What Does Backorder Mean? And What Happens When Your Favourite Product Isn't Available Right Now?
Understanding the backorder meaning is crucial for any Australian business operating in today's competitive retail landscape. Picture this: you're browsing your favourite online store, ready to purchase that must-have item, only to discover it's temporarily unavailable. Rather than losing the sale entirely, smart retailers offer backorders – a strategic solution that keeps customers connected to brands while managing inventory challenges.
This comprehensive guide will demystify backorders for Australian ecommerce businesses, showing you how to transform temporary stock shortages into opportunities for stronger customer relationships and improved inventory management.
What Does Backorder Mean?
The Simple Definition That Every Australian Retailer Needs to Know
A backorder is when a customer can buy a product you don’t currently have in stock, because you know more stock is coming, and you give them a realistic delivery date.
It lets customers buy an item that's temporarily out of stock with a clear, realistic ETA. Only offer backorders where you have reasonable grounds to believe you can deliver by the stated date under Australian Consumer Law (ACL s36). If timing changes, you must promptly inform customers and offer appropriate remedies. Unlike discontinued or permanently unavailable products, backordered items signal ongoing production and future availability.
Timeframes vary by channel. For example, eBay Australia requires presale items to be posted within 40 business days and clearly labelled as presale. Always check the marketplace's policy and set your own website ETAs conservatively.
The key distinction lies in the certainty of restocking. While out-of-stock items may never return, backordered products are actively being replenished through your supply chain. This fundamental difference shapes customer expectations and business operations significantly.
How Backorders Work in Practice
The customer experience begins when browsing your ecommerce store and encountering a "backorder" status instead of "add to cart." Customers can still place orders with clear expected delivery dates, receive regular updates throughout the waiting period, and eventually receive their products once stock arrives.
From a business perspective, accepting backorders involves sophisticated inventory management systems that track customer demand, coordinate with suppliers, and manage the complex fulfilment process. Unlike standard transactions, where products ship immediately, backorders require careful management of customer payments, supplier relationships, and delivery timelines. This process differs fundamentally from regular inventory transactions as it involves managing future promises rather than current stock.
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Backorder vs Out of Stock: Why the Distinction Matters for Your Bottom Line
When to Choose Backorders Over Out-of-Stock Notices
The strategic decision between backorders vs. out-of-stock notifications depends on several critical factors. Use this comparison table to evaluate which approach suits your business:
Consider your business model carefully when making this decision. Drop-shipping operations often rely heavily on backorders, while businesses with limited warehouse space use them to avoid excess inventory costs. The key is ensuring your inventory management system can handle the additional complexity while maintaining customer satisfaction.
The Customer Psychology Behind Backorder Acceptance and Market Share Protection
Consumer willingness to accept delayed shipment varies dramatically based on product perception and necessity. Customers readily wait for exclusive or high-demand items, viewing backorders as confirmation of product desirability. Brand reputation significantly influences patience levels – trusted retailers enjoy greater customer tolerance for delays.
Product categories affect acceptance rates differently. Fashion items face seasonal pressures, while electronics may become obsolete during extended waits. Essential items for immediate needs rarely succeed as backorders, whereas luxury or specialty products often thrive in backorder scenarios.
Smart retailers leverage scarcity psychology, positioning backorders as exclusive opportunities rather than inconveniences. Clear communication about why items are backordered – whether due to unusual demand or supply chain challenges – helps maintain customer satisfaction and reduces cancellation rates while protecting market share.
The Business Case for Backorders: Pros, Cons, and Strategic Considerations
Weighing Your Options Before Implementation
Before diving into backorder strategies, Australian retailers must carefully evaluate whether this approach aligns with their business model, customer expectations, and operational capabilities for sustainable growth.
Pros of Accepting Backorders
Accepting backorders offers compelling financial advantages for ecommerce businesses:
- Improved cash flow - If you capture payment before shipping, you take on ACL obligations to supply within the promised or a reasonable time. Many retailers instead authorise at checkout and capture on fulfilment (e.g., via Shopify's authorisation/capture settings or approved preorder apps) to reduce re-billing friction and expired cards. Note: most gateways (e.g., Shopify Payments) authorise cards for ~7 days; for longer ETAs, use manual capture on fulfilment or a compliant preorder flow.
- Reduced storage costs - Maintaining lower stock levels while still capturing sales, particularly beneficial for businesses with limited warehouse space and storage space
- Market insights - Backorder patterns reveal genuine market demand trends, helping refine future inventory planning and product development strategies
- Committed orders - Customers can cancel if goods aren't supplied within the promised/"reasonable" time, but backorder customers represent committed demand rather than casual browsing interest
- Customer data collection - Extended engagement allows businesses to gather preferences and loyalty indicators that inform future marketing strategies
- Competitive advantage - Small Australian businesses can compete against larger retailers without extensive warehouse networks
- Reduced inventory carrying costs - Lower holding costs for raw materials and finished goods
Cons of Managing Backorders
Managing backorders introduces several operational challenges:
- Operational complexity - Strains customer service resources with additional administrative requirements
- Payment processing challenges - Credit cards may expire during extended waiting periods, requiring effort to update payment methods
- Customer dissatisfaction risks - Delays or communication failures can damage brand reputation and erode customer loyalty
- Higher cancellation rates - Longer wait times increase the likelihood of customer order cancellations, particularly for impulse purchases
- Supply chain pressure - Promising delivery dates without confirmed stock availability can create cascading problems across supply chains
- Potential increased costs - Poor planning may lead to rushed orders from multiple suppliers at premium prices
Strategic Considerations for Implementation
When evaluating backorders for your business model, consider:
- Product suitability - Unique or high-demand items work better than commodity products that customers can find elsewhere
- Profit margins - High-margin products typically justify the additional complexity of managing backorders
- Supplier reliability - Only accept backorders when confident in your multiple suppliers' delivery capabilities and lead time demand calculations
- Customer base loyalty - Established brands enjoy higher backorder tolerance from devoted customers
- Inventory management capabilities - Ensure your advanced inventory management systems can handle the additional complexity while maintaining customer satisfaction
- Market positioning - Use backorders strategically to signal product desirability and exclusivity
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Managing Backorders Like a Pro: Advanced Inventory Management Systems and Best Practices
Advanced Systems for Backorder Infrastructure
Successful backorder management requires sophisticated technology and integration capabilities to handle the complexity of delayed fulfilment while maintaining customer satisfaction and operational efficiency.
Essential advanced inventory management systems include:
- Real-time inventory tracking - Integrates with your ecommerce store to provide live updates on product availability and expected restock dates
- Automated customer notifications - Send triggered emails for order confirmations, progress updates, and shipping alerts without manual intervention.
- Payment processing flexibility - Handles delayed charges, expired cards, and payment method updates seamlessly.
- Supplier integration tools - Connects directly with supply chain partners for automatic purchase order generation and delivery tracking.
- Demand forecasting algorithms - Use historical data and historical sales data to predict future demand and optimise accurate reorder points.
- Multi-channel synchronisation - Maintains consistent backorder information across your online store, marketplaces, and physical locations.
On Shopify, ticking 'Continue selling when out of stock' allows overselling (i.e., backorders) with tracked inventory. WooCommerce natively supports backorders through the "Allow backorders" settings. BigCommerce supports pre-orders natively; to take true backorders (checkout with stock at 0), you generally need an app. Businesses often require additional inventory management software for comprehensive control. These systems help minimise backorders by maintaining appropriate safety stock levels and calculating lead time demand accurately.
For dropshipping operations, ACL duties apply regardless of your supply source – you must be transparent about stock location and realistic delivery timing to customers.
Best Practices for Customer Communication and Satisfaction
Transparent communication forms the cornerstone of successful backorder management, transforming potential frustrations into opportunities for building stronger customer relationships and enhanced customer satisfaction.
Communication best practices include:
- Point-of-purchase transparency - Clearly display backorder status and expected delivery timeframes before customers complete their purchase
- Immediate order confirmation - Send detailed confirmation emails explaining backorder status, estimated delivery dates, and next steps.
- Regular progress updates - Provide weekly or bi-weekly updates on order status, even when there's no significant change
- Proactive delay notifications - Contact customers immediately when delays occur, offering realistic revised timelines and compensation options
- Shipping notifications - Alert customers when items ship with tracking information and delivery expectations
- Post-delivery follow-up - Check customer satisfaction and gather feedback to improve future backorder experiences
Successful Australian retailers use backorder periods to showcase exceptional customer service, often resulting in higher customer loyalty than standard transactions through personalised attention and regular communication. This approach helps meet customer demand expectations even during delays.
Common Backorder Challenges and Solutions: Addressing Warehouse Management Discrepancies
Common Backorder Challenges
Australian retailers face several recurring issues when managing backorders that can impact customer satisfaction and operational efficiency if not properly addressed.
The most frequent challenges include:
- Supply chain issues - Supplier delays, manufacturing problems, or raw materials shortages extending delivery timeframes beyond customer expectations
- Warehouse management discrepancies - Phantom inventory situations where systems show available stock that doesn't physically exist in available warehouse space
- Customer payment problems - Credit cards expiring or accounts closing during extended backorder periods, requiring administrative effort to update information
- Poor inventory management - Inaccurate demand forecasting leading to multiple backorders and disappointed customers
- Communication breakdowns - Failing to keep customers informed about delays, changes, or progress updates
- Operational inefficiencies - Lack of automated systems creates a manual workload and increased error rates
- Low safety stock management - Insufficient buffer inventory to cover unusual demand spikes
Solutions for Backorder Success
Implementing comprehensive solutions addresses these challenges systematically while creating opportunities to exceed customer expectations and build stronger business relationships.
Effective solutions include:
- Diversify suppliers - Maintain relationships with multiple suppliers for critical products to avoid single points of failure
- Regular inventory audits - Conduct physical stock counts and implement real-time tracking systems to identify discrepancies before they affect orders
- Payment method verification - Implement automated systems to verify and update customer payment information before cards expire
- Master inventory management - Use historical sales data and demand forecasting to optimise reorder points and safety stock levels
- Proactive communication - Contact customers immediately about delays with honest explanations, realistic timelines, and compensation offerings
- Process automation - Deploy advanced inventory management systems for automated alerts, customer notifications, and supplier coordination
- Strategic stock planning - Maintain appropriate safety stock levels to cover unusual demand without carrying excess inventory
Your Roadmap to Backorder Success in 2025: Optimising Reorder Points and Storage Space
Next Steps for Implementing Backorders in Your Australian Business
Begin your backorder journey systematically to ensure successful implementation while minimising risks and maximising benefits for your ecommerce business and customer relationships.
Follow these essential steps:
- Evaluate your current inventory management system - Assess whether your existing platform supports backorder functionality or requires additional inventory management software for comprehensive control.
- Analyse your supplier relationships - Review delivery reliability, lead times, and communication capabilities before accepting backorders on specific products.
- Develop clear backorder policies - Create written guidelines covering acceptable timeframes, communication schedules, payment processing, and cancellation procedures, including how long backorders remain active.
- Train your customer service team - Equip staff with backorder management procedures and tools to provide accurate updates and handle customer inquiries professionally
- Start with limited product testing - Begin with a small range of high-margin, popular items to test your systems and processes before expanding backorder offerings.
- Establish key performance metrics - Monitor backorder rates, fulfilment times, customer satisfaction scores, and cancellation rates to optimise your approach continuously.
- Build local supplier networks - Develop relationships with Australian suppliers where possible to reduce lead times and improve reliability for backorder fulfilment.
- Implement automated systems - Deploy tools for customer notifications, inventory tracking, and reorder point management to minimise manual workload and errors.
- Create customer communication templates - Develop standardised messages for order confirmations, progress updates, delay notifications, and shipping alerts.
- Monitor and refine continuously - Regularly review performance data and customer feedback to improve processes, reduce disappointed customers, and enhance overall backorder success while managing the company's backlog effectively.
Australian Compliance Checklist for Backorder Management:
- Don't accept payment unless you can supply by the stated/reasonable time; offer remedies if you can't (ACL s36)
- Avoid misleading delivery statements/ETAs; keep product pages and order emails accurate
- Label marketplace presales/backorders per policy (e.g., eBay AU "presale," ship ≤ 40 business days)
- If using dropshipping, disclose sourcing/timing impacts and manage customer expectations
- If offering lay-by-style instalments, provide written terms and honour cancellation rules/fee limits
- If delays arise, contact customers promptly with revised timing and offer a refund/alternatives
This systematic approach helps businesses understand when backorders happen, how to fulfil backorders efficiently, and how to maintain less inventory while still meeting customer expectations for immediate shipment when possible.
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Transform Your Backorder Challenges into Customer Loyalty Gold
Backorders represent far more than temporary inventory solutions – they're strategic tools for building stronger customer relationships and optimising business operations. When managed effectively, backorders signal product desirability, provide valuable market insights, and create opportunities for exceptional customer service that differentiates your Australian business in competitive markets.
The key lies in viewing temporary stock shortages as opportunities rather than problems. With proper systems, clear communication, and customer-focused policies, backorders can enhance your brand reputation while improving cash flow and reducing inventory carrying costs. Success requires balancing customer expectations with operational capabilities, always prioritising transparency and service excellence.
As Australian ecommerce continues evolving in 2025, businesses that master backorder management will enjoy competitive advantages through improved customer loyalty, better inventory efficiency, and stronger supplier relationships. The investment in proper backorder systems pays dividends through reduced disappointed customers, minimised excess inventory, and enhanced market share in your industry. Understanding backorder purchase patterns and maintaining optimal stock levels while managing storage space efficiently creates sustainable competitive advantages for forward-thinking retailers.