It depends on you whether you want it on the original bracelet or enjoy the touch of leather. Today, the copy rolex Datejust is celebrated for its refined elegance, history and its triumphant watchmaking quality. Apart from the looking as good for that next date you'll be making a sound investment for the future. For the casual watch enthusiast or the die-hard collector, this watch is not to be missed.
What does Backorder Mean & How to Manage it Using Retail Software Solutions?
How to Open a Bookstore Cafe in 2022 – 11 Simple Steps
April 11, 2022
How to Increase Sales in Retail Store – 15 Easy Ways
May 9, 2022What 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.
What does a Backorder Mean?
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?
It is through Backorders. It is a typical practice among retailers where customers can submit an order request despite the item being out of
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.
How do Backorders Work?
When a retail store takes orders (and payments) for products that are not in stock, it is termed as accepting backorders.
- When backorders are accepted, the inventory management system of the retail software solution accepts them as purchase orders.
- Post that, those purchase orders get forwarded to the respective supplier, distributor, or merchant.
- Customers are then provided with an estimated time of availability of the respective products.
- Retailer store owners can later decide whether to have the products delivered to the customers directly or notify them that their desired products are available at the store.
- Then these backorders are converted into sales orders and registered in the ledger.
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.
What are the Reasons for Backorders Getting Created?
A backorder might sound like an out-of-stock situation, but there is a difference. In an out-of-stock situation, the product is not available in the inventory itself, but in backorder, the product is not available in the store in the present scenario. There can be multiple reasons for the backorders to be created in the first place.
1) Unusual Customer Demand:
There are times when the demand for certain products goes higher than
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.
2) Irregularities in 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.
3) Discrepancies in Warehouse Management:
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.
4) Errors in Demand Forecasting:
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.
5) Human Errors in Reports:
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.
Difference Between Backorder, Pre-Order, and Out of Stock
| 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. |
How to Manage Backorders Using Retail Software Solutions?
The ideal way to manage backorders will obviously be not to accept any of those. But if we talk realistically, retail store owners will run into the issue more than often. Retail software solutions, like POS software, play a significant role here. You can provide an estimated availability date using accurate real-time data rather than leaving the customers high and dry with out-of-stock notification.
Effective management of inventory and supply chain using retail inventory management software
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.
1) Creating Customer Goodwill:
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, if a customer is placing a backorder for a refrigerator, you can give him the option of doorstep delivery free of cost.
2) Proactive Customer Engagement:
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.
3) Backorder Payment Processing:
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.
4) Conversion of Backorder to Sales Order:
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.
5) Enhance Customer Offerings:
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.
Summing it up
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.
- Enhance your customer base by automating backorder creation to reduce hassles for the consumers.
- Earn customer goodwill by adding promotional offers like free doorstep delivery of backorders.
- With Mailchimp integration of POS retail software solutions, send automated emails about their pending order status for transparent operations.
- Ease of payment processing through automated processes to make it simpler for customers to make transactions for backorders.
- Convert backorder to sales order through retail software solutions and avoid human errors that occur in manual record keeping.
To know more about backorder management through POS solutions and understand it in a better way,
