Drop Ship Tips for Minimizing Backorders

The right preparation can minimize the risks inherent in drop shipping

Backorders, especially when you drop ship, can break the backs of online retailers. If you can’t quickly deliver a product to your customer, they might just cancel their order and look for a more reliable webstore. Because drop shipping places inventory control in the hands of your supplier, it raises your exposure to the risk of backorders. You can, however, implement some strategies for minimizing your exposure to backorder situations:

• Monitor Quantities on Hand (QOH)
• Run shorter auctions
• Cancel an auction when supplies run low
• Pad your inventory by drop shipping items to yourself

Monitor quantities on hand (QOH)

The most obvious step you can take to protect yourself from backorders is to closely monitor quantities. Doba provides a data export tool that can help you monitor supplier inventories. If possible, monitor quantity trends before listing an item in an auction, and then, based on your observations, take one of the following steps:

• List only those items that have a large number of items in stock
• If you notice that a product isn’t exactly “flying off the shelves,” you may be comfortable selling items that have a lower number of items in stock

Run shorter auctions

I once listed an item on eBay that had only one item remaining in stock. Even though I knew the item to be a slow moving item, listing something with a quantity of just one had me a little worried.

To minimize my risk of falling into a backorder situation, I decided to run a three-day auction. The faster the auction wrapped up, the sooner I could drop ship the item to my customer, and the less I would have to worry about it. I wasn’t concerned about losing potential business from having a shorter auction, because listings typically get the most views and bids in the last 24 hours anyway.

Cancel the auction when the QOH reaches zero

Along with monitoring QOH’s before listing an item, continue monitoring quantities throughout the auction. If you notice quantities dropping each day, keep an even closer eye on the QOH.

You can’t drop ship an item that isn’t there. If the quantity ever reaches zero, end your auction pronto. In many cases, if you notice that an item’s QOH is dropping rapidly, you may want to end the auction if the item’s inventory starts running low. If an item’s inventory is rapidly depleting, there’s a good chance it will continue to do so until it is no longer in stock. Use your own judgment and experience to make a decision based on how much time is left on your auction listing, and the rate at which the item’s inventory is depleting.

Pad your inventory by drop shipping to yourself

Shipping a few items to yourself to pad your inventory is perhaps the most effective strategy for avoiding backorder situations. This is particularly advisable for items that are regular sellers for you.

Usually, you need to keep only one or two items in your personal inventory, even if you typically have several auctions with the same item running simultaneously.

By keeping a small buffer inventory of your own, you’ll always have the one or two items on hand. When the QOH drops to zero, you can still ship product to your customers and have a little breathing room to end all your auctions early until the item comes back into stock.

Despite your best efforts, there is no surefire, 100 percent foolproof method of preventing backorders, and you may still end up with a backorder situation on your hands.