What Is a Backorder? Definition, Causes, and How to Manage Them

Picture this: A customer excitedly clicks Add to Cart, buys one of your best-selling items, only to find your stock is empty. Should you cancel the order and lose the sale, or let them buy it anyway with the promise of future delivery? Backorders may be the solution you are looking for.

Table of Contents:

• What is a backorder and how can you manage them?

• Back order vs. out of stock vs. pre-order

• Common causes of backorders

• Is a Backorder Good or Bad for Business? (Pros & Cons)

• How to Manage Backorders Without Losing Customers

• Strategies to Minimize Backorders

What is a Backorder and How Can You Manage Them?

A backorder is an order for an item that is temporarily out of stock but is expected to be back in stock soon and shipped by a certain date. Rather than turning customers away, backorders let businesses make a sale even when inventory is out or running extremely low. It's a solid strategy, but it requires good, clear communication and a trusted inventory management system to avoid mistakes and unhappy customers.

E-commerce businesses must be familiar with how back orders work, especially regarding fulfillment partners, whether inventory is controlled in-house or by a third-party logistics provider. Backorders maintain a consistent revenue stream even when stock is out. It shows customers that your business is restocking quickly and responsibly, meeting their expectations.

A backorders strategy isn’t a one-size-fits-all type of option. Only high-sales products with dedicated or loyal customer bases often succeed with backorder systems, as the customers are willing to wait for their goods. For commodity products, which have many competitors and alternatives, the cancellation rate is much higher. Think about your position in the marketplace before setting up a backorder system.

Backorder vs. Out of Stock vs. Pre-order

Inventory shortages come in different types. Let’s look at them and how your business operates and manages your stock to meet customer expectations and improve your fulfillment strategy.

Backorder: Occurs when items that usually sell well are temporarily unavailable due to unexpected demand or a supply chain delay. The keyword here is temporarily. This item has a proven demand, is listed, and will be back in stock soon. Customers can still buy it, but they know there will be a delay before it arrives.

Out of Stock: When a product is out of stock, there isn’t a set restock date. In that case, the buy button will be disabled or show an unavailable notification. This status indicates uncertainty about when, or whether, the item will return. Customers can’t place an order for this particular item.

Pre-order: Pre-orders only apply to items that haven’t launched yet. A customer is simply reserving a product before its release date, sometimes weeks or months in advance. This strategy helps businesses gauge product demand before committing to a large production run. It’s also a successful way to generate early revenue.

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Common Causes of Backorders

Backorders happen to all businesses, even the largest and most prepared ones. If you have frequent backorders in your e-shop, it may be time to analyze the causes and hopefully prevent them. After all, most customers want instant gratification and the pleasure of ordering and receiving their item quickly.

Unexpected Demand: Anything from social media to a viral TikTok video can make a product an overnight sensation. Influencers on seasonal trends can make a demand spike that no one had forecast. When demand suddenly triples or quadruples, even solid inventory systems can struggle to keep up.

Supply Chain Disruptions: Anything from manufacturing delays and port congestion to transportation strikes and raw material shortages can create a large inventory gap. Global supply chains can be very complicated, and one little disruption can ripple through multiple stages of production and distribution. If your supplier faces delays, they cascade to you and then to your customers.

In recent years, the fragility of these networks has become more pronounced, with semiconductor shortages affecting electronics manufacturers and shipping container shortages delaying deliveries by weeks or months. Businesses are now diversifying their supplier base and maintaining relationships with backup manufacturers in case of such a possibility.

Inventory Management Errors: Human or software errors in stock counting can create ghost inventory situations where a dashboard shows five units, but there are actually zero. Discrepancies like these often go unnoticed until a customer tries to purchase the item.

Low Safety Stock: Keeping a lean inventory can reduce storage costs, but it leaves no room for unexpected spikes. While keeping overhead low is meaningful, zero safety stock means any deviation from your forecast ends in a stockout.

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Is a Backorder Good or Bad for Business? (Pros & Cons)

Backorders are a strategic tool and aren’t inherently either good or bad; they do, though, have specific pros and cons.

The Good (Pros)

Cash Flow: Payment is collected before the order is fulfilled, helping with cash flow and working capital. That can be a great help for small businesses that need revenue now to fund operations.

Demand Validation: Backorders prove that your product is in demand. High backorder volumes show a strong market demand and may therefore justify larger future production runs.

Reduced Storage Costs: Products spend less time in warehouses, reducing storage fees and the risk of going out of fashion or becoming obsolete.

The Bad (Cons)

Cancellation Risk: Customers might look for the item elsewhere while you wait to restock. If the delay’s too long, they’ll cancel the order and might not return.

Customer Service Load: A large influx of ‘where is my order’ emails and support tickets comes flooding in. Businesses must manage expectations through proactive communication and a dedicated customer service team.

Complex Logistics: Some businesses choose to split orders, shipping available items now and backordered items later. That satisfies customers because they get some items from their order, and they are more willing to wait for the backordered items. Splitting orders requires solid logistics, as a split shipment increases fulfillment costs, packaging materials, and the risk of errors.

How to Manage Backorders Without Losing Customers

The difference between a backorder that strengthens customer relations and one that worsens it comes down to execution. Businesses must learn to manage their backorders proactively and put customers first. Such a strategy emphasizes transparency, trust, and follow-through at every stage of the process.

Excellent communication

As soon as a customer places their order, communication must begin immediately. Generate and send a confirmation email that clearly explains the delay and provides a specific estimated arrival time. Don’t leave your customers guessing when or even if their order will be delivered. Send automated email updates throughout the waiting period to stop any further inquiries and reassure customers that their order hasn’t been forgotten.

This strategy offers two benefits: it keeps customers in the loop and prevents your business from receiving endless complaint emails or queries that create bottlenecks in customer service.

Clear messaging

Your messages must explain the reason for the delay, with an expected restock date, and outline what is being done to fulfill the order as quickly as possible. You can provide more behind-the-scenes updates, including supplier information, to humanize the delay or build trust. If your delivery timeline changes, customers will want to be notified right away rather than discovering the issue themselves.

Small incentive

A small incentive can also make a difference in how your backorder is viewed. Things like free shipping, discount codes for future purchases, or a complimentary item can turn a frustrating wait into a better experience and encourage long-term loyalty rather than cancellations.

Clear labeling

Product pages must clearly label when an item is on backorder. Clear and transparent information, such as “Backorder” or “Ships in 2–3 Weeks,” displayed on the Add to Cart button shows customers exactly where the item is in the pipeline. Such a clear display puts these expectations at the forefront of the order system, preventing disappointment or frustration after checkout.

Partial fulfillment

If an order includes both in-stock items and out-of-stock items, partial fulfillment is a good strategy. Shipping in-stock items immediately while sending the backordered product later, perhaps at no extra cost, is a good way to show a commitment to customer satisfaction. This method complicates logistics but usually results in a better overall customer experience and stronger brand loyalty.

Strategies to Minimize Backorders

Prevention is the better strategy than a cure, as backorders can never be completely eliminated. However, businesses can take steps to reduce the frequency. The best approach is to introduce options such as a structured inventory strategy that helps protect revenue, maintain customer trust, and streamline operations.

Demand forecasting

One of the best approaches is to improve demand forecasting using historical data. Companies can analyze past sales to better predict seasonal spikes and trend-driven surges. Advanced inventory management and fulfillment platforms offer in-depth real-time insights into sales velocity. This information helps teams see trending products before they sell out. You can also opt for sophisticated demand planning software that uses variables such as marketing campaigns, economic indicators, and seasonal patterns.

Set reorder points

Another strategy is to set reorder points. This method uses automated alerts when inventory reaches a predetermined threshold and guarantees replenishment orders are placed before items sell out. This process doesn’t rely on manual monitoring, thereby reducing the risk of human error.

Safety stock level

A safety stock level is a good contingency plan to protect against unexpected demand or supply chain disruptions. Although holding extra inventory that is ready to ship can incur hidden costs, such as storage expenses, these costs are often much lower than the potential losses from missed sales, delayed fulfillment, and damaged customer relationships.

Introduce Backorders to your Strategy

Backorders are a double-edged sword. They let businesses capture revenue when stock is out, while they highlight product demand. Still, they risk customer cancellations and other operational issues.

Communication is key to managing backorders in absolute transparency. When a business can communicate clearly and honestly about wait times, it will keep customers. If you can add free incentives to keep customers satisfied, then backorders work to your advantage.

Remember: transparency beats speed. A customer can forgive a delayed delivery if you have kept them informed about why it's been delayed and how much longer the delay will last. Most people don’t mind waiting for their order if they clearly know when to expect their delivery. They will not, however, forgive being left in the dark on their delivery.

When you partner with a third-party logistics provider such as Shipfusion, real-time inventory visibility and automated communication tools help manage backorders more easily. The right systems and processes turn a potential customer service disaster into an opportunity to demonstrate reliability and build long-term trust.

Shipfusion is the 3PL purpose-built for rapidly scaling DTC brands. Shipfusion helps you streamline operations, improve accuracy, and deliver a better customer experience. Get a custom quote today and see how Shipfusion can power your next stage of growth.