Order Holds in eCommerce: How and Why to Do It — Stitch Labs

Future of Commerce Blog

Order Holds: How and Why to Do It

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We live in a time of instant gratification. That’s affecting consumer behavior and expectations, and retailers have to be nimble to meet those expectations. Overnight shipping, the Amazon Dash Button and one-click-to-purchase functionality are just a few ways businesses are accommodating consumers’ need for immediate results.

But sometimes, it pays to slow down a bit. When you move too fast, operational havoc can ensue. That’s why it’s important to find a balance between meeting customer demands while maintaining operational control. One way to do so it by holding orders.

When you use order hold periods, you’re waiting before you kick off the order fulfillment process. There are many reasons why you might want to consider holding orders, both in the eyes of the customer and for your back-end business operations. Mike Phillippi, director of product marketing here at Stitch Labs, takes us through the topic:

Why Do You Need to Hold Orders?

“Retailers would want to use order hold periods prior to those orders being released to the warehouse for fulfillment for a number of reasons,” Phillippi says. “Despite speed and fast fulfillment and shipping to customers being the main priority for retailers who want to compete in today’s market, instituting a short hold period ensures accuracy and cost control.”

Let’s look at a few specific ways where using hold order periods comes in handy:

Prevent Fraud

One study by PYMNTS and Signifyd found that online retailers alone lost $3.3 billion to account takeover fraud in Q2 2017, and fraud increased by 5.5% compared to Q2 2016. The cosmetics and perfume industry especially is at risk, with the highest increase across retail industry verticals.

That’s why it’s important to take whatever steps you can towards fraud prevention, protecting your business and your customers. You can use hold order periods to help detect fraud before you fulfill fraudulent orders. “Hold orders long enough to allow payment companies and/or customers to identify and respond to fraudulent charges,” says Phillippi.

Once payment is confirmed and customers have had a chance to dispute, you can move forward with order fulfillment. Send an automated purchase confirmation email to your customers after they’ve placed an order to assist with early fraud detection, so customers will spot the notification in their email perhaps before they notice the change in their bank statement.

Maintain Stock Control

If you don’t use hold order periods, then you run the risk of straining your operations team when it comes to stock control. “It allows customer service and operational teams time to check, manage or QC orders prior to being released for fulfillment,” Phillippi says.

Plus, as customers make changes to their orders, your team can be ahead of the curve rather than retroactively try to adjust. “If an order is edited or changed by the customer, many times retailers have to create an entirely new order/fulfillment and send it to their warehouse or 3PL,” Phillippi points out. “This creates duplicates and adversely affects reporting and forecasting.”

With increased stock control comes improved operations efficiency. “Order hold periods allow the customer to make any changes needed, without having to cancel a fulfillment and start over or making the warehouse team do duplicate work (like picking and packing items that get changed and then need to be re-shelved),” Phillippi says.

Maintain Positive 3PL Relationships

By this point, we’ve established that not using order hold periods could cause disarray in your inventory and warehouse management processes. And this also spills over into your 3PL relationships. “It removes confusion, and if the retailer’s using a 3PL, it saves money,” says Phillippi.  

When working with 3PLs especially, any errors or disruption in processes can cost you. “3PLs often charge per order/fulfillment received into their system and typically don’t have easy editing abilities, if at all,” he points out. “If the order changes or cancels, then the retailer has to go through a manual, time-consuming, process of logging into their 3PL or actually contacting them to cancel/edit an order.”

When you disrupt processes and have inconsistencies, this strains your 3PL relationships. “The 3PL is unhappy as they wasted time and manpower and now have to reverse the stock back to shelves and start over,” Phillippi says. And you want positive business relationships if you want to continue to thrive and grow.

Improve Customer Experience

Holding orders “allows time for customers to edit, change or cancel any part of their order,” Phillippi points out. There are many reasons a customer would want to do this: They chose the wrong size or color, they have buyer’s remorse and want to remove an item from their basket, they saw a complementary product that they also want after they placed their order, etc.

By instituting a hold order period, you can give customers time to adjust their order and receive everything at once. This also prevents any extra hassle a customer may have to go through to return a product.

If your online store is on Shopify, you can use the saved carts functionality so customers can choose to save their cart while they continue shopping. This will help to alleviate discrepancies between the initial transaction and the customer’s actual wants post-purchase.

How to Hold Orders to Maintain Inventory Control

There are a few main ways you can implement hold order periods. The right approach depends on your needs, your customers, and which inventory management and fulfillment tools you use.

  • Manual: The most time-consuming approach to hold order periods, you can manually assess each order as it comes in and establish how long until you’ll continue with fulfillment. DOEN manually reviews every order before giving ShipStation the green light for fulfillment.
  • Automatic: Many inventory management systems will allow you to automatically create order hold periods for every transaction. Peak Design, for example, uses Stitch Labs to automatically hold every order for six hours, allowing customers time to make any edits to their order.
  • Customized: More robust inventory solutions offer customizations by account, sales channel or individual fulfillments.

 

Up next: How to manage inventory when you have multiple warehouses >

Ellie Kulick

Ellie is an experienced Marketing Communications and Content Specialist based out of San Francisco, CA. Passionate about technology and health, she is constantly looking for new challenges in effective communication and creative content development to help businesses grow and engage with current and prospective customers.

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