There’s a big question when it comes to running an eCommerce business: Where do you put all your stuff?
The answer to this question lies in eCommerce warehousing, and depending on where you are in your eCommerce journey, your warehousing needs and best options can be very different from each other.
In this post we’ll go over different ways to warehouse your eCommerce products, and when each of those ways makes sense for each stage of your business growth.
What is Ecommerce Warehousing?
Ecommerce warehousing is storing of your store’s products and can sometimes also involve any logistics there within, including (but not limited to) receiving product, sending out shipments, picking, packing, processing orders, and any activity that takes place in a warehouse.
For eCommerce warehousing, you obviously need some form of warehouse.
But what type of warehouse is best for your eCommerce business as it currently stands?
Let’s go over some options for warehousing and when you should utilize them
Warehousing Option 1: House Your Products Yourself
When you’re a very early stage eCommerce business, one popular option is to simply keep your products on hand at your place of residence.
You don’t have to pay anyone to check your products, label them, process them, anything when you are the one manually doing that work.
Indeed, many eCommerce companies get their start sending products out from their garage to save on the typical costs of running an online store.
It’s a great strategy at first, but a lot of sellers quickly outgrow their space and have to start thinking of other places to house their products.
This eventually means renting a larger storage space to continue managing your products, or sending your products to a third party to store and process items.
If you choose to rent warehouse space, you can retain that control over your products, and that might be the option you prefer, but it comes with its own challenges, and over time you will have to dedicate more resources to warehousing and processing orders rather than taking the easy option of having a 3rd party company handle it.
Benefits of warehousing products yourself
- Lowest cost option when starting. You are already paying for where you live, so having some product share your space can be an essentially free warehousing option.
- At large scale, having your own warehouse will ultimately cost less than having services and storage done by a third party.
- You have more control over your inventory, which increases the flexibility of what you can do with your products.
Drawbacks of warehousing products yourself
- If you sell on Amazon, your location might not be near a big FBA receiving warehouse, and your products will have to take long journeys to reach Amazon, across states and stretching into weeks to have products go in stock.
- If you decide to get a separate warehouse for storage and operations, you’ll be amazed at how little vacancy existing warehouses for rent have, how difficult it is to get a lease for warehouse space, and how expensive rent can be.
- The logistics of picking, packing, and shipping out orders becomes a big part of your business, which takes away from the finite amount of time you have to work on the business.
- Hiring employees might be a necessity in the future. If you wanted to keep your business a simple one-person show, warehousing everything yourself indefinitely might not be the way to go.
- If you’re not utilizing your full, or near full, warehouse space, then you’re paying unnecessary amounts of money for underutilized warehouse square footage.
Summary of Warehousing Yourself
Ultimately, if you want to always be close to your product, understand what that means for the type of business you want to be running. There
There are a lot of solutions for eCommerce sellers to hand off difficult aspects of their business for another party to handle, and warehousing has a lot of options for sellers.
We talked about how warehousing your products is a low cost option, but is it that much lower than utilizing a modern 3PL (third party logistics company)?
Warehousing Option 2: Third Party Logistics
3PL companies have come a long way in helping smaller eCommerce companies that are getting started or in early growth.
Nowadays, services offered by 3PL companies are very granular, allowing a custom solution to businesses of all sizes.
They can store products down to the pallet level, ship out orders coming in from different online selling platforms, and even forward product over to fulfillment warehouses like Amazon FBA.
Since using a 3PL can be cost effective, even when starting your business, you can run an entire physical product based company completely from your computer. Talk about convenience!
Benefits of using a 3PL for Warehousing
- Huge convenience of not having to physically manage products.
- Most 3PL companies will charge only for the storage space you take in their warehouse, making it simple to manage storage costs and grow effectively.
- You never have to deal with physically processing your products, which can be a huge time commitment.
- No need to hire employees as your business grows, your 3PL can easily handle your growing product catalog.
- If your 3PL is close to your port and a popular Amazon FBA warehouse, forwarding pallets to Amazon will be fast and efficient.
Drawbacks of using a 3PL for warehousing
- Storage fees will likely be higher than if you stored products yourself.
- Service fees provided by a 3PL can be expensive.
- While a 3PL can do things fast, if you need something really fast, you still have to wait your turn to get anything done.
- It can be hard to find a 3PL that hits all the needs your business has at a reasonable price.
Summary of a using a 3PL for Warehousing
A 3PL is extremely convenient while simultaneously relieving you of a really thick layer of complexity when running an eCommerce business, which is extremely valuable.
On the other hand, using these services can come at a big cost, so you have to make sure that using a 3PL won’t come at the expense of all your profits.
As always, monitor your costs closely and if you want to focus on scaling and growing your product business, rather than managing the logistics of your products, a 3PL is a great option.
Warehousing Option 3: Sending Product Directly from Manufacturer to Fulfillment Warehouses
This option mostly applies only to Amazon FBA sellers, but it is likely to be an option for Walmart Marketplace sellers in the future.
If you don’t want to deal with any warehousing at all, you can send your products directly from your manufacturer’s factory straight into an Amazon FBA Fulfillment Center.
While shipping your product directly from the factory to Amazon is very similar to shipping it to a 3PL, there are some slight differences that make it an option of its own.
Benefits of Shipping Directly to Amazon
- Once your product is at Amazon and you no longer have to coordinate with anyone about your products.
- Less potential for fees of different types to occur. For example, no LTL fees or carton forwarding fees.
Drawbacks of Shipping Directly to Amazon
- Amazon’s holiday season storage rates are absolutely insane.
- Individual product limits might make it difficult to pull off, but
- Your inventory score (something Amazon cares a lot about) will probably be lower if you use this method.
Summary of Sending Directly to Amazon
While sending straight to Amazon is technically warehousing since it’s going to their warehouse, it definitely cuts out a lot of the logistics involved with managing eCommerce products through a 3PL or storing everything yourself.
In the end, sending straight to Amazon is not for everyone, but those that can make it work should definitely consider getting all of your “warehousing” done by Amazon themselves.
At the end of the day, you have to decide what level of control you want for your warehousing, what you want to spend time doing on your business, and if you want to introduce complexity through hiring employees vs using third parties for everything.
When you answer those questions, you will know how you want to run your business and what to focus on for growth.
There’s no issue with switching from one way to store your products to another. You can start in your garage and shift over to a 3PL when you do your first large order, or go full Amazon and start sending products directly from overseas into their fulfillment centers. As with anything in business, you’re in control!