website showing stock where there is non and taking customers money and what they can do to restore customer confidence.
This is the nub of the problem.
Never answering the phone, taking days to respond to email and then coming back with a combative tone does nothing to help the 'we've had yet money now f. off' vibe of the customer relations and is a stupid own goal, but really the sheer level of fail in their web shop/stock control system and its relation to what's actually in the warehouse is just inexcusable.
If you have finite stock levels you do not expect to be replenished anytime soon, you know exactly how many you have to sell.
Selling more and then hiding behind T's and c's that state that ordering, paying, and even being emailed back to thank you for your order still doesn't constitute a contract to supply sounds like either a clueless organisation that never paid a real web/SQL dev/have pushed a simple design too far or a cunning scheme to obtain temporary capital. I'm assuming the former, by the way. A real SQL/web dev could fix the problem in days/weeks assuming there isn't a culture of people helping themselves to stock without booking it out.