Have you ever wondered how your favorite online store manages to deliver your orders so quickly and accurately?
The secret lies in their ecommerce warehouse.
Ecommerce warehousing is more than just storing products—it’s a critical piece of the puzzle that helps businesses meet customer expectations with speed and precision. From the moment you click ‘buy’ to the package arriving at your doorstep, efficient warehousing plays a vital role.
In this blog post, we’ll explore what makes an ecommerce warehouse essential and why choosing the right one can make or break your online business.
What is an eCommerce Warehouse?
An eCommerce warehouse is simply defined as a large and enclosed space for storing goods prior to online sales, packaging, and distribution to customers.
Ecommerce warehouses are different from traditional warehouses in that eCommerce businesses deal with the requirement of specific space and storage, as well as the number of orders and fluctuations in demands. In other words, warehousing in eCommerce is much more demanding and complicated.
One funny thing is that from the get-go, many eCommerce warehouses are garages, living rooms, bedrooms, basements, etc. They can be literally any place where you can stock your inventory to the maximum storage.
However, as businesses grow, many more types of eCommerce warehouses rise to meet the growing demands.
7 Types of eCommerce Warehouses
There are various types of eCommerce warehouses available, and each of them has its own pros and cons. Below is a detailed guide on some of the most popular eCommerce warehouses currently in use.
1. Private Warehouses
This type of warehouse is typically owned by large businesses such as retailers, manufacturers, wholesalers, or distributors. Amazon, the world’s online retail giant, is now running such warehouses.
Private warehouses are often built to meet specific business requirements such as appropriate size, more amenities, better security, and other specific features that tolerate the local environment.
More often than not, they come with a huge cost, but long-term benefits make them a worthy strategic move for SMBs to consolidate their presence in a market.
2. Public warehouses
Public warehouses are owned by the government and are available for businesses to rent. In general, they are more affordable than private ones.
Public warehouses are also suitable for short-term storage, which is an ideal pick for small businesses and eCommerce startups.
The only problem with this type of eCommerce warehouse is its size, technology, and functionality.
3. Government warehouses
They are similar to public warehouses. However, the name speaks for itself: this type of warehouse is entirely owned and controlled by the government.
Sometimes they are for rent at an economical price. Higher security is also guaranteed.
In case the rental fee is not fully paid on time, the government has the right to sell the goods to make up for lost revenue.
4. Cooperative warehouses
Cooperative warehouses are essentially private warehouses with more than one owner. They belong to several businesses working together on a common sector or project.
Normally, businesses outside such a partnership can use the warehouse, but will not benefit from the reduced price that is shared among members of the co-op.
5. Consolidated warehouses
This is a place where small shipments from suppliers are collected, grouped and delivered to consumers. The perks include low pricing and suitability for eCommerce start-ups.
However, the destination of customers must be the same region, be it a city or any other random area.
6. Bonded warehouses
The good thing about bonded warehouses is that companies store their products in bonded warehouses before customs duties are paid. They only need to pay once the goods are delivered and withdrawn from the warehouse.
The name originates from the “bond” issued by the authority to certify that companies are using the warehouse to store their items, thereby preventing any financial loss. This type is an ideal choice for businesses involved in international trade.
7. Smart warehouses
This final category is probably the most desirable for any eCommerce business. A smart warehouse is technologically advanced, fully automated, and operated by AI.
Needless to say, it comes with higher efficiency, better productivity, and reduced errors. Machines such as robots and drones are employed to help with storage and fulfillment.
The downside, as you may guess, is the massive cost of construction and maintenance. Even after selecting the right type of eCommerce warehouse for your business, equipping it efficiently remains pivotal.
Streamlining operations and enhancing productivity necessitates implementing an essential e-commerce warehouse equipment checklist tailored to suit variable demands.
6 Benefits of E-commerce Warehousing
In the fast-paced world of online shopping, e-commerce warehousing plays a crucial role in ensuring that operations run smoothly and efficiently. These specialized warehouses offer several advantages that can significantly enhance business operations and customer satisfaction.
Here are some key benefits that these facilities provide.
1. Faster Shipping
E-commerce warehouses help get your products to customers quickly.
By having warehouses in strategic locations, products are closer to customers which means they get delivered faster and shipping costs are lower. Customers love getting their items quickly, so this helps increase their satisfaction.
2. Improved Inventory Management
These warehouses are specially designed to store and track inventory effectively.
This helps reduce mistakes, prevents situations where items are out of stock, and allows businesses to predict product demand better. Well-managed inventory keeps operations smooth and customers happy.
3. Scalability
One of the great things about e-commerce warehouses is their ability to handle changes in demand.
Whether your business grows or you need more space during busy times like holidays, these warehouses can easily adjust to your needs without requiring long-term commitments. This flexibility is crucial for growing businesses.
4. Cost Savings
Using e-commerce warehouses can actually save money in the long run.
Even though it costs to use these services, they eliminate the need for you to rent your own warehouse space, hire staff, and manage the logistics of shipping and handling products. These savings can add up and help your business’s bottom line.
5. Focus on Core Business
When you outsource warehousing and fulfillment, you free up a lot of your own time.
This allows you to focus more on the important parts of your business like developing new products, marketing, and expanding your customer base. It’s all about letting experts handle the logistics while you grow your business.
6. Expert Handling
The staff at these warehouses are professionals at what they do.
They use the latest technology and their expertise to make sure that all products are handled correctly. This reduces the chances of errors in shipping and handling, which can prevent the cost and hassle of returns.
Ecommerce Warehouse Management: Best Practices
Here are 4 recommended strategies to efficiently manage and get the most out of warehouse management.
1. Use an eCommerce warehouse management system (WMS)
This is essentially a tool to help you monitor your warehouse more thoroughly and comprehensively.
For instance, it gives you a closer look at your inventory, i.e. how much of this product is left or whether demands for that product are peaking, etc. These data assist in your decision-making process.
2. Try different picking systems to find the most suitable one
This strategy goes hand in hand with the previous one. As warehouse management systems vary, it’s best to test them out and see what works best for you.
Some of the prominent WMS software include Sortly, NetSuite WMS, and Fishbowl Inventory.
3. Integrate your online store
Online store integration facilitates smoother workflow, as customer order information is seamlessly transferred between your store and your warehouse.
At this point, we return to the above benefit of better order fulfillment. Link to your online store makes things even better than that!
4. Set inventory minimums/maximums for your warehouse
The final strategy has something to do with the benefit of efficient inventory management mentioned earlier.
Inventory minimums reduce the chance of your product being out of stock, while inventory maximums prevent all unnecessary capital. Either way, the profit is all yours!
The Relationship Between Ecommerce Warehousing and 3PL
To begin with, 3PL (Third-Party Logistics) is normally referred to as a partner or a service that provides assistance in managing merchants’ supply chain. They help businesses to focus more on their main competencies, thereby promoting growth and gaining better competitive edges in the market.
Outsourcing logistics to a 3PL provider can be a great way to step up your eCommerce supply chain, including the warehouses. They are expected to help with warehousing itself, inventory management, order fulfillment, and other relevant tasks.
“Do we, as eCommerce business owners, really need a 3PL provider?”, some may ask. The answer lies in the following 3 main benefits of outsourcing eCommerce warehousing to 3PL:
1. Higher proficiency for your eCommerce business: 3PL providers are often linked to both eCommerce platforms (Shopify, Magento, WooCommerce, etc.) and online marketplaces (Amazon, eBay, AliExpress, Walmart). Needless to say, such connections should serve as a real helping hand when it comes to, well, selling online.
2. Less stress: So you’ve come across this “less-stress” thing twice in this guide, but it is what it is. Tasks such as inventory management and order fulfillment are made even less burdensome as you have someone else take them off your plate. A good eCommerce warehouse management system? Cool. What about a 3PL provider? Even better!
3. More opportunities to grow your business: More efficient eCommerce supply chain means more revenue and of course, more room for the business to thrive. Things are as simple as that!
How to Choose The Right eCommerce Warehouse
Choosing the right e-commerce warehouse is crucial for managing your online business effectively. Here are some important factors to consider when selecting a warehouse:
1. Space availability: This depends on your quantity of products, so make sure to find a warehouse with sufficient storage.
2. Types of stored inventory: Different types of stock require different ways to properly store them.
3. Budget: Don’t splash out on an eCommerce warehouse if your corporate budget does not allow it. Remember you have other business sectors to spend on!
4. Local climate: For many kinds of products, the local climate can make or break their quantity. For instance, an F&B distributor wouldn’t invest in a warehouse built in an extreme climate.
5. Distance to customers/suppliers: The cost of distribution may well blow your budget if your warehouse is miles away from your buyers.
6. Security: Losing products prior to shipment would be a nightmare for any business. Make sure to scan the surrounding area and take steps to enhance security for your warehouse.
7. Customization needs: These needs can be product rearrangement, layout modification, amenities equipment, or anything that meets your business requirements.
FAQ
What is ecommerce warehousing?
E-commerce warehousing involves storing and managing goods sold online. It facilitates inventory management, order fulfillment, and shipping operations, optimizing the delivery process to enhance customer satisfaction and operational efficiency. These warehouses are designed to handle large product volumes and accommodate varying demand levels.
How do I set up an ecommerce warehouse?
To set up an e-commerce warehouse, select a strategic location near key markets, design an efficient layout for storage and picking, invest in technology for inventory management, and implement robust security measures. Ensure the facility can scale with fluctuating demand and operational needs.
Do online stores have warehouses?
Many online stores operate with warehouses to manage inventory and fulfill orders efficiently. These facilities enable the storage, organization, and dispatch of products directly to customers, supporting the operational backbone of e-commerce businesses by enhancing delivery speed and service quality.
