What does backorder mean? Is the most asked question in the retail world. When served with an out-of-stock notification, numerous consumers will eventually switch to another retail store to purchase the desired items. To counter this situation, many retail store owners resort to utilizing backorders. This way, the retailer gets to notify the customers that the product/products are not present in the store but is/are guaranteed to be available within a set period. The customer gets the product, and the retailer completes the sale – a win-win situation.
Let’s have a quick analysis of a particular occurrence. A customer goes to a retail store to get a jacket that he has had his eyes on for quite some time. However, the jacket is not available at the store at present. But the store figures out how to serve the customer holding up in the queue for the desired product. Ever wondered have that happens?
stock. For example, the recently launched iPhone gets stock on Amazon because of the high product demand. Even then, Amazon keeps taking orders rather than losing prospective customers. All the while, a notification regarding the delivery date is displayed to the respective customer. At the point when the customer proceeds with the order request, it is called creating a backorder.
When a retail store takes orders (and payments) for products that are not in stock, it is termed as accepting backorders.
This is undoubtedly not an excessively overwhelming process for a limited number of SKUs at a manageable volume. However, issues arise when the number or quantity of back-ordered products increases or when retailers have multiple manual order processes and have to coordinate each purchase order with a present sales order while wrapping up the order fulfillment.
normal. For example, candies are higher in demand when Halloween is around the corner. Such situations cause a quick depletion of the store inventory. The products go out of stock and need to be sourced from the supply chain.
Disruptions can occur in the supply chain due to multiple reasons. The most recent and relevant example can be given of the global COVID-19 pandemic. These disruptions further lead to delays in product supplies to the stores, which causes backorders to be created.
In case there is any discrepancy in warehouse management – like misplacement of inventory, damaged inventory, inaccurate data reporting, etc. – there is a high chance that the retail store will not receive the required products on time.
Demand forecasting helps a retail store owner predict the inventory requirements through inventory management software to meet the customer demand for specific products in the near future. However, errors in the same can lead to products being out of stock for a certain time, causing the creation of backorders.
Reports created manually might contain certain human errors. These sales reports with errors cause faulty predictions in product sales and affect the product availability in stores. This increases the chances of backorder creation.
|Backorder||Pre-order||Out of stock|
|Product launch is not awaited.||The product launch is awaited.||Product launch is not awaited.|
|Order is placed with an estimated date of delivery.||Order is placed with an estimated date of delivery.||An order does not get placed.|
|The product is not available with the retailer in the present scenario but will be available soon (a specific date).||The product has not been launched yet but will soon be available with the retailer (a specific date).||The product is not available with the retailer at present and there is no assurance of its date of availability.|
|Backorders can happen due to disruptions in the supply chain, unusually high demand, or irregular forecasting data.||Pre-orders are a way of estimating the consumer demand for a product even before the product is launched to gauge its popularity.||A product is out of stock in two scenarios – either the product has been discontinued, or there is a delay in the manufacturing.|
solutions can help retailers keep a check on product availability and maintain the stock accordingly to avoid backorders. However, backorders can be managed efficiently in the following ways.
With retail software solutions, you can provide your customers with an estimated date of availability. You can also add some promotional deals as a side benefit to keep up the goodwill with the customers doing business at your retail store.
For example, in case a customer is placing a backorder for a refrigerator, you can give him the option of doorstep delivery of the same free of cost.
As a retail store owner, you would want to keep your customers engaged with you while they wait for their backorder to be converted to a purchase order. Using retail software solutions like POS, you can communicate with them regarding their order availability status. This way, they will also appreciate the transparent functioning of the retail store.
In creating a backorder, payment processing is also a crucial factor to consider. Retail software solutions take care of such issues by automating the retail store cash register and ledger. This helps customers make hassle-free payments for backorders and just sit back and wait for the product to be available in the store.
Once a backorder is fulfilled, you, as a retailer, will need to mark it as a sales order in your records. If done manually, this can be quite troublesome if the number of backorders is high. However, retail software solutions automate the process and convert the backorder to sales orders as soon as the product becomes available.
By automating backorder processes using retail software solutions, you can make it easy for consumers to make other purchases even though they have to wait for the order fulfillment. This enhances your customer base by reducing their hassles and providing a seamless shopping experience.
One might consider backorders as a boon as well as a bane. It all depends on how efficiently you, as a retailer, can manage the backorders created in your store. If managed properly, you can get market insights, minimize your storage issues, and improve your cash flow as well. With retail software solutions like POS, you can manage your backorders easily to improve your business.
To know more about backorder management through POS solutions and understand it in a better way,