Wholesale Backorders - Why So Many Now?

- article by Chris Malta

I’ve been getting a lot of questions about wholesaler backorders over the last few months, especially related to drop shippers.

When you use a drop shipper, you place images and descriptions of a product on your site, make the sale and collect the money from your customer, and then pay the wholesale price to the drop shipper. The drop shipper then delivers to your customer, and you never touch the product.

What happens, though, when you make a sale, place the order with the drop shipper, and that wholesale drop shipper is ‘out of stock’ all of a sudden and can’t send the product to your customer?

The First Thing To Understand

The first thing we need to understand as retail business owners is that there will always be
situations in which our suppliers run out of stock and can’t deliver something to us or our
customers. It goes with the territory, and is a normal part of the retail business. (In case you
hadn’t considered it…if you’re selling products online, you’re in the retail business!)

So, backorders and out of stock situations are something we will always deal with in retail.

Why So Much More Of It Now?

The thing that has both offline and online retailers concerned right now is that there are more
wholesale and drop shipper backorders than usual. For some of us, it seems that every other order we place with a supplier gets answered with “Sorry, we’re out of stock at the moment”.

Why is that happening more often these days?

Well, keep in mind that our Federal Government has gotten together with banks, credit card companies and Wall Street and has decided to throw us a giant Recession. Aren’t we lucky!

Think about how you’re dealing with the recession in your own household. If you’re like most people, you’re cutting out non-essential services, watching your budget carefully, and holding on to more cash instead of spending it.

The exact same is true of your wholesale suppliers. For a wholesaler to stock a warehouse full of products, they need to have ‘Positive Cash Flow’. Money coming in at a rate that is greater than money going out. In a recession, consumers are buying less, so wholesalers are unsure how much product they’ll be able to sell, and the result is that they don’t stock as much product as they normally would in a good economy. They’re doing the best they can to minimize their own risk and maintain a positive cash flow.

So, you have more backorders because wholesalers have to be careful with their money, and stock fewer products.

You’ll continue to see this kind of thing across the board for a while to come. It’s not your
wholesale supplier’s fault. They’re doing what they have to do as a business in order to survive.

You’re not to going to be able to switch wholesalers and eliminate that backorder problem. All
wholesale companies are dealing with this, as are all other businesses of all kinds.

When will it get better?

Well, the obvious answer is that when the recession finally gets better, the backorder situation will get better. But, there’s another answer in the short term.

Why? Because the Holiday Season is coming. The summer months are typically when wholesalers plan what they think they can sell throughout the Holidays at the end of the year, and start finalizing their orders and filling their warehouses. The earlier they stock up for the Holidays, the less that stock tends to cost them. After July, you’ll start to see the backorder situation easing up a bit as wholesalers start to load up their warehouses for the biggest retail season of the year…the Holidays.

What Do We Do In The Meantime?

While we’re waiting for this recession to end, there are three things we can do to help our
businesses through product backorder situations. They are (1) Customer Service, (2) Customer Service, and (3) Customer Service.

I’ve been in business in one way or another through three recessions, and I can tell you that nothing will keep you in business through this better than bending over backwards for your customer. If you have to notify a customer of a backorder:

- Contact the customer immediately and explain the situation. Don’t wait.

- Be apologetic and understanding. Offer to refund the order if they don’t want to wait until the
item comes back into stock. Being proactive and offering the refund before it’s asked for often defuses any bad feelings your customer might have toward your business.

- If the customer acts like they want a refund, go find the product somewhere else, buy it and send it to them. Yes, even if you lose a couple of dollars. I’ve done this before, fairly often, and I can tell you for a fact that the couple of dollars I’ve lost in those situations has been paid back thousands of times over in customer satisfaction. When you do this, and let the customer know you’ve done it for them, you not only have a customer for life, you have a customer that will tell everyone they know about what you did. That brings you more customers.

This recession will end. They always do, no matter what the doom-and-gloom idiots moan and cry about in order to sell newspapers, and sell commercials on the TV news shows. Soon enough, we’ll be happily spending our way into the next recession, and things will be back to ‘normal’. In the meantime, understand that in the short term you will see more backorders than usual.

Turn it into an opportunity to let your customer service shine, and your backorders can actually help more than they hurt, by gaining you more committed customers and more new business.