Apple and OnePlus devices get sold out within minutes of their launch. But, the brands still manage to serve the customers waiting in the queue. Have you ever wondered how?
Thanks to backorders. It is a common practice among retailers where customers are allowed to place an order even though the product is out of inventory. In such cases, customers are happy to shop despite knowing that the order will be delivered later than expected.
For instance, due to high demand, the newly launched iPhone goes out of stock on Amazon. Instead of losing customers, Amazon continues taking orders. While doing so, a message mentioning the delivery date is displayed. When the customer goes ahead with the order, this creates a backorder.
Backorders can be beneficial in various ways, including attracting and retaining customers. However, if not managed properly, backorders can turn into an inventory nightmare. Typically, companies opt for the best inventory management software to avoid problems.
In this article, we’ll discuss the importance of backorders, the problems it can cause if not managed well, and ways to manage them.
Importance of Backorders
Customers and costs are two major concerns for any eCommerce company. Overstocking products lead to a surge in storage and purchase costs. If the goods remain unsold, it results in losses. On the other hand, insufficient inventory and late deliveries cause dissatisfaction among customers.
This is devastating for small businesses that cannot afford to lose customers but also do not have space and money to stock up enough products. Backorders is a smart thing to do because:
It eliminates the costs of storage space since it does not require keeping extra items at the warehouse.
It reduces carrying costs.
It helps retain customers because sales happen even though the stock is unavailable at the moment.
It boosts growth and improves your brand value.
Simply allowing backordering doesn’t bring you these benefits. It depends on various factors like the type of product and supply chain efficiency. If not planned well, it can put the retailer’s reputation at stake.
Issues with Backorder
In times where customers are used to instant gratification, eCommerce companies cannot afford wrong or delayed order deliveries.
Backorders translate to having orders that can’t be fulfilled at the moment. The process requires retailers to raise purchase orders, coordinate with vendors, fulfill supplies, and ship items – all this by the date promised to the customer.
With a single product, this isn’t an issue. But, with frequent backorders for different products, in different locations, it results in a lot of data. Plus, correct order delivery within the established time is essential.
Without a proper inventory management tool, like Control ERP order management system backordering can turn into a problem. Failure to manage backorders causes severe problems like:
Loss of customer trust
Loss of business
Loss of your brand’s credibility
Financial losses due to additional costs of inventory and shipment charges
Fortunately, there are ways to tackle backorders efficiently.
Tips to Manage Backorders
Here are some ways of handling backorders to effectively manage your customers’ expectations:
Track selling trends for the product from the time it is introduced. This helps you to be prepared for rising demands and backorders.
Estimated Time of Arrival or ETA is a date that is displayed when customers place the order. Providing an ETA helps customers know when they can expect the product.
Along with an ETA, provide customers with an option to cancel their order if they cannot wait.
Being honest is crucial to win your customer’s trust. Follow up and keep them informed of developments through emails or texts.
Have an end date. For instance, if the back ordered item is not sent within a month, you will refund the amount.
When you are selling multiple products across countries, managing backorders gets complicated. Apart from the above-mentioned tips, a good inventory management system, like the Control ERP order management system assists in streamlining the process.
Inventory management software not only systemizes orders and supplies but also enables forecasting sales.
Control ERP order management system allows tracking of inventory from the supplier to the customer with double entry. It also lets you align your inventory based on a zone, a brand, or a lot. Synchronize it in real-time to get an overview of available stock, anytime.
It also lets you trigger requests for quotations based on your stock forecast. So, if the stock of a certain product is almost over, the system sends a request for quotation to suppliers to replenish the stock.
This enables you to fulfill backorders in time, ensuring customer satisfaction, and boosting brand loyalty.
You don’t want to lose customers to competitors simply because an item is temporarily unavailable. Backorders help you gain a competitive advantage in the market while also saving you money at the same time.
Automating the inventory management process is like icing on the cake, as it reduces glitches in backorder management. Consult an inventory management vendor to help you seamlessly serve your customers.