When an order contains products that vary in availability, customers won’t want to wait for these to be back in stock before they receive everything. Managing more orders means more administrative time spent processing, updating, and fulfilling them, which takes time away from managing your business’s growth.įurthermore, backorders complicate the fulfillment process when a customer is buying other items. While backordering may result in higher conversions, it also increases your fulfillment costs. It’s a useful tactic to stoke demand and increase the perceived value of your product. By closely controlling the number of units available, Kylie Cosmetics was able to shape the desirability of the brand and build demand.īackordering products that are artificially scarce enables you to leverage consumers’ Fear of Missing Out (FOMO) by paying in advance to guarantee their spot in your next shipment. But because it brought consumers closer to living like their favorite influencer. The frenzy surrounding the product wasn’t because they were selling something unique. Their inaugural Lip Kits sold out just minutes after going live, with units later being listed on eBay for thousands of dollars. Kylie Cosmetics is a great example of a brand that has used scarcity marketing to increase interest in a highly over-saturated category. Scarcity works because it leverages a very primal consumer instinct the harder something is to access, the bigger a status symbol it becomes. Scarcity marketing is a tactic where brands deliberately release a small number of a product to drive demand. So, when an item is constantly sold out or on the verge of selling out, we take this as an endorsement that it’s a good purchase. A whopping 97% of consumers say that customer reviews influence their purchasing decisions. Humans are social animals, which means we’re constantly looking for social cues for what products we should buy.
The pros and cons of backordering Leveraging the economics of scarcity
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Regardless of the causes of backordering, retailers must know how to manage backorders effectively to meet consumer expectations and maximize sales opportunities.
It might even be a deliberate strategy to make a product more desirable (more on this later). There might be a supply chain issue that delays a product from becoming available. A new product might experience higher demand than expected. There are numerous reasons why backorders take place in retail. In this sense, backordering closely resembles pre-ordering for an item that hasn’t been released yet. Once the product becomes available again, the brand will contact the customer to arrange either pick-up or delivery.īackordering differs from an item being out of stock in that the retailer can guarantee delivery within a certain timeframe, either due to ongoing shipments or a strong relationship with the supplier. What is backordering?īackordering is when a retailer allows customers to place an order for a product that’s currently out of stock. In this article, we’re going to weigh up the pros and cons of backordering, and whether accepting backorders is a good strategic move for your business. If you’re planning on introducing a backordering system, you need to be certain that you have the ability to deliver. But late delivery, poor communication, or canceled orders can seriously damage your brand’s reputation. When executed well, backorders aid customer retention and build higher levels of brand loyalty. However, taking backorders isn’t without risk. With consumers now accustomed to longer wait times, retailers with the ability to process backorders have a huge competitive advantage. Secondly, supply chain disruptions caused by the COVID-19 pandemic have made backordering a necessity. Firstly, they want to do business with retailers they know and trust. There are two key reasons why many consumers are happy to place backorders.
After all, why would a customer pay for an item not available if they can find something similar elsewhere? So, it’s easy to think of backordering as a bit of a faux pas. Today’s consumers demand instant gratification. Written by Beth Owens on August 3rd, 2021 E-commerce Omnichannel Retail Technology Transportation
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