather than overstocking to meet peak demand, they can keep inventory lean while fulfilling backorders as needed.
6. Improving Customer Experience: Transparent communication about backorders, along with regular updates on expected restock dates, enhances the overall customer experience. Customers appreciate honesty and clarity regarding product availability.

While backorders can be a valuable strategy, it's essential for businesses to effectively communicate with customers, provide realistic timelines, and actively work to minimize the occurrence of backorders when possible. Backorder can have both benefits and potential disadvantages for your business. We've compiled both cases for you.

What Causes Backorders?

To understand causes of backorders helps to understand and manage backorders better.

• Unexpectedly high customer demand can quickly decrease available stock, leading to backorders as the business works to replenish inventory. As we learned dramatically in 2020, online sales might be very sensitive to world agenda and should be handled carefully. Being prepared for the world's upcoming changes is a strategy that makes your business stronger than ever. Let’s remember that eCommerce sales increased by 43% in 2020.
• Delays in receiving products from suppliers, whether due to manufacturing issues, shipping delays, or other logistical challenges, can result in backorders.
• If a business manufactures its products, any delays in the production process can lead to insufficient stock and subsequent backorders.
• Seasonal spikes in demand, such as during holidays or special promotions, can lead to backorders as businesses may struggle to keep up with increased order volumes.
• Inaccurate demand forecasting can lead to underestimating the required inventory, causing unexpected backorders.
• If there are quality issues with a batch of products, it may result in a delay in releasing them for sale, leading to backorders until the issue is resolved.

In such cases, for your Shopify store, you can use Fabrikatör's backorder feature to manage expectations effectively and establish transparent communication with your customers.

In What Cases is Accepting Backorders Useful?

Accepting backorders brings so many benefits but not all items are appropriate for backorders. The products that are niche or with a premium price tag are usually desired objects for customers, which makes them more appropriate for backorders. For instance, customers will not want to wait for regular underwear, but they can wait for a special cut, sustainable body suit.

1. High Demand and Seasonal Fluctuations: During periods of unexpectedly high demand, backorders help businesses continue accepting orders and fulfill them as soon as stock is replenished. 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. Backorders help businesses cope with seasonal spikes in demand, ensuring customers can still secure products even during peak periods.
2. Product Launches: When launching a new product, backorders allow businesses to gauge initial demand and manage inventory accordingly. You could use backorders as a way of accumulating revenue while still allowing customers to have access to your pre-launch sales.
3. Supplier or Production Delays: When facing delays in receiving products from suppliers, backorders allow businesses to maintain customer orders and commitments. If there are delays in the manufacturing process, backorders provide a way to manage customer expectations while production catches up.
4. Unpredictable Inventory Levels: For businesses with fluctuating inventory levels, backorders provide a means to balance supply and demand without overstocking.

In these situations, backorders serve as a strategic tool to optimize inventory management and maintain positive customer relationships.

📌 You can now learn more by reading Backorder as a Cash Flow Generator & Backorder Benefits for Your eCommerce Store.

What are the Disadvantages of Backorders?

Backorders can be thought of as a double-edged sword; while offering benefits, they also present potential disadvantages. ⚖️ These include potential customer dissatisfaction due to extended wait times, lost sales opportunities, uncertain delivery timelines, increased administrative workload, negative impacts on cash flow, potential order cancellations, and risks to a business's reputation if not well-managed. 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.

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. To address these challenges, clear communication, realistic timelines, and proactive inventory management strategies are essential.

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

How to Manage Backorders?

If you're struggling with backorders and cannot understand how it works, then 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 eCommerce 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 in your store are likely to be snapped up quickly, so keep an eye on their inventory levels. Of course, nothing in the eCommerce 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 Backorder Practices & Tips for Shopify Stores

So, what are some practices you can use while managing backorders in your Shopify store?

There is no one-size-fits-all solution for backorder issues. Backorders may be handled in 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. For informing customers and setting up automated email flows in your Shopify store, leverage Klaviyo, which seamlessly integrates with Fabrikatör.

• Provide an ETA: Expected Time of Arrival, which is frequently shown as a date. The most effective Shopify stores provide estimated delivery dates in 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 consumers 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.

• Set 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 potential 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 in your Shopify store.

• Forecast demand more accurately:  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.
• Use a Shopify app to handle backorders easily: As Shopify does not handle backorders, you need to use a Shopify app to handle backorders. 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!

Why You Should Use Fabrikatör for Backorder?

Because Fabrikatör turns backorders into revenue!

Fabrikatör provides all the benefits of backorders and it seamlessly integrates with your Shopify store. With Fabrikatör, you can fully automate and utilize features like backorders and so much more to increase your profits efficiently.

⭐ Fabrikatör helps you to use backorders as a lifesaver 🛡️, enhancer 🚀, profit-maker 💰, and customer relationship feature 💬 How? Let’s discuss this briefly together!👇

🎉 Exciting news is that Fabrikatör is proudly rated 5/5 on the Shopify App Store. Our users love it, and we're confident you will, too. You can experience the power of Fabrikatör and start maximizing your Shopify revenue today, turning backorders into valuable opportunities. Book a demo now!