Backorder vs Out of Stock: Meaning, Differences & Management Strategies

Backorder vs Out of Stock – these two terms can be a source of confusion for consumers and a critical decision point for businesses. If you’ve ever tried to buy something online and seen it listed as “out of stock,” you know the disappointment of not being able to order it. On the other hand, seeing “available on backorder” might offer hope that you can still reserve the product, albeit with a wait. For logistics managers, deciding whether to label a product as backordered or simply out-of-stock can impact sales, customer satisfaction, and inventory costs. In this comprehensive guide, we’ll clarify backorder vs out of stock meaning, explain their key differences, and share tips on managing inventory to keep customers happy and supply chains running smoothly.

What Does Backorder Mean?

A backorder refers to an item that a customer can purchase even though it’s currently not in stock, with the expectation that it will be restocked and delivered later. In other words, the product is temporarily unavailable now, but the retailer knows or anticipates more are coming soon. Businesses allow backorders to keep sales flowing instead of turning customers away during short-term inventory shortages. For consumers, placing an order for a backordered item means you are reserving your spot in line to receive it once it’s available again.

Key characteristics of backorders:

• Available to order, delayed fulfillment: You can place an order for the product, and it will be shipped once new stock arrives. This differs from an immediate purchase because you agree to wait for delivery.
• Expected restock: Backordered items are planned to be replenished, whether the next manufacturing batch is underway or incoming shipments are expected. There is a reasonable timeframe in which the item should become available again.
• Customer communication: Retailers typically notify the customer at checkout or via email that an item is on backorder, providing an estimated delivery date. Keeping the buyer informed of delays and status updates is crucial to maintain trust.
• Payment handling: Some businesses charge customers at the time of ordering a backordered item; others may charge when the item actually ships. In either case, transparency about when you’ll be billed is important to avoid confusion.
• Example: Suppose a new smartphone model is in high demand and sells out. The store might label it “backorder available,” allowing you to buy it now and receive it in, say, 3 weeks when the next shipment arrives.

In summary, backorder status means “sold out, but more is coming, and you can still order it.” This approach can keep eager customers on board rather than losing the sale to a competitor.

How Long Does a Backorder Take?

One of the first questions customers ask when they learn an item is on backorder is: “How long will I have to wait?” The answer varies widely. The backorder duration depends on factors like supplier lead times, production schedules, shipping transit times, and any supply chain delays or disruptions. On average, backordered items might take anywhere from a couple of weeks up to a few months to fulfill. Simple items sourced locally could restock relatively quickly, whereas complex products or those coming from overseas manufacturers might require a longer wait. Seasonal demand spikes or unforeseen events (natural disasters, factory delays, etc.) can also extend backorder timelines.

Tip: If you offer backorders, always give a realistic estimated delivery date or range. Providing clear timelines manages customer expectations and reduces frustration. It’s better to err on the side of caution with a longer estimate and then deliver earlier than to promise a quick turnaround and then face delays.

What Does Out of Stock Mean?

When a product is out of stock, it means the item is completely unavailable for purchase until the seller replenishes inventory. In an out-of-stock scenario, customers typically cannot place an order for that product at all. The buy button might be disabled or replaced with an “Out of Stock” notice. Essentially, the retailer is saying “we’re sold out and don’t have more on the way immediately.”

Key characteristics of out-of-stock situations:

• Not available to order: Unlike backorders, the retailer will not accept new orders for an out-of-stock item until it’s restocked. Customers must wait and check back later or find the product elsewhere.
• Uncertain restock timing: Sometimes the seller has a restock shipment on the horizon but isn’t taking orders until the items are physically in hand. Other times, the product might be out of stock indefinitely (for example, if it’s end-of-line or there are supplier issues). From the customer’s perspective, there’s no guaranteed future availability date.
• Lost sales opportunities: Every moment a popular product is out of stock is a missed chance to make sales. Customers who can’t buy from you may go to a competitor. Prolonged stockouts can also hurt your brand’s reputation if shoppers repeatedly find nothing but “Sold Out” signs on your site.
• Customer impact: Seeing an item out of stock can be frustrating. Some customers might sign up for “back-in-stock” notification emails if offered, while others will immediately start looking for alternative products. If the item is something they need urgently or a close substitute is readily available, you risk losing that sale.
• Example: A toy retailer experiences unexpected demand for a popular action figure, and inventory runs out. They mark it as out of stock on the website. Until the next batch of toys arrives in their warehouse (with no confirmed date yet), customers cannot order that toy from them.

In short, out of stock means “sold out with no immediate restock available – you can’t buy it right now.” This status signals a hard stop on sales for that item, at least temporarily.

Backorder vs Out of Stock: Key Differences

While both backorders and out-of-stock indicate that a product isn’t currently on the shelf, the key difference lies in whether a customer can still place an order and in the expected availability. One industry summary puts it succinctly: backorders allow customers to purchase an item that’s temporarily unavailable but guaranteed to restock soon, whereas out-of-stock items are completely unavailable for purchase, with uncertain restock plans. Let’s break down the distinctions more clearly:

• Ability to Order: If a product is on backorder, you can order it now (the system will take your order despite zero stock on hand) – essentially reserving the item for future delivery. If a product is out of stock, you cannot order it; the retailer stops sales until they have it back in inventory.
• Expectation of Restock: Backordered items imply a commitment that new stock will arrive. The business has confidence that the product will be available again (it might already be on order or in production). Out-of-stock items carry no such promise – the item might be restocked eventually, but there’s no firm timeline, and in some cases restock may not happen at all if the product is discontinued.
• Customer Wait Time: Choosing backorder means the customer is opting to wait for the item. They know there’s a delayed fulfillment but have an approximate date. With an out-of-stock item, the wait time is undefined – customers are essentially told “come back later” without assurance, which could lead them to look elsewhere.
• Impact on Customer Experience: A backorder, if handled well, can still result in a completed sale and a satisfied customer – especially if the retailer communicates clearly and perhaps even offers updates or freebies for the patience. An out-of-stock situation is more likely to disappoint; the customer can’t get what they want and might feel the retailer failed to meet demand.
• Business Implications: Backorders let the sales continue despite inventory issues – capturing revenue that might otherwise be lost. They also act as a signal of high demand for the item (useful for inventory planning). However, they add operational complexity in fulfillment and customer service. Out-of-stock, by halting sales, might simplify operations in the short term (no future orders to manage) and avoids overpromising. But stockouts can hurt revenue and drive customers to competitors if they happen frequently.

In summary: A backorder status is a way of saying “temporarily unavailable, but we’ll get it to you later,” whereas out of stock says “temporarily unavailable, please check back – we can’t take your order now.” Understanding this difference is crucial for managing customer expectations and making strategic inventory decisions.

Backorder vs Pre-Order: What’s the Difference?

It’s also helpful to distinguish backorders from pre-orders, as these terms sometimes get mixed up. Both involve waiting for a product, but they occur at different stages of a product’s availability:

• Pre-Order: This is when you buy a product before it’s officially released or available for sale. Pre-orders are common for brand-new products (like an upcoming video game, a new gadget, or a book release). The item has never been in stock before – you’re reserving it ahead of launch day. Businesses use pre-orders to gauge demand and ensure they produce enough for launch.
• Backorder: This refers to an existing product that has gone out of stock due to demand or supply issues, but will be coming back into stock. The item used to be available, sold out, and now customers must wait for the next inventory replenishment.

Key nuance: With pre-orders, customers are waiting for initial availability (often knowing the exact release date). With backorders, customers are waiting for re-availability (restock) of a product that’s already in the market. For example, if a new model of gaming console is announced for release in six months, you might pre-order it now to get it on release day. In contrast, if that console is released and sells out, any orders you place afterward would be backorders – you’re waiting for the manufacturer to produce and ship more units.

Common Causes of Backorders and Stockouts

No company likes telling customers that products aren’t available. So why do backorders and out-of-stock situations happen? The root cause is usually an imbalance between supply and demand, but the specific reasons can vary. Here are some common causes:

• Sudden Demand Surges: An unexpected spike in customer demand can deplete inventory faster than anticipated. For instance, holiday shopping frenzies or an internet trend can send a product’s sales skyrocketing overnight. If supply can’t immediately catch up, backorders pile up or items go out of stock.
• Supply Chain Disruptions: Delays or problems in the supply chain are a major culprit. This includes supplier delays, manufacturing issues, or shipping problems. Events like factory shutdowns, raw material shortages, port delays, or global crises (e.g. natural disasters, pandemics) can slow down replenishment. Such supply chain delays mean even if consumer demand is normal, stock isn’t refilled in time.
• Long Lead Times: Products that require long production or shipping lead times are inherently at higher risk. If it takes your supplier 3 months to make and deliver an item, any forecast miss can leave you out of stock for a long period. Businesses with very extended supply lines often use backorders to bridge the gap, but customers might be waiting a while.
• Inaccurate Forecasting: Poor inventory forecasting or planning is a frequent cause of stockouts. If a company underestimates how much product to have on hand (or how quickly it sells), they run out. Conversely, overestimating might mean they avoid backorders but at the cost of holding excess stock. Striking the right balance is tricky. Many backorder problems are “symptoms of inaccurate forecasting” that could be mitigated with better demand planning.
• Insufficient Safety Stock: Related to forecasting, not keeping a buffer of extra inventory (safety stock) means any little spike in sales or a slight supplier delay will cause an immediate stockout. Companies that run very “lean” on inventory to save costs are more prone to backorders when things don’t go perfectly.
• Supplier or Manufacturer Issues: Sometimes the issue isn’t on the retailer’s end at all. A manufacturer might face production delays, quality control issues, or shipment errors. If your supplier fails to deliver on time, your shelf goes empty. Small retailers especially might get de-prioritized by bigger suppliers and end up waiting longer for restocks, causing backorders for their customers.
• Inventory Management Errors: Data and process errors in inventory management can also lead to phantom stockouts. For example, miscounting inventory, not updating stock levels in the system, or syncing issues in an omnichannel environment might show inventory available when it’s actually not (resulting in unexpected backorders), or vice versa. Good inventory management systems and audits are important to prevent these human or technical errors.
• Intentional Stock Strategy: In some cases, businesses intentionally keep inventory low and accept backorders as a strategy – for example, luxury or limited-edition products to maintain an aura of exclusivity, or small businesses that can’t afford large stock holdings. They’d rather sell out and take backorders than overstock. This can boost the perception of high demand, but it’s a fine line to walk without upsetting customers.
• External Crises and Seasonality: Weather events (like hurricanes prompting generator purchases), geopolitical issues, or seasonal trends (flu season for pharmaceuticals) can all create temporary mismatches in supply and demand. Many companies experience regular seasonal backorders for their high season products (e.g., air conditioners in summer) if they purposely produce less during off-season.

Understanding why backorders happen is the first step to preventing them or at least minimizing their impact. Next, we’ll look at how handling backorders vs. out-of-stock situations can actually impact your business positively or negatively.

Pros and Cons of Allowing Backorders (vs. Marking Out of Stock)

Should a business take backorders or just mark items as out of stock? There are trade-offs to each approach, and the best choice can depend on the product and situation. Here are some advantages and disadvantages of accepting backorders:

Benefits of Accepting Backorders

• Continued Sales & Revenue: Perhaps the biggest pro is that you don’t miss out on sales. By allowing backorders, you keep the order pipeline flowing even when inventory is temporarily unavailable. This keeps your revenue stream going and can improve cash flow (especially if you charge customers at order time). It’s essentially a way to capture demand instead of turning it away.
• Customer Retention: If customers can place a backorder, they are less likely to go to a competitor. You’ve locked in the sale (assuming they’re willing to wait). This can be especially useful for unique or brand-loyal products where customers want your specific item. Offering the backorder option can prevent losing market share to others.
• Market Demand Insights: Backorders provide valuable data – they act like a live indicator of what people really want to buy. A surge in backorders for a product tells you it’s in high demand, which can inform your future inventory purchasing and production decisions. In fact, many companies view backorders as a gauge of customer interest, helping with more accurate forecasting down the line.
• Reduced Storage Costs: Keeping inventory in a warehouse costs money (storage fees, insurance, risk of unsold stock). By operating with some backorders, businesses can keep inventory levels leaner without losing sales. You essentially shift some stock from “on-hand” to “on-order.” This minimizes warehousing costs for products that consistently sell out – you don’t pay to store what quickly ships out. (However, be careful: too lean an operation can backfire with constant stockouts.)
• Creates Urgency & Exclusivity: Counterintuitive as it sounds, items on backorder can sometimes hype customers even more. If an item is popular enough to be backordered, it signals high demand and can generate buzz. Think of limited-edition drops – consumers might feel the product is worth waiting for. This only works if the wait isn’t too long and communication is good, but it can add to a product’s allure.

Drawbacks and Challenges of Backorders

• Customer Frustration: The most obvious downside is that customers may get tired of waiting. Backorders require patience, and not everyone will be happy about a delay. If someone expected 2-day shipping and now hears the item will ship in 3 weeks, you risk cancellations and a hit to your brand loyalty. There’s always a chance the customer changes their mind, finds an alternative, or just cancels out of frustration.
• Uncertain Fulfillment: Backorders are a promise that you’ll deliver later – but what if your supplier falls through or takes longer than expected? Accepting backorders can put you in a tough spot if restock timelines slip. Retailers must be cautious not to take more backorders than they can reasonably fulfill in a timely manner. Failing to fulfill backorders (having to cancel them eventually) will definitely upset customers more than if you hadn’t taken the order at all.
• Operational Complexity: Handling backorders adds extra work operationally. Your systems need to track backordered items, your staff needs to manage those orders specially, and your customer service team must handle inquiries about them. It’s not a “set and forget” situation. There’s complexity in merging backorders with new stock when it arrives, potentially processing partial shipments, and keeping payment information up to date if the charging happens later. Small businesses might find this overhead challenging without good systems in place.
• Risk of Overselling: If not managed carefully, backordering can lead to selling more units than you actually receive (especially if there are supplier shortfalls). Overselling results in some backorders that can’t be filled, forcing cancellations and apologies. This is often due to poor inventory visibility or delays in updating the website. It’s a scenario you want to avoid at all costs – it’s bad for customer trust.
• Delayed Cash Flow (in some cases): If your policy is to charge customers only when you ship, backorders won’t bring immediate cash in. You have a bunch of unfulfilled orders (liabilities) on your books. This can be a cash flow strain if you need to pay for the new inventory upfront but don’t get paid by customers until later. (By contrast, if you charge at order time, you get the cash but incur an obligation to fulfill or refund.)
• Not Suited for All Products: Backorders make less sense for certain types of goods. If an item is a commodity that customers can find easily elsewhere, many won’t wait for you – they’ll just go buy from another store. For low-margin or low-uniqueness items, taking backorders might just prolong the inevitable loss of a sale. Also, for extremely time-sensitive needs (say, medical supplies or event-based items), a backorder offer won’t satisfy the customer’s need.

The Out-of-Stock Approach

By contrast, marking an item “Out of Stock” and not accepting orders can have its own pros/cons:

• Pros: It sets clear expectations – no false hope. Customers won’t order and then get annoyed by a delay because you simply don’t take the order. This can preserve trust through honesty. It also can create an urgency to buy when it’s available (if used sparingly, a product that’s often sold out might seem highly popular, which can spur future demand). Operationally, it’s simpler – you don’t have to track outstanding orders. For example, some brands intentionally use “out of stock” as a strategy to avoid overselling and to encourage customers to come back when available, hopefully eagerly.
• Cons: Every out-of-stock item is a sale you could have had but didn’t. If the customer finds it somewhere else in the meantime, you’ve lost not just that sale but possibly future business from that customer. Frequent stockouts can damage your reputation and customer loyalty – shoppers might think you’re unreliable or poorly managed. There’s also the lost opportunity to capture demand data; with no orders, you might underestimate true demand for the product.

In practice, many businesses strike a balance: they might allow backorders for certain high-value or unique products that customers are willing to wait for, but mark as out-of-stock for inexpensive, easily substitutable products to avoid hassle. It comes down to customer expectations and the nature of the product. Inventory management strategy should be tailored to your business model to decide when backorders make sense versus when to simply display out of stock.

Smart Strategies to Reduce Backorders and Stockouts

Backorders and stockouts disrupt both sales and customer trust. Here are 8 practical tips for inventory managers and retailers to stay ahead:

1. Forecast Demand Accurately
   Use historical sales data, trends, and inventory software to predict demand. Proactive forecasting helps prevent unexpected sellouts, especially during peak seasons.
2. Keep Safety Stock
   Always maintain a buffer inventory for fast-moving or essential items. Set reorder points based on daily sales and supplier lead time to avoid running out.
3. Diversify Suppliers
   Don’t rely on just one source. Having multiple suppliers reduces risk and shortens delays if one vendor falls behind.
4. Build Supplier Relationships
   Strong supplier partnerships mean better communication, faster fulfillment, and potential priority during shortages.
5. Use Inventory Management Tech
   Real-time tools show current stock, update listings, and automate reorders. Alerts and back-in-stock notifications can reduce manual errors and lost sales.
6. Streamline Fulfillment
   Speed up backorder fulfillment by improving warehouse efficiency. Cross-docking and trusted 3PL partners can help clear pending orders faster.
7. Communicate With Customers
   Always inform buyers about backorders or delays up front. Regular updates and transparency build trust, even during wait times.
8. Offer Similar Products
   When items are unavailable, suggest close alternatives to retain sales and ease customer frustration.

By combining better planning, smarter tech, and clear communication, you can reduce costly stock issues and keep your customers satisfied.

When to Stop Accepting Backorders

Backorders are helpful—but only up to a point. Continuing to accept them can hurt your operations and customer trust if not carefully managed. Here’s when to pause:

Unacceptable Wait Times: If customers would need to wait too long (e.g., 8+ weeks), it’s better to mark the item out of stock and communicate clearly.

No Clear Restock Date: If your supplier gives vague or indefinite timelines, stop taking orders until you have confirmed availability.

Major Supply Chain Issues: Severe disruptions like factory shutdowns or global shipping delays can make fulfillment unpredictable. Pause to avoid overwhelming your backlog.

Too Many Pending Orders: If backorders are piling up and straining your team, hold off on new ones until you catch up.

Product Changes or Quality Concerns: Don’t accept backorders if the next version of the product is uncertain, under revision, or has unresolved quality issues.

FAQs: Backorder vs Out of Stock

Q1: Is backorder the same as out of stock?
A: No. Out of stock means you can’t buy the item—it’s unavailable with no clear restock date. Backorder means it’s sold out now, but you can still buy it and receive it later once restocked.

Q2: How long does a backorder take?
A: It depends—anywhere from a few days to several weeks or months, depending on supply, production, and shipping delays. Most sellers provide an estimated delivery date.

Q3: How can businesses manage backorders better?
A: Forecast demand, keep safety stock, and use real-time inventory tools. Work with reliable or multiple suppliers and clearly communicate with customers.

Q4: Is it better to allow backorders or show out of stock?
A: It depends. Backorders help keep sales going but need good planning. Out-of-stock is safer when delays are long or uncertain. Many businesses use both, depending on the product.