Ecommerce Warehousing: Benefits, Types of Ecommerce Warehouses, and Best Practices

While warehouses date back to second century BC Rome (to store grain, olive oil, wine, food, clothing, and marble), the concept of an ecommerce warehouse is a newer one.

Many ecommerce businesses rely on efficient warehousing to support future growth. But each time your business hits a new inflection point, ecommerce warehousing becomes much more complex. During stages of growth, you may experience any of the following moments:

  • Outgrow your first storage space
  • Have too much safety stock that needs to be stored in an overflow location
  • Choose to purchase land or lease a warehouse
  • Invest in fulfillment infrastructure including staff, technology, certifications, shipping supplies, forklifts, conveyors, and other equipment for the ecommerce warehouse
  • Introduce new sales channels and need multichannel inventory management capabilities
  • Open or expand into a second fulfillment center to reduce transit times and shipping costs
  • Scale international fulfillment capabilities and become a global brand

There is no single path brands take, and there are a lot of variables that go into identifying the right ecommerce warehousing solution for you — and finding one that won’t need to be replaced within months (or even years).

To ensure that your business benefits from ecommerce warehousing, it’s important to implement best practices to optimize your supply chain, whether you keep it in-house or work with third-party logistics companies (3PLs) as needed.

In this article, we will examine the state of ecommerce warehousing and help you determine the ecommerce warehouse that is best suited for your business.

What is ecommerce warehousing?

Ecommerce warehousing refers to the storage of physical goods that are sold online. Taking place in an ecommerce warehouse or fulfillment center, common operations include:

Types of ecommerce warehouses

There are a variety of ecommerce warehouse options that suit different businesses’ needs. The best ecommerce warehouses not only have the amenities and expertise to provide the fulfillment services needed but also enable brands to store inventory in strategic locations that are physically near their customer base for the quickest and most cost-efficient delivery.

Let’s take a look at some of the more popular ecommerce warehouse types and when they are useful.

Warehousing from home

Many ecommerce businesses start out by storing ecommerce inventory at home (in their living room, basement, garage, office, etc.). This makes sense if your business has a small order volume. If you transform your home into a makeshift ecommerce warehouse, you won’t incur storage charges (though your house may fill up very quickly).

“In 2017, we had a breakout year. All I did was eat, sleep, and pack orders. We were operating out of my garage, which was filled exclusively with inventory. I bought racks and organized all of the products. My garage was at maximum capacity — we couldn’t even fit another person in there. I knew I had to make a transition in order to scale and find a 3PL partner. I kept hearing very good things about ShipBob and went with them.”

Noel Churchill, Owner and CEO of Rainbow OPTX

Fulfillment centers or distribution centers

More functional than a traditional warehouse, a fulfillment center or distribution center is an ecommerce warehouse designed to receive and store your inventory and pick, pack, and ship your orders in a timely manner.

The most common type of fulfillment centers used amongst ecommerce businesses are outsourcing fulfillment to a 3PL or utilizing Amazon for FBA. These professional fulfillment services handle order fulfillment on your behalf.

“It’s a pain to pick, pack, print labels, and manage storage. It would be a huge stress for us to do it ourselves, but the fact that ShipBob takes care of it all, both the savings in costs and time, is invaluable to our business.”

Founder of Ombraz Sunglasses

Temperature-controlled warehouses

For businesses with temperature-sensitive products, these warehouses offer a regulated environment that can either be cool or warm, depending on your product’s needs. While a temperature-controlled warehouse doesn’t necessarily replace refrigeration or freezer services, products like chocolates and cosmetics can benefit from the temperature and/or climate control regulation.

On-demand warehousing solutions

On-demand warehousing allows businesses to rent available storage space for short periods at a time. Most of these solutions are provided by technology companies that contract warehouses with excess, shared warehouse space to store your inventory.

This model can be good for seasonal sales or pop-up events. But because they don’t handle any order fulfillment services themselves, on-demand warehousing is kind of like outsourcing fulfillment to a company that outsources it to others.

“The [on-demand warehousing] technology company was unable to properly communicate amongst itself, both in regards to technology and people. We had to rely on a game of telephone and someone else to do everything for us. Because of a lack of ownership of the entire fulfillment stack, it’s difficult to rectify, unlike with ShipBob who owns the entire stack: inventory and order management system, warehouse management system, and their ecommerce warehouses.”

Gerard Ecker, Founder & CEO of Ocean & Co.

Dropshipping

Dropshipping refers to when the product’s manufacturer controls the entire supply chain, including producing, storing, and shipping items. When a customer places an order online, the manufacturer ships the item directly from their factory to the consumer, so the merchant never handles inventory.

Since most dropshipping arrangements are done overseas, transit times are notoriously long. While this model can help prove out a business concept, the merchant has no inventory control or oversight of the customer experience.

“When we first got started, we were dropshipping. It was nice because we had no money tied up in inventory, but we also had no quality control. With no control over the customer experience and very poor shipping times, we quickly realized dropshipping was not a long-term solution. We had to move to a professional fulfillment company. To date, ShipBob has fulfilled over 10,000 shipments per month for us.”

Gerard Ecker, Founder & CEO of Ocean & Co.

Which ecommerce warehouse is right for my business?

The answer to this question depends on a number of factors, such as the size of your business, your available capital, and the resources you can dedicate to your ecommerce logistics strategy. If you have ecommerce warehouse space that caters to your inventory needs and complements your order management process, and only you can drive the customer experience you want to orchestrate, then managing your own ecommerce warehouse should suffice.

However, if you are a growing business looking to scale fast, then it’s probably time to consider using a 3PL’s fulfillment center. There’s a reason that huge companies like Amazon and Walmart make extensive use of distribution centers to improve inventory management and streamline fulfillment.

The good news is you can leverage a 3PL’s ecommerce warehouses that makes it easy for small to mid-sized brands to offer the same service level.

“We see outsourcing fulfillment as a cost-savings and believe it will save you money in the long run. 3PLs negotiate rates, give you back all the time you’d spend stuffing mailers, and reduce the errors you’d make. We looked into opening our own warehouses and hiring employees, but couldn’t come close with what 3PLs charge for picking, packing, and shipping. We’d also be worried about scheduling fulfillment shifts, ordering boxes and shipping labels, and dealing with the extra headaches of running logistics. You should spend time doing what you do best, and fulfillment is an easy task to take off your plate.”

Gerard Ecker, Founder & CEO of Ocean & Co.

3 benefits of using an external ecommerce warehouse

Using an external ecommerce warehouse to store your inventory can be highly beneficial. Partnering with an established 3PL like ShipBob provides ecommerce sellers access to a number of external ecommerce warehouses to choose from. These state-of-the-art fulfillment centers can be used to reduce shipping costs and speed up delivery times (e.g., 2-day shipping).

Here are a few reasons why ecommerce warehousing is often best left to the pros.

1. Easier to stay organized

With more space and a better organizational system, you’ll have an easier time managing everything from inventory tracking to customer orders. A 3PL provider can take the tedious inventory management process off your hands and keep tabs on your products for you.

Moreover, ShipBob’s proprietary fulfillment software keeps ecommerce brands up to date with real-time inventory counts, shipment tracking, and much more.

“ShipBob’s technology provides cost savings. Other 3PLs pass fees onto the client for work they do related to manual processes because they lack the fulfillment technology needed to meet customer expectations. ShipBob’s technology has effectively eliminated the work of a program manager at other 3PLs, while providing immediate visibility into inventory and the ability to respond and make changes myself.”

Carl Protsch, Co-Founder of FLEO

2. More accurate picking and packing

In addition to ecommerce warehousing, 3PL services include picking and packing, taking much of the fulfillment process off your plate. They have highly specialized staff for each part of the order fulfillment process and others that work to identify supply chain optimizations. Their technology and processes help ensure the right products are packaged and delivered on time for a good customer experience.

“If I’m going to outsource one of the most important parts of my business, it needs to be in the hands of people who are honest, knowledgeable, and can do the job a lot better than me. ShipBob was the perfect fit.”

Tracey Wallace, Founder of Doris Sleep

3. Time to focus on growth

Successfully growing your business demands a significant amount of time, attention, and resources. By using a 3PL provider, you won’t get bogged down in the details of ecommerce warehousing. Instead, you can allocate your time and staff to other functions like expanding your customer base. Your ecommerce warehouse can even help contribute to growth.

“We are growing really fast and won’t slow down anytime soon. With ShipBob, we have the option to use more of their ecommerce warehouses to further reduce shipping costs. Because ShipBob has a lot of people to handle our orders and additional warehouses we can expand into, we can scale up with ease as we continue to grow quickly. If we ran our own warehouse, it would be much harder to hire people and we’d inevitably outgrow the space.”

Oded Harth, CEO & Co-Founder of MDacne

Ecommerce warehousing best practices

Implementing poor ecommerce warehousing processes can result in brands wasting money and even delaying orders. Proper warehouse management follows best ecommerce warehousing practices that improve your bottom line and provide a great customer experience.

Use a warehouse management system (WMS)

A warehouse management system is a specialized software that offers businesses features that optimize an ecommerce warehouse. A WMS can:

  • Provide real-time insight into your inventory and product availability
  • Manage and monitor supply chain operations, from the manufacturer to the distribution center
  • Forecast inventory to determine when your stock might run out
  • Streamline the ecommerce fulfillment process and make your operations more efficient

Integrate your ecommerce store (and other tools)

Integration with your ecommerce store will make inventory management much easier. Using warehouse management software, your business will be able to determine stock availability in real-time, forecast inventory more easily, and set reorder points in advance before a shortage can occur.

“Our website is built on Shopify, and Shopify and ShipBob work very well together. All I had to do was click a couple buttons and they were connected. The integration and visibility of the two systems keeps everything very simple. I really like ShipBob’s dashboard — it’s our backend logistics that keeps us up-to-date on everything that’s happening.”

Tim Fink, Co-Founder of EnduroSport

Distribute your inventory

Distributing your inventory across multiple warehouses reduces shipping costs so that when an order is placed, it is automatically prepared and dispatched from the nearest distribution center to the customer. This can also improve the customer experience by providing a faster, more cost-efficient delivery.

“As we started to hit that first inflection point of growth, it became apparent we needed to look for a 3PL that could help us expand geographically in the US and also drive down shipping costs and expenses. We distribute inventory across ShipBob’s fulfillment network so we can be closer to major distribution hubs, shipping carriers, and more of our customers. Since switching to ShipBob, our fulfillment costs went down by 25%.”

Michael Peters, VP of E-Commerce Operations at TB12

Test multiple picking systems to find the right one

Ecommerce businesses have a multitude of picking systems to choose from. Small organizations that receive only a few orders per day may prefer the ‘one-order-at-a-time’ picking process. However, this method is not ideal for larger ecommerce businesses. More advanced tools can enable batch picking and auto-generate picking lists based on the ordered items’ proximity to one another in an ecommerce warehouse to reduce the walking paths and time it takes to pick an order.

Set inventory minimums points

Finding the right balance in inventory is always a challenge. Ordering too many products can bring harm to a business’s profits and lead to high inventory carrying costs, while not enough can lead to out-of-stock notices and angry customers that go elsewhere. Thus, setting mandatory inventory minimums is a smart precaution for businesses to take. Any good software lets businesses set reorder points, so they can receive a notification once a product reaches a specific threshold.

“ShipBob’s analytics tool is really cool. It helps us a lot with planning inventory reorders, seeing when SKUs are going to run out, and we can even set up email notifications so that we’re alerted when a SKU has less than a certain quantity left. There is a lot of value in their technology.”

Oded Harth, CEO & Co-Founder of MDacne

How 3PLs help unlock ecommerce growth

An ecommerce business that aspires to grow should partner with a 3PL provider. Managing the ecommerce fulfillment process yourself is time-consuming and demands a lot of human resources. Using an order fulfillment service like ShipBob lets you focus on growth while not having to worry about ecommerce warehousing. Here are some of the ways in which ShipBob’s experience, scalability, and tools can help.

Distributed Inventory

ShipBob has a number of fulfillment centers in the US, Canada, and Europe. You can utilize any combination of their ecommerce warehouses so that orders are delivered to customers on time and shipping costs are minimal. ShipBob’s built-in inventory management software keeps you up to date with order data and inventory status across ecommerce warehouses in real-time.

“ShipBob continues to expand its geographic footprint. We use all of their fulfillment centers across the United States. There is a cost benefit to being spread out, as orders can be shipped from ecommerce warehouses that are closer to customers and delivered very quickly. As we expanded our online presence into Canada, we knew we needed a trusted fulfillment partner with a physical presence in Canada. From our history through the years with ShipBob, it was a no-brainer to expand into other markets with them.”

Matt Dryfhout, Founder & CEO of BAKblade

Order management

Inventory isn’t the only thing that ShipBob excels at overseeing; we manage your orders just as well too. From the moment an order is placed, you can track its progress in the ShipBob dashboard. You can easily search for specific orders, look up shipping details, and automatically send customers ecommerce order tracking emails.

“ShipBob has done a great job of giving each store owner a feeling of complete control over everything. You can outsource your fulfillment while seeing what their ecommerce warehouse associates are picking. Inventory is automatically marked as accounted for, so it’s held until it’s shipped. You can see all orders “in exception” on a shipping hold in one dashboard screen and hover over any order on that list and see why it was being held and resolve it directly within ShipBob.”

Gerard Ecker, Founder & CEO of Ocean & Co.

Customized packaging

ShipBob gives ecommerce businesses the option to use customized packaging to enhance brand awareness. A unique unboxing experience is a great way to increase customer loyalty and market your business. You can utilize ShipBob’s packaging partners to create your own branded boxes or poly mailers.

“We’ve been doubling our growth year over year, and a major contributor has been fantastic delivery that increases satisfaction with the post-purchase experience. ShipBob offers the option to customize packaging and tell a story through our products when shipping to our customers, giving us more control over our business and brand. ShipBob helps us deliver on our customer expectations, and they are continually evolving to help us stay ahead of the competition.”

Matt Dryfhout, Founder & CEO of BAKblade

Analytics and detailed reports

ShipBob offers business partners full transparency in the form of a free analytics tool that helps with everything from monitoring their own performance to providing year-end reporting. Merchants can assess data and learn how to make better supply chain management decisions.

ShipBob’s analytics tool also offers insight into matters such as which distribution centers to stock to save money and speed up deliveries, average shipping cost by delivery method selected, how running promotions will affect stock levels, and other distribution metrics.

“ShipBob’s analytics tool is a game-changer and it’s helped me grow my business tremendously. It’s so easy for any of my team members to pull data in real-time. I felt like I couldn’t grow until I moved to ShipBob. My CPA even said to me, ‘Thank God you switched to ShipBob’. ShipBob provides me clarity and insight to help me make business decisions when I need it, along with responsive customer support.”

Courtney Lee, founder of Prymal

Conclusion

Ecommerce warehousing can be tricky, but your business needs an efficient ecommerce warehouse to improve profits and scale. When researching warehousing options for your ecommerce business, consider that you’ll need supply chain experts on hand who can manage fulfillment and provide a great customer experience.

“Ecommerce companies who are approaching an inflection point will benefit from ShipBob because they allow entrepreneurs like myself do what we do best — create, sell, and grow! I’m proud to be a ShipBob partner. A lot of entrepreneurs underestimate the cost-savings and power of choosing your entire supply chain and partner network wisely. These choices will make or break your business.”

Courtney Lee, founder of Prymal

ShipBob is an industry-leading global 3PL. There’s a reason why thousands of fast-growing brands utilize ShipBob’s ecommerce warehousing and fulfillment solution. Contact ShipBob today by clicking the button below and learn how you can grow your business.