When you first daydreamed about starting an eCommerce business, you probably didn’t imagine running said business out of a guest bedroom, packed floor-to-ceiling with your product.
While inventory storage isn’t the most glamorous business topic, it’s no overstatement to say that effectively storing your product can impact both your profitability and efficiency.
- Pay too much for storage, and your overhead will cut into profits
- Pay too little, and you may end up without enough space to properly manage and fulfill orders, impacting efficiency.
When it comes to storage for an eCommerce business, you have a few options. But what method you should choose depends on a variety of factors, such as:
- The amount of product you have/the size of your business
- The type of product
- How you’re fulfilling orders (i.e., yourself or through a fulfillment center– more on that later)
Below, we’ll be diving deep into the two major choices for eCommerce storage. Then, we’ll talk about tips for choosing the right storage option and making the most of that storage space.
E-Commerce Warehousing vs. Renting a Storage Unit
Whether you’re a brand new eCommerce business or a growing brand, there are essentially two major categories of storage space for eCommerce businesses:
- Warehousing
- Storage units
Within each, you do have a few sub-options, though. Let’s break down what those options are and why you might choose one storage option vs. another.
The Benefits of Self-Storage Units
If you’re just starting out, chances are you’re storing your product in your home, whether in an extra room, garage, or right in your living room (true story).
This is the beginning for most eCommerce businesses. After all, one of the major draws of starting an eCommerce business is that you don’t need to pay rent on a brick-and-mortar location.
But once you begin to grow, you may find yourself quickly running out of storage space to the point where it inhibits your ability to locate products and quickly pack orders or simply enjoy yourself in your home– or both.
This is when you’ll want to consider a self-storage unit.
You have two main options here:
- Self-storage facility
- Peer-to-peer storage
Self-storage facilities generally offer easy access and are relatively inexpensive. Peer-to-peer inventory storage, available through marketplaces like Neighbor.com, offers either equal or slightly greater convenience at a similar cost.
Here are some of the benefits of using a self-storage unit over a warehouse space.
Benefit #1: Great Low-Cost Storage
While renting a warehouse can cost thousands of dollars (and warehouse space often hundreds), a self-storage unit typically costs between $20-100, depending on the size of the unit. (Note: Car storage will be a tad more expensive. Check out the average costs of car storage in these 11 major cities).
This makes it the perfect low-cost way to fix your product storage issues without spending much, making it the ideal solution in the early growth stages.
Benefit #2: Convenient access
The problem with renting warehouse space is that you’re typically renting through a business owner who isn’t always stationed at their place of business.
Storage unit facilities, however, typically stay open late (some even 24/7) and make it easy to get in and out on your own.
In addition to this, due to their popularity, there are self-storage facilities just about everywhere, which means you’ll typically be able to find one close to home (which often isn’t the case for warehouses).
The Benefits of Warehousing
Now, let’s talk about why you might choose to go with a warehouse.
But before we touch on the benefits, let’s talk about your warehouse storage options:
- Warehouse rental: Exactly what it sounds like, renting a warehouse or warehouse space on a monthly basis.
- Fulfillment center: Third-party logistics providers will not only store your product but handle packing and shipping.
By default, a fulfillment center is what you’re using for any products you’re dropshipping.
However, a fulfillment center is also a decent option if you’re a growing eCommerce brand that wants to speed up its shipping time.
If you’re located on the West Coast (and ship from the West Coast), having a fulfillment center on the East Coast can help you service your East Coast customers faster, increasing customer satisfaction.
However, renting a fulfillment center translates to added costs and the added work of having to stock and ship that product in advance so that the fulfillment center has it ready.
Here are some of the benefits of warehousing:
Benefit #1: More Space Than a Self-Storage Unit
Whether you’re renting a piece of a warehouse through a peer-to-peer marketplace like Neighbor or an entire warehouse, you’re typically going to have access to more space than a simple business storage unit.
If your eCommerce business is growing from startup to mid-sized, there will be a point eventually where using your home is just not feasible anymore.
Benefit #2: More Efficient Shipping and Fulfillment
If you rent a segment of a warehouse space, the experience will be very similar to renting a storage unit. However, if you’re renting an entire warehouse to run your business out of, that’s a different story.
Business districts, where you typically find warehouses, have convenient docks or loading areas for shipping pickups. Local shipping companies likely already make circuits every business day where your warehouse would be.
No more dropping off at the nearby UPS store or crowding everything near your front door for your daily pick up.
In addition to this, you’ll have the space you need to set up a true fulfillment center.
You may have something now that works for you, but chances are, you’re cramped for space and not running optimally. With enough space, you can implement a process that makes it easier to do everything from pick to pack and ship.
Read more to learn what to consider if you’re thinking about renting a warehouse: Renting a Warehouse? Cost And Other Considerations.
Do You Need a Warehouse for eCommerce?
The simpler answer is: no, you don’t need a warehouse to run an eCommerce business. At least, not in the early stages.
If you’re just starting out and you’re running out of space in your garage (or wherever you store your product in your family home), you can always rent a small bit of storage space and work your way up as you grow.
A storage unit the size of a typical full or half-bedroom costs significantly less than a warehouse. Right now, that may be all the space you really need.
By renting a storage unit, you can get the space you need now without it affecting your bottom line. After all, you don’t want to rush into investing in a warehouse until you’re in a position to comfortably pay for one and you absolutely need the space.
Monthly warehouse rentals can easily go into the thousands depending on the size of the facility. Before you fork out the money on an additional rent payment, consider the sizable monthly investment this space will involve.
4 eCommerce Storage Space Tips to Maximize Profitability and Efficiency
Now, let’s talk about some tips for making the most of the storage you invest in.
Whether that’s a small storage unit to start or you’re expanding to a warehouse, you’ll find tips for making the most of your space.
1. Use Inventory Management Software
It’s not enough to get more space. You’ll also need to organize that space effectively.
Before your business gets so big that you need to expand and relocate some of your inventory into a storage unit, you’ll want to make sure you’re tracking every product on your shelves using inventory management software.
Inventory management software allows your eCommerce businesses to do quite a few useful things. Such as:
- Track all your inventory so you know when you’re low in stock
- Create purchase orders and invoices
- Run valuable reports that offer insights into what is selling and what isn’t
Overall, it allows you to keep a firm handle on, and a complete picture of, your inventory.
This becomes especially important if you’re juggling inventory in multiple locations–whether you’re just starting out and storing in a spare room and/or storage unit OR housing your inventory in multiple warehouses.
2. Adopt a First-In, First-Out Approach to Minimize Wasting Product
This is a tip that’s specifically useful if your product has an expiration date of any kind (or can simply warp or spoil if storage conditions aren’t perfect).
A first-in, first-out approach is a simple principle that ensures you never ship bad goods.
The basic idea is that the oldest product gets shipped first. When new product comes in, it should be tagged with a date–both physically and in your inventory software.
That date doubles as a priority level, with the oldest date taking priority over all other inventory of the same type or SKU number.
By managing your product in this way, you’re able to ensure that you never ship expired or bad goods to a customer or need to throw out inventory (resulting in lost revenue).
3. Open New Warehouses in Your High-Activity Areas to Minimize Shipping Times and Costs
As you begin to grow in size, it becomes more important to expand to multiple fulfillment centers.
This not only ensures that your main warehouse doesn’t become bogged down with too many orders but also allows you to offer a better customer experience through faster shipping times.
Take a look at the locations you ship to the most. Now, cross-reference that set of locations with the furthest part of the location from you.
In and around these areas are where you should consider opening new fulfillment centers, whether you do it yourself or hire a third-party logistics company.
For example, if you’re located in Portland, Oregon, setting up a warehouse in Texas or on the East Coast could be perfect.
That way, you can offer both your western and eastern U.S. customers a 1-2-day ship time, offering an experience more in line with what customers expect (thanks, Amazon).
This makes for happier customers who are more likely to shop with you again, which can pay big dividends in the long run.
4. Outsource With a Third-Party Fulfillment Center
Third-party logistics or fulfillment centers are a great option for mid-sized eCommerce brands.
Specifically, they’re worth considering if you:
- Have a central warehouse and are looking to expand
- But don’t yet have the funds or resources to purchase (or rent), staff, and manage a whole second fulfillment center
With a third-party fulfillment center, you get both the warehouse space and a team that will pick, pack, and ship your orders.
You give up some measure of control and need to pay for their services, but the cost is similar to when you first scaled your business storage.
Think of a third-party fulfillment center as the storage unit of mid-sized eCommerce growth: you get many of the benefits of opening up an entirely new warehouse without many of the costs and hassle.
That’s mostly because you don’t need to pay the cost of renting or purchasing the warehouse, which can easily save you tens of thousands of dollars each year.
Take the Next Step In Your eCommerce Journey
Growing eCommerce businesses takes a multifaceted skill set and lots of hard work.
Don’t let storage be the reason your business doesn’t perform at its best this year.
If you’re busting at the seams, or simply feel like your current amount of space is leading to inefficiency, consider sizing up.
Whether that’s a simple bit of extra storage space or a whole new warehouse or fulfillment center, making the most of where you store and ship your products is key.
If you’re a budding eCommerce store or emerging brand that is beginning to outgrow your current warehouse, consider renting additional storage to solve your space issue (without breaking the business bank account).
With Neighbor’s peer-to-peer storage marketplace, you can find a host of conveniently located storage options and warehouses to store your products.
Discover affordable self-storage options in your area with Neighbor.
