CHOICE membership

Online sales - payment taken when goods out of stock

Hi

I’ve recently made online purchases from three separate Australian companies. In each case, “due to Covid-19”, stock has been unavailable, and thanks for my patience but I’ll have to wait extra weeks.

These three purchases were made around the beginning of July (it’s now 20th) and none have delivered but all have debited my account.

Is that legal?

cheers

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When was this advised, before or after you paid for the purchase?

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I’d also be interested to hear the legal status of this.

I used to work at a very small shop selling physical products, and with very few exceptions we erred on the side of not taking the order unless the stock was in the warehouse. I believe it was less about thinking it may be illegal, more about the boss preferring it that way, for simplicity of juggling order status.

Where we did sell stock not yet on hand we stated they were placing a back order, before they committed to the order.

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In the world of e-commerce the system usually trusts the computer to have a correct inventory. But the companies that do it right do not process the charge for an order until it is at least pulled for packing if not when shipped.

Those that put the charge through before having product ready to go need to be called out.

The obvious solutions for a consumer caught out ordering something, being charged, and being advised it is not in stock/back ordered (without prior warning at the order phase) is an order cancellation and/or chargeback to their card and/or paypal dispute for non-supply, depending on how the order was paid.

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Hmm, I’m sure it’s possible somehow with a CC payment but not sure how without breaking PCI-DSS by holding the CVV until a future processing time. Perhaps banks started offering CC payment preauths nowadays, not sure

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I recently ordered click and collect from Chemwarehouse online. The CC charge was authorised but they state charges are not processed until the item is ready for collection. That way if they go to insufficient stock between an order being placed and picking at the particular store, the customer might not be happy but the customer has not been charged. They also take paypal and note ‘some payment methods are immediately processed’ because that is how PP works.

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I would imagine that if they said it was in stock on the website and after it was ordered one was notified that it was out of stock, then this could be grounds to break the sale contract (however see below)…it could be seen as misleading under the ACL or not be able to fulfil the sale.

If the website was silent (or made it clear before/on purchase), then it would be classed as a rain check…see

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I was informed of delays, but I did not expect payment to be taken without goods being shipped. Or even in their hands.

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It is common for businesses to take monies from their customers before a product is shipped. This is done for a number of reasons, including

  • instigates the contract for the sale of a product (if a payment was not sought, one could cancel a purchase after it was made and before it was paid for and the business may have already paid for the item from their supplier - leaving the retailer with a product with no customer)
  • reduces risks on the business from a customer not being able to pay for an item at a later date, when payment is required

Some businesses don’t stock all items they sell as it can tie up considerable cash in stock (or each product may be unique say for a piece of custom furniture) which they may or may not sell if the customer pulls out of the contract. If it is popular or a very low cost item, (depending on the popularity of the item), it is more likely to sell and they may stock more in their inventory.

There are also more and more online businesses/platforms which don’t stock any inventory, but are the middle person between the manufacturer and customer. When one purchases these items they add their sales commission to it and it is shipped direct from the manufacturer/importer.

If they advised that the item was not currently in their stock and you proceeded with the purchase, you have agreed with this aspect of the purchase.

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