If only vendors shipped everything on order every time — wouldn’t that make our lives as retailers so much easier? But the reality is that there are frequently products out of stock at the time a shipment is being picked and packed. When you mark an order “ship complete,” you may never get any of it.

When you are the customer, you get to determine how you want a back order (often abbreviated as b.o.) handled. It might seem simplest to say “no back orders” whenever you place an order, but that means you are less likely to get some items that are in hot demand or short supply. And as long as you are set up to receive back orders accurately (there’s a form for this in the new edition of Specialty Shop Retailing), why not accept them?

I will tell you why: high freight costs. One of our soap vendors recently shipped us a $25 back order that came with an invoice for $18 in shipping. How could we possibly make a profit on these items?

On our own purchase order forms, we clearly state that we only accept small back orders (i.e. under $50) if the vendor pays the freight. And although I don’t always add that note to orders placed at shows, online, or with reps, a conscientious supplier would ask if it’s OK to ship a small back order if the freight is not free. I’m sure that companies are well aware of the shipping costs on their own goods, and the ratio between the wholesale cost and the freight.

Vendors sometimes mention that it’s hard to get hold of retailers to ask permission to ship a back order. I’d suggest sending an email stating that unless the shopkeeper responds within two days, the back order will be cancelled. The message should clearly state whether freight costs will be added to the invoice. Because if the vendor is paying, I’m usually quite happy to receive goods that I had ordered.

The exception would be back orders that date back more than a few months. I’ve received advent calendars from a back order after Christmas, and items from a previous year that I’d long since forgotten about. This would be another instance where a simple email saying “do you still want this” would be a welcome courtesy.

There isn’t much your store can do about receiving a small back order with high freight cost if you haven’t spelled out your policy in advance. But do contact the the vendor to indicate that you would like a note on your account about how to handle future back orders — some companies are able to keep this information on file. And give priority to suppliers that offer free freight on back orders, because this shows that they have a real concern for your bottom line.

Happy Retailing,
Carol “Orange” Schroeder