The Rise of Warehouse Investments for E-Commerce Businesses

Warehouse investment has become a hot topic in the e-commerce industry, as more businesses are changing their warehouse approach and looking for new solutions. The demand for warehouses has never been higher, with more businesses looking to expand and have more space for their products. It’s estimated that in 2025, there will be 33 billion square feet of warehouse space globally. 

For e-commerce businesses, it’s no longer about online versus in-person shopping anymore, it’s about who can best optimize channel control, dominate the market and delight customers. With the rise of warehouse investments for e-commerce businesses, it means that they need to sooner take advantage of the opportunities awarded from warehousing to stay ahead of their competitors.

This article will explore how e-commerce businesses have capitalized on the rise of warehouse investment by looking more in-depth at different warehouse solutions.

On-demand Warehousing

Being able to access different warehouses whenever you need them is huge for e-commerce businesses, as it means that you don't have to make any long-term commitments. This helps to create a dynamic distribution strategy for e-commerce businesses by upscaling and accommodating unexpected demand. Using this solution makes for smoother changes to market conditions.

Small to medium sized e-commerce businesses would best use on-demand warehousing, as it offers them a minimal commitment without having to promise too long of a stay. This means that these sizes of retailers can better leverage cost-effective solutions rather than having to deal with large up-front fixed costs. This is perfect for successful budgeting.

The main advantages of on-demand warehousing include:

• Sustainable Retailing Solution: The on-demand warehousing model allows for a more sustainable utilization of resources, which will reduce the environmental footprint of e-commerce businesses.

• Faster Shipping: The strategic placing of warehouses through the on-demand model minimizes time in transit for product deliveries.

• Lower Fixed Costs: Warehouse owners can maximize their space, which can help them gain additional profits by reaching fulfillment capacity. This will lower fixed costs in the process.

• Larger Network: E-commerce businesses can add warehouse locations quickly and easily. This means that they can stock their products in multiple locations at once.

• Higher Supply Chain Flexibility: Seasonal demand and market interruption responsiveness offers a great flexibility option to e-commerce businesses.

Urban Warehousing

One reason for the rise of warehousing is urban warehousing and last-mile delivery. There is an ever-increasing demand for faster delivery times, which is why urban warehousing has become so popular in the e-commerce world. The idea of urban warehousing is to locate warehouses near urban areas that are also in close proximity to main cities. This is to make the distribution of goods more efficient in highly populated areas.

E-commerce businesses are forced to meet the demands asked by customers, which is why more of these companies are investing in warehouses based in underutilized urban areas. They are usually cheap to locate and the redevelopment will not cost as much either. Transportation costs and delivery speed are the biggest factors that are improved with the investment in urban warehousing.

Cooperative Warehousing

This type of warehousing allows e-commerce businesses to store goods at a much lower rate. The facility will usually be collectively owned or rented and is ideal for companies that are in the same industry. Business resources are pooled together using this type of warehousing, which is good for managing costs. Export credit insurance may be a key difference for cooperative warehousing, as the insurance for the building will likely be shared.

Cooperative warehouse investments have several advantages that other offering don’t have, such as:

• Cost-Efficiency: E-commerce businesses can reduce operating costs by sharing space and resources. With this type of warehousing, you can easily bulk buy and negotiate discounts.

• Democratic Approach: Working together with another company ensures that different opinions can be taken into account for the good of the businesses.

• Scalability: The process of scaling up can be made smoother in a cooperative warehouse. More flexible arrangements can be made to base your movements on real-time events.

• Environmentally Friendly: The shared use of resources can lead to less energy, packaging and transportation waste. If both companies have the same views, energy efficient solutions can be put in place, such as LED lighting.

Government Warehousing

Although primarily used for unique industries, such as B2B online wholesalers, they can be used by any e-commerce business due to the rise of warehouse investment. The properties are managed by governments and the leases are usually more affordable to give businesses a better chance of operating success. However, if businesses don’t make the necessary payments the property can be seized, as well as all the products inside the warehouse.

The main benefits of investing in a government owned warehouse are:

• Affordable Storage Costs: For businesses looking to save money on storage costs, government warehousing does offer a helping hand by offering affordable rates.

• Clean Conditions: Good Manufacturing Practice (GMP) analyzes government warehouses to ensure that they have a high standard of cleanliness, which improves the quality of stored materials.

• Local Coverage: These warehouses are usually located in places that offer ease of travel with minimal distribution costs.

• Security: Strict security measures are put into place for government warehouses to protect valuable data and information.

Advance Warehouse Designs

Warehouse design has evolved due to the rise in popularity of e-commerce businesses. The addition of advanced technology like automation, robotics and artificial intelligence (AI) have increased the efficiency inside of the warehouse. The overall productivity in warehouses has increased dramatically during the past several years, as the order process has become faster and the inventory tracking more accurate.

Multi-channel fulfillment has become a must-have for e-commerce businesses, which has made warehouse investments even more crucial. They now need the flexibility to support this, and e-commerce companies use the new flexibility of warehouses to expand their presence across different online channels.

The rise of warehouse investments has driven this need for more advanced designs, as more demand equals more development over time.

Flexible Leasing

The possibility of more flexible leases can open up many opportunities for e-commerce businesses. Access to flexible space that can adapt on a seasonal basis allows businesses to have shorter term contracts at shorter notices with warehouses. This allows them to better capitalize on sudden spikes in demand or new trends in the industry.

This type of flexible warehouse leasing could lead to e-commerce businesses sharing spaces to make the process more streamlined, efficient and cost effective. This type of investment means that businesses could end up staying at a hub for longer overall so that they can recoup costs.

E-commerce businesses with seasonal inventory, short-term demand, infrequent orders or smaller bulk orders will benefit the most from flexible warehouse leasing. If your business fits under this, you need to make sure you ask the appropriate questions to ensure it meets the right needs. Some examples include:

• How long does the warehouse have to be rented for?

• What will the turnover time be?

• Are there any expansion opportunities?

• What happens when the lease ends?

Asking questions like these will help you determine whether flexible warehousing is the right solution for your e-commerce business, as there are other options available as we have outlined.