Most Amazon sellers have heard the term “backorder” at one point or another, but what does it actually mean? This guide will provide a comprehensive overview of backorders for Amazon sellers, from what causes them to happen to how to avoid them. By understanding backorders, Amazon sellers can minimize the risk of lost sales and maintain a successful business. So, what are you waiting for? Read on!
Table of Contents
What Does Backorder Mean for Amazon Sellers?
For many people, backorders are a source of frustration. After all, who wants to wait longer for an item they’ve already paid for? But in the business world, backorders can actually be a good thing. They occur when customers demand more of a product than the company has available.
While it might mean a temporary delay for customers, it’s also a sign that there’s strong demand for the product. In other words, backorders can be a valuable marketing tool, helping businesses to gauge customer interest and make production decisions accordingly. So the next time you find yourself cursing a backordered item, remember that it might just be good for business.
Consequences of Running Out of Stock on Amazon?
1. You’ll Miss Out on Sales
If you run out of stock on Amazon, you’ll miss out on sales. This is because potential customers will see that your product is unavailable and will likely purchase it from a competitor. This can lead to a market share loss and revenue decrease.
2. You’ll Lose Out on Reviews
When customers purchase your product and leave a review, this helps to improve your product’s ranking in Amazon’s search results. This, in turn, can lead to more sales. However, if you’re out of stock, customers won’t be able to leave reviews, which can hurt your ranking and lead to fewer sales.
Read More: How to Remove Negative Reviews on Amazon
3. Your Account May Be Suspended
If you frequently run out of stock, Amazon may suspend your account. This is because Amazon wants to ensure that customers have a positive experience and can find the products they need. If you’re constantly running out of stock, it reflects poorly on Amazon. It may cause them to lose faith in your ability to provide a good customer experience.
Discover how reimbursements can add revenue back into your business with our easy-to-follow guide.
4. You May Be Fined
This is because Amazon has strict policies in place regarding inventory levels and availability. You may be subject to fines or other penalties if you violate these policies.
5. You’ll Lose Your Paid Ranking
Running out of stock on sponsored products means you’ll have to bid much more next time to get the same paid ranking. So make sure you have enough items in stock before launching any Amazon Ads campaigns.
Eva can get this problem out of your hair by deeply integrating stock level with real-time PPC bidding to control the sales velocity in order to prevent stock-outs.
Pros and Cons of Selling Backordered Items
The crowdfunding model emphasizes some of the benefits of receiving preorders for your products.
✅ Pros of Backordering
Demand is guaranteed.
This is the closest thing to a crystal ball for predicting future demand.
Contacts with customers You have a customer’s contact information once they place an order. You need to get the customer informed about their current order as well as future offers.
Prepayment.
Crowdfunding platforms collect money upfront, and businesses use that money to ramp up production on a new product to hold the backorder and process all or some of the payments. This can improve your cash flow in manufacturing and distribution.
Possibility of expansion If some of your products have already been reserved, you can use that capital to expand your manufacturing run. This can assist you in meeting revenue targets and growing your eCommerce business.
Insights into the market.
Backorders are the best form of customer feedback. Customers tell you what will be popular, including the hottest colors and sizes.
⛔Cons of Backordering
There are some significant drawbacks when your customers have to wait for an order.
Cancellations
The longer someone has to wait for an item, the more likely they will change their mind. They may have second thoughts about making an impulse buy. Or their circumstances may have changed, and they no longer want or require the product.
Processing of payments.
If you wait until the order ships, the credit card your customer provided when placing the order may expire before you process the payment. Contacting them for updated payment information gives them another opportunity to change their mind.
Customer service issues.
Backorders increase the likelihood of issues requiring customer service time to resolve.
Fortunately, you can avoid the headaches that come with backorders by managing them properly. Continue reading for advice on how to make backorders a positive experience for both you and your customers.
How Can You Prevent Backorders?
1. Use a forecasting tool
One of the best ways to prevent backorders is to use a forecasting tool. A forecasting tool can help you predict future demand for your products and ensure that you have enough inventory to meet that demand. Eva’s inventory management tool is using machine learning to generate the best inventory forecast for you based on market trends, your sales data, and above all, profitability!
2. Set up a reordering system
Another way to prevent backorders is to set up a reordering system. This system can help you to keep track of your inventory levels and automatically place customer orders for new products when your stock items get low. This way, you can make sure that you always have the products that your customers need in stock.
3. Communicate with your suppliers
It’s also important to communicate with your suppliers about your inventory needs. Let them know what products you sell and how much inventory you typically keep on hand. This way, they can inform you if they anticipate any delays in manufacturing or shipping. Additionally, they might give you some advice on how to avoid backorders in the future.
4. Have a plan for dealing with backorders
Despite your best efforts, there may still be times when backorders occur. When this happens, it’s important to have a plan to deal with them. For example, you may want to offer a discount or free shipping on orders that are placed on backorder. Eva can help you here with a super advanced Amazon inventory management system that is 100% synched with your pricing and advertising to slow down or speed up the sales in order to safeguard your business against stock-outs.
Tips for Recovering from a Backorder Situation on Amazon
1. Don’t Panic
The first and most vital thing to do when you find yourself in a backorder situation is to not panic. It can be tempting to freak out and start emailing all of your customers to let them know that their order is delayed, but this will only make the situation worse. Take a deep breath and relax; everything will be alright.
2. Communicate With Your Customers
Once you have calmed down, it is time to start communicating with your customers. Let them know that there is a delay and give them an estimated waiting time of when they can expect their order. It is essential, to be honest with your customers and keep them updated on their order status.
3. Offer a Discount or Free Shipping
If you want to really please your customers, you can offer them a discount or free shipping on their next order. This will indicate that you are sorry for the inconvenience and appreciate their business.
4. Learn From Your Mistakes
Finally, it is important to learn from your mistakes once the situation has been resolved. Take a look at what went wrong and try to prevent it from happening again in the future. Products on backorder can be frustrating, but they don’t have to be the end of the world.
How Can Eva Help You with Backorders?
Eva is an excellent choice for a comprehensive inventory management solution. Our end-to-end system allows you to track and control every aspect of your supply chain, from when you receive bulk items to when they are delivered to your customers.
We also provide FBA inventory management, purchase order management, 3PL logistics, and returns management, ensuring that every aspect of your business is in good hands. Furthermore, our user-friendly interface makes it simple to keep track of all your inventory, no matter where it is.
You’ll have complete visibility into your entire operation with Eva, as well as peace of mind, knowing t0hat everything is under control. Start your Free Trial Today to see for yourself! (No Credit Card Needed
Conclusion
To customers, backorder means frustration, but they can actually be a good thing for your Amazon business. When demand exceeds supply, it’s a clear sign that the product is popular. And as any business owner knows, popularity is key to success.
So the next time you find yourself cursing a backordered item, remember that it might just be good for business. If you’re interested in learning more about how backorders can help your business grow, contact us today for a Free Consultation. We’d love to chat with you about ways we can help you achieve your marketing goals!
