When a product isn’t available right away, businesses are faced with a decision: risk losing a sale or find a way to bridge the gap. Rather than missing out, businesses can turn to pre-orders and back orders to bridge the inventory gaps. These strategies capture missed sales but create opportunities for better cash flow and smarter inventory planning. 

What Are Pre-Orders and Backorders? 

Pre-Orders: Pre-orders are made for products that are not available yet. This method is normally used for upcoming releases, limited-edition products, or just highly anticipated items. Customers place their orders ahead of time to secure their spot in line before the product is officially released. 

Back orders: Back orders are orders made for out-of-stock items. They are shipped out as soon as they are restocked. Customers can still buy the product, but they have to wait for it to arrive at a later date. 

How Brands Use Pre-Orders and Backorders 

1. Building Hype and Driving Demand 

Offering pre-orders creates buzz around new or exclusive products. Brands can leverage marketing campaigns to promote urgency and exclusivity, enticing customers to purchase early. Apple, for example, generates excitement and long virtual queues for its latest product launches through pre-orders. 

Backorders can also drive demand. When products are labeled as “temporarily out of stock but available for backorder,” customers may be motivated by the fear of missing out. This urgency can lead to quicker purchase decisions. 

2. Enhancing Cash Flow and Mitigating Financial Risks

Pre-orders offer upfront revenue, which can fund production, manufacturing, or marketing expenses. This is especially valuable for small businesses or brands launching new product lines. By collecting payments before manufacturing, companies reduce the financial risk of producing surplus inventory. 

Backorders, on the other hand, prevent lost sales when stock is temporarily unavailable. Instead of customers leaving the website, they can place their order and wait for restocking. This steady revenue stream helps businesses manage cash flow and ensures customer retention. 

3. Customer Data and Demand Forecasting 

Pre-orders and backorders both offer valuable insights into customer demand. Pre-orders allow businesses to assess interest levels before production even begins. By analyzing pre-order data, companies can adjust production schedules to better match demand, preventing overproduction or underproduction. 

Backorders also help businesses identify high-performing products and accurately forecast future demand. A product that consistently sells out and generates backorders signals a clear opportunity for increased production or better stock allocation. 

Additionally, both strategies generate critical customer data that can be used to inform future business decisions. Brands can analyze purchase behavior to: 

• Identify which items to promote for future launches 

• Adjust marketing campaigns to align with customer preferences 

• Improve inventory planning for seasonal trends 

With the right approach to preorders and back orders, brands can make smarter production decisions and turn mismanaged stock into opportunities for growth. 

Want to improve your inventory management? Learn more about how our order and inventory management system can help.