Every online merchant has the same problem: what to do when popular items are selling faster than inventory can be restocked?
In a word, it’s a trade-off; businesses can opt to send customers packing, or they have to figure out how to sustain sales lift by providing low or high water (in this case, empty shelves).
Back orders are one of the best responses to this issue. Businesses do not have to lose those potential sales altogether; they can still keep taking orders while customers wait for that restock.
This approach transforms temporary shortages from complete sales losses into managed customer experiences.
This ultimate guide to backorders discusses backorder strategies, how they’re done, and best practices to keep you earning money while maintaining a positive customer relationship when placed in an inventory bind.
What Does Backorder Mean?
A backorder occurs when businesses accept customer orders for temporarily unavailable products, with fulfillment scheduled once new inventory arrives. This system allows continued sales activity despite stock depletion.
The process follows these steps:
- Inventory reaches zero for a specific product
- The system switches to backorder mode instead of showing unavailable
- Customers place orders knowing delivery will be delayed
- Orders enter a fulfillment queue organized by purchase date
- New stock allocation goes to waiting customers first
This method differs significantly from simply closing sales until restocking occurs. Backorders maintain business activity and customer engagement throughout supply interruptions.
Backorder vs Out of Stock — What’s the Difference?
| Aspect | Backorder | Out of Stock |
|---|---|---|
| Customer Purchase Options | Customers can place orders and secure their spot in line | No purchasing allowed, customers must wait or leave |
| Business Revenue Flow | Sales revenue continues during stock shortages | All sales for that product stop immediately |
| Customer Purchase Intent | Shows strong commitment, willing to wait for your product | No commitment captured, customers are likely to shop elsewhere |
| Competitive Market Position | Keeps your business visible and active in the market | Allows competitors to capture your customers |
| Market Research Value | Reveals actual customer demand and popular products | Provides limited insight into true demand levels |
Key Takeaway: Backorders transform unavailable inventory from a complete sales stop into a managed customer experience.
Out-of-stock situations temporarily end the customer relationship, but backorders maintain engagement and capture sales that competitors would otherwise lose.
What Causes Backorders?
Your Customer Base Assessment
Making Powerful Decisions: Will Your Customer Wait? Consider these factors when deciding not to offer backorders.
Before you make backorders available, you’ll have to understand whether or not your customers really will wait for your product:
- Level of customer loyalty: Some of your customers might prefer your brand over others, in which case you can rest assured that they will wait.
- Unique product: Do you have a niche product, or is it a product that is easily substituted for another?
- Purchase urgency: Can your customers wait weeks or months before making a purchase, or are they buying products right away?
- Price sensitivity: Are customers more willing to accept backorders on premium-priced items or budget products?
Your Operational Capacity
You must evaluate whether your business can handle the additional complexity:
- Customer support resources: Is your support team equipped to manage a higher volume of calls and emails about order statuses and delivery dates?
- Communication systems: Do you have systems in place to provide regular feedback to clients throughout the waiting period?
- Inventory predictions: Do you have a realistic idea of when an object will be delivered based on hardcore supply chain intel?
Your Financial Considerations
Backorders can significantly affect your cash flow and financial planning.
- Payment timing: Will you charge customers immediately or when you ship their orders?
- Cash flow impact: Can your business operate with delayed revenue from backorders?
- Refund policies: How will you handle customers who change their minds during long waits?
- Cost of customer retention: What will you spend on communication and customer service during waiting periods?
Your Supply Chain Reliability
Your ability to fulfill backorders depends on your suppliers:
Supplier Reliability
This refers to how consistently your suppliers meet their delivery commitments. Track metrics like on-time delivery rates, quality consistency, and communication responsiveness.
Reliable suppliers typically maintain 95%+ on-time delivery and proactively communicate about potential delays.
Poor supplier reliability creates a domino effect, making it impossible to give customers accurate fulfillment timelines.
Lead Time Predictability
This is your ability to accurately forecast when you’ll receive inventory. It involves understanding both quoted lead times and actual performance patterns.
Some suppliers consistently deliver in 30 days, while others might quote 30 days but take 45-60. Historical data helps you build realistic restocking schedules and set customer expectations appropriately.
Backup Sourcing Strategy
Having secondary suppliers prevents single points of failure. This means identifying alternative vendors for critical products, even if they’re more expensive or have longer lead times.
The goal isn’t to use backup suppliers regularly but to have vetted options ready when primary suppliers face disruptions like factory issues, shipping delays, or capacity constraints.
Seasonal and External Factor Management
Supply chains face predictable disruptions like Chinese New Year factory shutdowns, holiday shipping delays, or weather-related transportation issues.
Smart businesses plan around these by adjusting order timing, building buffer inventory before known disruption periods, and communicating proactively with customers about potential delays.
The key is building visibility into these factors so you can make informed promises to customers rather than hoping everything goes smoothly.
How to Manage Backorders in eCommerce
Transparent Communication Strategy
Being honest turns into your best weapon when clients experience delays. When people are aware of what is happening and have a reasonable timeframe to work with, they can endure waiting much better.
How to implement it
When estimating delivery dates, allow for flexibility instead of making unrealistic promises. When delays arise, provide genuine explanations without assigning blame or offering inadequate justifications.
Keep customers in the loop regularly, even when you don’t have major updates to share. Reach out through whatever channels your customers prefer, whether that’s email, text messages, or phone calls.
Set up online portals where customers can check their order status whenever they want, giving them control over the information flow.
Challenges
Managing the balance between transparency and overwhelming customers with too much technical detail can be difficult. Some team members may resist sharing negative updates, fearing customer backlash.
Setting up automated communication systems and training staff to deliver bad news constructively requires initial investment in time and resources.
There’s also the risk that competitors might capitalize on your transparency by promising unrealistic timelines to win business away from you.
What you’ll gain
There may be fewer negative calls to customer service and customers who will still trust you even if things don’t work out.
Key benefit: Reduces customer service enquiries and maintains customer trust during waiting periods.
How to Prevent Backorders
The smartest approach to backorders is preventing them from happening in the first place. Knowing out of stock vs backorder strategies also helps businesses decide whether to continue accepting orders or temporarily pause sales. When you can anticipate problems before they hit, you protect both your business and your customers’ experience.
How to implement it
Set up your systems to alert you when stock levels get low, before you’re completely out. Look at your sales history and seasonal trends to better predict what customers will want and when.
Foster relationships with multiple suppliers to ensure continuity in case one is unable to meet your needs. Keep extra inventory on hand based on how long it typically takes to restock and how unpredictable demand can be. Use data analysis tools to spot potential shortages coming down the road.
Challenges: Requires significant upfront investment in technology and inventory, there are also increased storage expenses and capital commitments.
Poor forecasting may lead to overstock, but shortages may still arise from sudden changes in the market.
What you’ll gain
Fewer products go out of stock, and when they do, customers wait shorter periods to get what they ordered.
Key benefit: Minimizes the number of products that go into backorder status and reduces waiting times for customers.
Customer Segmentation Strategy
Not every customer should get the same treatment when supply runs short. Your most loyal and valuable customers have earned priority service and special attention during difficult times.
How to implement it
Determine which of your customers are most valuable to your company by examining their past purchases, loyalty, and overall worth.
Create different service tiers where your VIP customers get their orders filled first while regular customers follow standard procedures. Communicate more frequently and offer better compensation to your top-tier customers.
Give waiting customers early access to similar products or special perks they can’t get elsewhere. Adjust payment terms and policies based on the customer’s relationship with your business.
Challenges
Regular customers are at risk of resentment and brand damage. The administrative complexity of managing multiple service tiers has increased significantly. These developments could potentially raise legal and ethical concerns.
Maintaining transparency without negative publicity can be challenging. You must strike a balance between short-term retention and long-term brand reputation.
What you’ll gain
Your most valuable customer relationships stay strong, and you use your resources where they matter most.
Key benefit: Maintains relationships with your most important customers while optimizing resource allocation.
Value-Added Waiting Experience Strategy
Instead of letting backorders become purely frustrating experiences, you can turn waiting periods into chances to strengthen relationships with customers.
How can it be implemented?
Offer exclusive preview discounts to backordered customers with 10–15% off complementary items. Create bundle deals combining backordered products with available accessories at discounted rates.
Provide escalating discounts (5% at week 2, 10% at week 4) as wait times increase. Use loyalty program bonuses like double points or tier advancement for patient customers. Send personalized promotional codes based on purchase history and buying patterns.
Challenges
Discount structures can erode profit margins, especially with extended delays. Customers may begin expecting compensation for any delay, creating unsustainable precedents. Inventory management becomes complex when allocating complementary products for bundles.
Personalized promotions strain customer service resources and require robust data systems. Customers may intentionally wait for backorder discounts, which could disrupt regular sales trends.
What you’ll gain
Customers feel more connected to your brand during delays, leading to stronger loyalty and future purchases.
Key benefit: Turns potential customer frustration into positive brand engagement and increased loyalty.
Flexible Fulfillment Strategy
Having alternative ways to fulfill orders can be crucial when your main supply chain encounters problems. Multiple fulfillment options give you flexibility when disruptions happen.
How to implement it
Consider establishing partnerships with a range of suppliers and distributors to ensure you have alternatives available if one encounters difficulties. To expedite delivery, think about having some suppliers ship straight to clients.
Look into cross-docking facilities that can move products faster through your system. Use distribution centers in different regions to cut down shipping time.
Mix and match different fulfillment approaches depending on what product you’re shipping and how much demand you’re seeing.
Challenges
Increased operational complexity, higher coordination costs, difficult inventory tracking across multiple channels, and maintaining
Maintaining uniform quality standards with diverse partners is a challenge.
What you’ll gain
When your primary suppliers can’t deliver, you have alternatives ready, and customers wait less time for their orders.
Key benefit: Provides backup options when primary supply chains fail and can significantly reduce customer waiting times.
Performance Monitoring Strategy
You need to track how well your backorder system works so you can spot problems early and keep improving your approach over time.
Making it work in practice
Monitor major metrics such as the frequency of successfully completing backorders, customer satisfaction, the number of cancelled orders, and the cost of each backorder.
Watch how well your suppliers perform and whether they meet their promised delivery times. Look at whether backorders hurt or help customer relationships in the long run.
Ask customers who experienced backorders about their experience through surveys. Study your backorder patterns to find recurring problems you can fix.
Challenges
The challenges include resource-intensive setup, incomplete data collection, limited customer feedback response rates, difficulty separating backorder-specific issues from other operational issues, and long-term relationship impacts that are difficult to measure immediately.
What you’ll gain
Real data provides clear insights that enhance your backorder management and stop similar problems from recurring.
Key benefit: Provides data-driven insights for optimizing your backorder management and preventing future problems.
Advantages of Implementing Backorders
Revenue Protection and Growth
- Maintain sales during stockouts
Instead of losing customers to competitors, you keep them engaged and preserve future revenue. This is especially valuable for seasonal businesses or those with unpredictable demand spikes.
- Capture full demand
You can measure and capture all customer interest, not just what your current inventory can satisfy. This gives you a complete picture of market demand for your products.
- Reduce price pressure
When customers wait for your unique products, it shows brand preference and lessens their sensitivity to competitive prices.
Customer Relationship Benefits
- Build customer loyalty
Customers who wait for your products instead of making purchases elsewhere demonstrate their commitment to your brand. This has a tendency to yield increased customer lifetime value.
- Maintain market presence
Competitors will become out of sight during stockout periods, but your business remains active in the market and keeps customers from moving away and keeps the brand in sight.
- Gather customer commitment data
Backorders reveal which customers are truly loyal and which products generate the strongest brand preference.
Operational and Strategic Advantages
- Improve demand forecasting
Real backorder data shows actual customer demand rather than estimated demand, leading to better inventory planning and purchasing decisions. Use our inventory forecast tool to predict stockouts before they happen
- Reduce inventory risks
With confirmed demand through backorders, you can order inventory with more confidence, reducing both overstock and understock situations.
- Create predictable fulfillment schedule
Knowing exactly what orders are waiting allows better workforce planning and resource allocation.
Disadvantages of Implementing Backorders
Customer Experience Challenges
- Increased customer service burden
You will get more requests for order status, shipping dates, and delivery information, which will take more staff time and resources.
- Risk of customer frustration
Long delays, particularly with indefinite timelines, can ruin customer relations and damage your brand reputation.
- Higher cancellation rates
Extended waiting periods give customers more time to change their minds, find alternatives, or experience buyer’s remorse.
Operational Complexity
- Complex inventory management
You need sophisticated systems to track backorders, available inventory, and allocation priorities across different customer segments.
- Communication overhead
Maintaining regular contact with waiting customers requires robust communication systems and processes.
- Payment processing complications
Managing payments for orders that won’t ship for weeks or months creates additional administrative complexity.
Financial and Business Risks
- Cash flow impact:
If you don’t charge until shipping, backorders can significantly delay revenue recognition and impact your working capital.
- Competitive vulnerability
Long backorder periods give competitors opportunities to win over your waiting customers with immediate availability.
- Brand reputation risks
Poor backorder management can damage your reputation for reliability and customer service.
Conclusion
Backorders represent a strategic tool for maintaining business continuity during inventory challenges. When implemented thoughtfully, they preserve revenue streams, strengthen customer relationships, and provide valuable market intelligence.
Success requires balancing customer expectations with operational capabilities. Clear communication, realistic timelines, and consistent follow-through build trust that converts temporary inconvenience into long-term loyalty.
Begin implementation by focusing on high-demand products with reliable supply chains. Develop clear communication protocols and train staff on backorder procedures before expanding the program to additional product categories.
The businesses that excel at backorder management often discover that these temporary challenges become competitive advantages, demonstrating commitment to customer satisfaction while maintaining market presence during difficult periods.
FAQs
How long should customers typically wait for backordered products?
Most customers accept waiting periods of 2-4 weeks without significant dissatisfaction. Beyond 30 days, cancellation rates increase substantially. Always provide realistic estimates with additional buffer time to account for unexpected delays.
What payment timing approach works best for backorder situations?
This depends on your customer base and cash flow needs. Immediate payment secures revenue but increases cancellations. Payment at shipping reduces cancellations but affects cash flow. Consider offering both options to accommodate different customer preferences.
How do backorders differ from pre-orders?
Pre-orders involve unreleased products with planned launch dates, while backorders apply to previously available items experiencing temporary stock depletion. Pre-orders are planned marketing events; backorders are reactive inventory management responses.
How do I calculate appropriate safety stock levels?
Use historical sales data to determine average daily sales and maximum daily sales. Factor in supplier lead times and seasonal variations. A basic formula: (Maximum daily sales × Maximum lead time) – (Average daily sales × Average lead time).
How do backorders affect inventory turnover calculations?
Backorders can improve turnover by preventing overstock situations, but monitor carefully to ensure adequate stock levels. Calculate turnover based on actual sales rather than available inventory to get accurate performance measurements.
Can backorder patterns be used for marketing purposes?
Yes, backorder data reveals product popularity and can inform marketing strategies. Use this information for targeted campaigns and inventory planning, but be transparent about availability in promotional materials to maintain customer trust.
Blair Forrest is the Founder of AMZ Prep, one of North America’s fastest-growing third-party logistics and fulfillment networks, built entirely without outside capital since 2016. Under his leadership, AMZ Prep has scaled to 50+ fulfillment centers across 6 countries, processing over 8 million units monthly and powering $2 billion+ in annual GMV for more than 5,000 brands worldwide including 437, Silverts, Saltyface, Unilever, Duracell, and JBL. A recognized authority in eCommerce logistics, Amazon FBA strategy, and supply chain optimization, Blair has helped thousands of sellers and brands master their fulfillment operations from first shipment to enterprise scale. He regularly consults on FBA prep, multi-channel fulfillment, last mile delivery, international expansion, and cost reduction strategies that save brands 20–40% compared to traditional 3PL providers. Blair’s insights on Amazon logistics, 3PL operations, and eCommerce growth are widely cited across the industry. Through AMZ Prep’s content, guides, and resources, he continues to share battle-tested strategies drawn from managing one of the largest independently owned fulfillment networks in North America.
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