Backorder vs. Out of Stock: What’s the Difference?

Even the most efficient retail operations can hit a snag when inventory runs low. Two common scenarios retailers encounter are backorders and out of stocks. While they sound similar, they’re actually completely different scenarios that require different solutions. 

The way you handle these inventory setbacks shapes customer trust, affects sales flow and determines how efficiently your business can recover from disruptions. Keep reading as we explore the differences between backorder vs. out of stock scenarios, and share best practices for getting through them.

• What is a backorder?
• What does “out of stock” mean?
• Key differences between backorder vs. out of stock inventory
• Why understanding the difference between backorder vs. out of stock matters
• How to manage backorders and out of stocks effectively

What is a backorder?

A backorder happens when a product is temporarily unavailable but customers are still able to purchase it. Essentially, you’re accepting orders for an item that’s out of your current stock, with the commitment to fulfill those orders once new inventory arrives.

Retailers often use backorders to keep sales moving and maintain demand momentum, even when supply chain delays, production slowdowns or sudden spikes in demand occur.

For example, a limited-edition sneaker might sell out within hours or even minutes. Allowing backorders lets you capture ongoing demand and assure customers that more pairs are on the way—turning potential lost sales into future revenue.

Why backorders can be a good thing

Not having inventory available right away might sound like an obvious disadvantage, but this isn’t necessarily true. Backorders allow you to: 

• Preserve sales: Continue generating revenue even when inventory is temporarily unavailable
• Retain customers: Offer transparency and clear timelines to maintain trust instead of losing shoppers to competitors
• Gather insights: Backorder data can help you forecast future demand and adjust purchasing or production schedules

However, success with backorders depends on clear communication. Set realistic expectations for delivery times and keep customers updated every step of the way. 

What does “out of stock” mean?

When an item is out of stock, it’s completely unavailable for purchase. Customers can’t add it to their carts, preorder it or receive a set restock date. This lack of availability often sends shoppers looking elsewhere. Between backorder vs. out of stock situations, an out-of-stock scenario is one you should be actively working to avoid the most.

Out of stocks can happen for various reasons: delays in manufacturing, supplier shortages, mismanaged forecasting or product discontinuation, to name a few. In some cases, it’s temporary (caused by a short delay in shipment, for example). In others, it’s permanent, such as a discontinued or seasonal product line. 

Why being out of stock matters

Experiencing these stockouts can result in unintended consequences for your business, including:

• Lost sales opportunities: Every unavailable item represents immediate revenue left on the table
• Customer frustration: Without clear communication, customers may assume poor management and turn to competitors
• Brand perception: Frequent stockouts can make a brand appear unreliable or unprepared

That’s why proactive communication and transparency are essential; even if an item won’t be restocked soon, letting customers know as soon as possible builds trust and shows professionalism.

The difference between backorder vs. out of stock

In short, backorders and out-of-stock items both signal product unavailability, but they differ in what happens next. An out-of-stock item has no inventory and no confirmed replenishment date, so customers usually can’t place an order until it’s restocked. A backordered item is temporarily unavailable but already scheduled for replenishment, meaning customers can still buy it now and receive it later once new stock arrives.

Key differences between backorder vs. out of stock inventory

The main distinction between backorder vs. out of stock comes down to purchase availability and customer communication.

From a customer’s perspective, a backorder means that their item is coming soon, while an out of stock communicates uncertainty. When it comes to operations, managing a backorder means coordinating suppliers, tracking incoming shipments and updating customers promptly. Conversely, managing out-of-stock items involves reassessing demand forecasting, evaluating vendor relationships and ensuring accurate availability listings across channels.

Why understanding the difference between backorder vs. out of stock matters

Knowing whether a product should be marked as backordered or out of stock helps shape your customer experience strategy. Getting it right helps you:

• Set expectations: Customers appreciate transparency. When they know what to expect, they’re more likely to return
• Streamline fulfillment: Proper labeling ensures your teams prioritize orders effectively
• Enhance demand forecasting: Accurate reporting helps you reorder at the right time and avoid future shortages

Even when products are delayed, customers value your openness and honesty over silence. This strengthens relationships and keeps your brand top of mind when they’re ready to buy again.

How to manage backorders and out of stocks effectively

Effective inventory management calls for a blend of technology, communication and customer care. Regardless of the difference between backorder vs. out of stock inventory, you can use the same tools to navigate these situations effectively.

1. Communicate early and often

Whether an item is backordered or out of stock, let customers know as soon as possible. Provide estimated restock or delivery dates, and follow up to keep them informed about any changes or delays. Proactive communication reduces frustration and shows customers you’re being transparent rather than leaving them guessing. Consider using automated email or SMS notifications through your POS system so updates are timely and consistent. Even a short message acknowledging a delay can go a long way in building trust and reducing support inquiries.

2. Use real-time inventory tracking

With a centralized inventory management system such as Lightspeed’s, you can view stock levels across all your locations and channels in real time. This kind of visibility helps you:

• Stay on top of inventory levels 
• Prevent overselling and understocking
• Manage supplier relationships and streamline reordering 
• Alert your team before shortages occur

Learn more about Lightspeed’s inventory management. 

3. Offer alternatives and preorders

For out-of-stock items, make thoughtful suggestions for similar products, and ask customers how they’d like to be contacted in case the product becomes available. For backorders, consider offering small incentives such as free shipping to keep customers engaged while they wait. The way you handle backorder vs. out of stock scenarios can impact your customers’ perception of your brand, so act accordingly!

4. Strengthen supplier relationships

Collaborate closely with your vendors and suppliers to forecast demand more accurately and minimize delays. A transparent supply chain can prevent many backorder and stockout situations before they happen. Building strong, transparent relationships helps you negotiate better lead times, secure priority during high-demand periods and find quick solutions when disruptions arise. Regular check-ins with suppliers can help prevent many backorder and stockout situations before they happen.

Connect with all your favorite suppliers directly in your Lightspeed POS with the Supplier Network. Streamline inventory ordering, management and selling right from your point of sale system.

5. Learn from your data

Use sales and inventory analytics to identify patterns in demand. Are certain products repeatedly selling out? That’s a sign to adjust reorder points or diversify your supplier base. Data-driven insights can also reveal seasonal trends, local preferences or emerging bestsellers you might not notice otherwise. Over time, these insights allow you to forecast more precisely, reduce excess stock and ensure popular items are always available when customers want them most.

The bottom line

Understanding the difference between backorders and out of stocks gives you a strategic advantage. Backorders may be inconvenient for customers, but they keep revenue flowing while you restock; out-of-stock items, if not handled well, can disrupt sales and damage customer trust.

Handled thoughtfully, both scenarios can provide valuable insights into demand trends and supply chain performance. Pair proactive communication with accurate, real-time inventory tracking through a powerful POS like Lightspeed, and you’ll not only minimize disruptions, you’ll turn these challenges into opportunities for growth.

Talk to an expert to see how better inventory management can help you grow your business.