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eCommerce Warehousing 101: Types, Benefits and More
As more people open their own eCommerce businesses and as retailers expand their product offerings, the eCommerce industry is rapidly growing.
Wix eCommerce stores generated $5.4 billion in online transactions in 2020 and experienced 114% YoY growth in sales revenue.
This means that now is the best time to launch your eCommerce business. It may appear that all you have to do is build a website and wait for the sales to start rolling in. It’s actually a lot more. It’s important to understand the eCommerce business model and to apply these strategies when you create your online shop.
It is crucial to know where and how to store your stock. This is where eCommerce warehousing comes in and eCommerce warehouse management comes in. This article will explain everything you need to know about this important technique, including its benefits and the various types of eCommerce warehouses.
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What’s eCommerce warehousing?
eCommerce warehousing is the storage of goods for sale online. The management of an eCommerce warehouse includes all processes that are involved in the operation of such a warehouse.
- Management of warehouse employees
- Secure products
- Tracking equipment
- Inventory management. This includes both raw materials as well as finished goods. (Can include a process like FIFO.
- All processes are monitored from the moment stock arrives at the warehouse to the time it is shipped out to the customer
- Establishing and maintaining relationships with shipping companies
- Forecasting the demand is key to avoiding stock shortages or stock overstock
- Safety precautions to prevent accidents and protect employees, equipment, and inventories
You may need to outsource fulfillment when your business is experiencing difficulty keeping up with order volume. Many third-party logistics providers ( 3PL) can assist with fulfillment of your eCommerce orders. This Wix eCommerce guide to fulfillment services will assist you in identifying when outsourcing is necessary and which companies are compatible with your online store.
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Types of eCommerce warehouses
There are no two warehouses the same. For major retailers like Walmart, what works for a startup or traditional brick-and mortar store will not work for them. These are the major types of eCommerce warehouses, and all you need to know:
- Public warehouses
- Private storage
- Cooperative warehouses
- Government warehouses
- Fulfillment centers
- Smart warehouses
- Bonded storage
- Consolidated warehouses
01. Public warehouses
A government entity owns a public warehouse. You can use the space for your personal or business purposes.
These warehouses are often the best option for small businesses to store their goods for a short period of time. These warehouses don’t have the latest technology.
02. Private storage
Private warehouses are often owned by manufacturers, wholesalers, or distributors. Amazon and other major retailers have private warehouses.
Although private warehouses are more expensive than public ones, they can be an attractive option for small eCommerce businesses. These warehouses are particularly important if your business needs to be present in a specific market.
03. Cooperative warehouses
Like wineries or farmers, cooperatives own and operate cooperative warehouses. Both members of the co-op and non-members can store goods. However, co-op members have access to lower rates.
04. Government warehouses
A government warehouse is an area that a government body controls and directly owns. These warehouses are affordable for businesses. The government can recoup lost revenue if a business is unable to pay its rent payments by selling its inventory.
05. Fulfillment centers
These storage spaces are also known as distribution centres. They are designed to meet specific needs. Fulfillment centers are often temporary because items change rapidly through the supply chain. A fulfillment center receives large quantities of inventory and distributes them to retailers and resellers within days.
Perishable items are usually distributed within 24 hours. Distribution centers can be leased at a reasonable rate. They can be expensive depending on the products they store. Wix eCommerce is one of many all-in-one eCommerce platforms that allows users to connect their stores with top eCommerce fulfilment companies such as ShipBob, ShipStation, and Shippo .
06. Smart warehouses
Smart warehouses use AI automation to manage storage, management, and fulfillment. Automation goes beyond inventory management software and includes robots and drones that pick up and pack orders for shipment. Robots and drones can also transport, store and weigh goods. Smart warehouses are used by major eCommerce companies such as Amazon and Alibaba to reduce errors and speed up order fulfillment.
07. Bonded storage
Bonded warehouses are able to store imported goods until a company is required pay customs duties. The government offers warehouse bonds that allow companies to rent space. This ensures that they don’t lose their money when their products are released.
A company that stores goods in a secured warehouse is not required to pay customs duties until they are released. You can also store restricted items in a bond warehouse until all paperwork is completed. This space can be used by companies to store items either for a short or long time.
These warehouses make the best choice for importers because they allow them to store their items duty-free until someone buys them. These warehouses are well-known for their safety and security. They’re a great option for eCommerce companies that do cross border trading.
08. Consolidated warehouses
Consolidated warehouses combine small shipments from different suppliers to create larger shipments that are then distributed to buyers. This is not a good option for eCommerce sellers as all shipments must be within the same geographic area.
Selecting an eCommerce Warehouse
Once you are familiar with the various types of eCommerce warehouses available, it is time to decide which one is right for your company. These are some things to keep in mind:
- Particular business requirements
- Supply chain
- Target market
No matter which option you choose to follow, your decision will not be irreversible. You can always change the type of business you choose as your company grows and develops.
Best practices for eCommerce Warehouse Management
There are best practices that you need to follow, regardless of the type of eCommerce warehouse you choose. Poor eCommerce warehouse management can lead to delays in orders and waste of money. However, proper warehouse management can improve customer experience and ultimately increase revenue. These are some tips to help you create a warehouse management strategy that is effective.
- Use an eCommerce warehouse management software (WMS).
- Integrate your eCommerce shop with other tools
- You can store your inventory at multiple distribution centers
- Minimum inventory
- Test multiple picking systems
01. Use an eCommerce warehouse management software (WMS).
This software is used to monitor and control warehouse operations day-to-day. This software includes:
- Real-time information about product availability and stock levels
- Management of the eCommerce Supply Chain
- Forecasting inventory
- Streamlining order fulfillment
02. Integrate your eCommerce shop with other tools
You can streamline your workflow by integrating your store with your WMS or other tools. Automate tasks like:
- Customers receive shipment notifications and order updates
- Automated ordering of more inventory before the items run out
- Managing inventory across multiple sales channels
03. You can store your inventory at multiple distribution centers
You can distribute your products to as many warehouses across the country as you like so customers get their orders from the nearest one. This will ensure that customers receive their products quicker and provides a better customer experience. It also reduces eCommerce shipping cost.
04. Minimum inventory
Balance in your inventory is one of the most difficult tasks in commerce. It’s difficult to determine how much inventory you will need when you are just starting out.
You don’t want inventory that is too large and you can’t sell it. You will need to purchase storage space in order to store the inventory. This can increase your inventory carrying cost.
However, it is important to not have too much inventory. You could run out of stock and lose sales. Customers may become upset if this happens often. They might not want to return for another chance.
It is useful to establish inventory minimums. The WMS will place an additional order when inventory reaches a certain level. By doing this, inventory will be available for customers when the last stock is sold.
There is always the possibility that inventory may sell quicker than expected due to changing demand. This precaution protects you from long-term out of stock issues.
05. Test multiple picking systems
There will be plenty of choices to choose from. You might be able to get only a few orders per week by using a one at a time approach. This is not practical and efficient for larger companies or operations. Advanced tools allow for batch-picking and auto-generated picking list generation.
These operational features are available as standard for direct-to-consumer eCommerce companies. There are many reliable 3PL fulfilment centres. These fulfilment and warehouse companies can easily be integrated with your chosen eCommerce platform. However, it is a good idea to do your research to ensure you find the best one for your business.
You can test out different systems to determine which one is best for you and your order volume. You should choose something that is flexible and can scale with your company.
The benefits of eCommerce warehousing
While you are trying to grow your revenue, it might not be feasible to invest in warehousing to support your eCommerce business. These resources can be a boon once you get to a certain point.
Deliver products faster to your customers
Today’s online shoppers expect fast delivery thanks to the Amazon Prime Effect. Even if they shop with other merchants, they don’t always want to pay shipping.
Wix stores offering free shipping have a higher order value (18%)
It is unreasonable to assume that a small eCommerce company would be able offer the same speed and free shipping as Amazon. However, many customers don’t notice that you aren’t a large operation.
Your customers will get their products quicker if you leverage the power of warehouses. Orders are processed in batches and shipped from the nearest distribution center. You can also take advantage of bulk shipping discounts that make eCommerce shipping more affordable.
It is tedious to pack up each order and ship them individually. You can save time and hassle by outsourcing your eCommerce warehousing. You only need to ship your inventory to the warehouses.
It may seem like a good idea to keep stacks of boxes in your garage. However, it is easy to lose track of what is where and how many orders you pack. If you have limited space, organizing everything can be difficult and stressful.
You will have better information about the inventory status. Also, you are less likely to lose items. You’ll also have a better understanding about your inventory turnover rates so that you can reorder whenever you need.
eCommerce warehousing doesn’t only involve the storage of your inventory. It involves a variety of packaging options, shipping, stock management, re-ordering, and many other things. There is so much to do. You can now focus on the other aspects of your business like customer service and marketing by transferring it to an eCommerce warehouse management company.
You’ll have many problems running your business if you don’t use eCommerce warehousing.
- You will eventually outgrow your storage space unless you build another garage or buy another storage shed.
- At some point, inventory will be lost.
- It is possible to ship incorrect inventory to customers. This could damage your reputation and make it difficult for a customer to return.
- Stock-outs and excess inventory can be a problem if you don’t know your top and worst-selling products.
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What should you look for in an eCommerce warehouse?
Quality warehouses can be used for more than just storage. When choosing a provider, consider:
- Safety and security for your inventory as well as your employees
- Staff that is well-trained
- Accessibility and proximity to the market
- A well-designed interior will provide adequate storage space.
- Software, appliances and equipment in the latest versions
- Follow the most recent recommendations for emergency protocols
- Highly organised order picking and receiving processes
- Quality checks
- Excellent customer service and prompt delivery
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