The Definitive Guide to Finding Your Ideal E-Commerce Warehouse

Third-party logistics (3PL) providers can be useful partners in scaling your e-commerce business, but they have their limits. Added costs, lack of control, unfavorable terms of service, and the potential for unexpected policy changes can all impact the effectiveness and profitability of your brand over time. For these reasons, many omnichannel e-commerce businesses opt to take the reins of their own fulfillment by establishing and operating their own warehouses.

Much of the success of an e-commerce warehouse comes down to effective planning.

If done well, investing in a physical space for your stock, inventory, and order processing can save you substantial time, money, and frustration compared to third-party options. As such, setting up your own warehouse can be a key ingredient in an omnichannel growth strategy.

To get your planning started, we have compiled some of the most important details you need to be considering from the outset.

Making the right decision of where your warehouse(s) should be located means considering the answers to several questions.

The proximity of your home base to your warehouse has several implications for both your bottom line and your ability to manage your
inventory.

The closer your warehouse is to your headquarters, the easier it is to supervise and conduct on-site business without requiring extensive travel.

Similarly, the shorter the distance between your headquarters and your warehouse, the quicker and more cost effective it is to move physical goods between locations as well.

Shorten fulfillment times and improve customer satisfaction by choosing warehouse locations near to your most popular shipping destinations.

In some cases, a centralized location may be best. In others, choosing a location on the other side of the country can give your brand improved bi-coastal fulfillment capabilities. Taken further, an established warehouse overseas can be a valuable asset in localizing your brand in international destinations.

Depending on what you ship and who handles your shipping, it may be worth considering where your freight suppliers’ hubs are located when choosing your own optimal warehouse location.

Shortening these distances can make moving inventory a faster and less-expensive proposition.

In all likelihood, you may not be able to find one location that suits every one of the aforementioned needs perfectly, but the optimal destination should give you the best possible balance of logistical efficiency and cost-effectiveness.

The size of your ideal e-commerce warehouse should be determined based on a combination of your short-term needs and your long-term growth goals.

Just as you need to consider the space needed to house your stock, don’t ignore the space necessary to move and process inventory safely and efficiently as it enters and leaves your warehouse. Scalable order-processing tools and warehouse management systems (WMS) can give you the flexibility to configure the movement of goods and information throughout your warehouse, but you need to be sure to account for the room and technological infrastructure your warehouse team will need to get the most out of them.

Large-scale investments like a warehouse should always be made with an eye toward the future. Scalability must be a priority for any omnichannel e-commerce brand. The ideal warehouse satisfies your immediate needs, but leaves enough room to grow so that you won’t need to be searching for a new location the moment business picks up.

For all their benefits, warehouses can become a drain on your resources and actually hamper your productivity if you overlook certain potential pitfalls.

Some of the most common mistakes e-commerce brands make when opting to open their own warehouses include:

Each of the aforementioned considerations come with their own cost ranges that must be accounted for before settling on a final warehouse location.

• Real estate prices vary by region. On the macro-level, warehouses will cost significantly different prices across different foreign and domestic regions. As demand continues to rise, so will prices. On the micro-level, locations in neighboring municipalities or even in the same cities can range in price and tax-rates depending on market and neighborhood-level conditions.

• Set-up costs – A warehouse is typically a blank slate. You need to budget for the time and expenses associated with configuring a warehouse so that it is optimized for your e-commerce workflows and storage requirements. This means accounting for physical purchases like racks and forklifts, as well as technological considerations like your power, networking, safety, and security needs.
• Labor – A warehouse won’t run itself. Labor costs and regulations vary by region and can have as much of an impact on your bottom line as the price of the warehouse itself.
• Relocation expenses – Finding the perfect warehouse location can lead to stability and scalability that will foster long-term e-commerce brand growth. However, having to move to a new warehouse at the end of a lease or when you outgrow the space can be costly.

Just like any other real estate transaction, you need to be aware of the market to be sure that you are making a sound investment.

One of the goals of investing in your own warehousing is to save money and take more control over your e-commerce brand’s inventory and fulfillment needs. If you are overpaying for your space or settling for too small of a location, you may not be able to fully reap those benefits.

Even if a particular warehouse checks all of your boxes, there may be considerations that you are missing. Don’t ignore environmental factors like flood zones, fire risks, storm potential, or earthquakes that could lead to unexpected damages or loss. Furthermore, these factors – as well as others (like crime, HVAC equipment, building age, proximity to toxic materials, etc.) – can drive up your insurance costs, cutting into the overall profitability of your warehouse.