Backorder is a kind of order in business that indicates that the desired product a customer wants is out of stock right now but he/she can get the product once it's restocked via advanced payment. In other words, it means ordering a product in advance so that the retailer brings the product soon, but for that, the customers may have to make an advanced payment.
When a rapid rise in sales implies that things are being sold quicker than they can be stocked, businesses tend to implement backordering. When dealing with an increase in demand, it's a popular tactic utilized by businesses all over the world.
Backordering enhances profits and keeps customers away from their competitors. Backordering helps sellers to avoid product overstocking, lowering warehousing expenses. It allows new stores to pay very little on inventory when they first open their doors. It also frees up resources that might otherwise be hampered by shares and keeping charges.
Backorders, on the other hand, can be very complex. Buyers may be upset if somehow the company is unable to deliver the item. Management of these orders can also be a hassle for the accounting and logistics departments.
For example, Emily has been purchasing products from a store named Beautymania for the last few months. Now, she needs lipstick from a specific brand that is not in stock right away. So, the salesperson asked her if she would like to backorder that item so that she can have that once the product arrives. Emily agreed and paid for that lipstick in advance.
Use of the Term in Sentences
- The term “Backorder” is commonly used among businesses, companies or organizations that sell products.
- Backordering can be beneficial for businesses but also can backfire if the promised products don't arrive in time.
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