E-commerce sites are sprouting left and right and one of the perks of running an e-commerce business is that having an actual warehouse space is optional. Enterprising business men often would lease a warehouse or part of a warehouse in order to store their unsold stock and among other items.
Renting or leasing a few warehouse storage systems provide e-commerce sites a complete order fulfillment and storage solution, given that it costs less than actually owning warehouse. Following this line of thinking, a single warehouse can now accommodate several clients at a time, especially if you have an efficient inventory and management system.
But what are the risks and benefits of operating a warehouse?
- It’s not all about storage – warehouses offer more than warehouse racking, the majority of warehouse operators provide overall logistics solutions which include:
- Inventory Management
- Account Administration
- Round-the-Clock Security
- Delivery and Tracking
- Opens Door for Expansion – seeing new products come in and go gives you a glimpse of current trends which can often lead to profitable ventures and partnership.
- Insurance Costs – property insurance for warehouse operations is considerably higher as you would need to have insurance packages for everything, including the stock you would be storing.
- Too Much Space – sadly, there is such a thing as having too much space with too few merchandise or clients to serve. Several factors including improper niche matching and low stock turn-over.
But how would you avoid the pitfalls?
Here are some actionable tips on starting a warehouse business.
1- Choose a Niche That You’re Familiar With – warehousing is not just about placing warehouse racking on a piece of property and taking in stock from this and that company without paying any mind to the kind of products that you will be storing. Choose a niche of products that you are familiar with so that you would know how each one is stored and how often each needs to be cycled in order to keep fresh stock.
2- Scout the Competition – just like any business, research about how your competition works especially their best practices and operating systems. You’re not going to copy them per se, but if they’ve been around for quite a while, it means they’re doing something right.
3- Estimate Start-Up Costs – list down items like online inventory management systems, warehouse racking and building rental. Line them up against their cost and project the expense for a period of 12 months. This will tell you how much the start-up costs are and how much the monthly earning of the warehouse should be.
4- Determine Building Size – this goes hand in hand with finding out what your niche will be. That way you can estimate how much space you would need plus some extra.
5- Find the Perfect Property – if you don’t have one or know of one, contact a trusted realtor and see what deals they might have for you. Newer warehouses come with their own security system and office space, while older ones still have warehouse racking and established utility connections. Look for properties that are close to the main thoroughfare as you would want to maintain fast access for deliveries and ship outs.
6- Explore Financing Options – unless you have the right assets, chances are you will need either a business partner or at least the help of a financial expert that can guide you as you set-up you warehouse racking empire. Browse online for the banks and financial institutions and narrow them down to three that you can go personally to discuss your business plan.
7- Hire Employees – once you have your property and business plan ready, it’s time to hire bodies that can help you grow your warehouse business. Look for skills and potential rather than experience as this would ensure that you always the right people.
8- Build A Client Base – warehousing is all about maintaining an excellent business-to-business relationship which would not happen if you don’t build enough clients. Go to trade fairs and invest in attending conferences where you could meet and mingle new and potential clients.
9- Expand Your Channels – don’t stick to trade fairs and conferences, expand your network through social media marketing. Draft up a website where you can showcase your services as well as the interior of your warehouse. Be honest with the pictures as you don’t want to promise something you cannot deliver.
Renting out storage space to multiple clients can be a good idea if you know what you are doing but the best practice is to start with a couple of clients. This will help ease you into the world of logistics and inventory management while keeping your sanity.
Factors like manpower problems and maintenance issues, as well as haphazard warehouse racking, are some of the problems that you might encounter during operation but these are easy to get by with regular checks and activities that boost employee engagement.