Warehouse Alternatives Every Small Online Seller Should Consider

Running out of room for your stock?

It's something that will occur to almost every ecommerce retailer. One month in your spare room is okay. The next month you've boxes in the hallway, boxes in the kitchen and one very upset family.

So the obvious fix seems to be leasing a warehouse.

Here's the problem:

Warehouse leases are costly, lengthy, and designed for companies much larger than yours. Most small merchants won't need 10,000 sq feet. What they need is a clean, dry place to store a couple hundred units of inventory.

The good news? There are much cheaper alternatives available. Most of which can be done this week.

What you'll walk away with:

• Why warehouse space rarely suits small sellers

• The storage options that cost a fraction of a lease

• How to pick the right space for your stock levels

Why A Warehouse Is Usually The Wrong First Move

Warehouses are priced for volume. Serious volume.

The national average asking rent for industrial space is $10.18 per sqft annually. That's BEFORE operating expenses, utilities, and annual rent increases are factored in. Lease a multi-year contract on a modest-sized unit and you're financially strapped for years.

Then there's the flexibility problem.

Ecommerce turnover is rapid. Q4 is manic, January is sleepy as, and rent is the same either month on a long lease. You also have to fit out your own place — racking, lights, security, insurance. Not cheap.

For a store shipping 20 or 30 orders a day, it's overkill.

Mini Storage Units: The Small Seller's Secret Weapon

This is where most sellers should start.

Mini storage units provide you with a secure locked space to rent month to month. No long term commitment. No fit-out costs. Just a roller door, a key and somewhere to stack your inventory off the stairs.

Sizes range from a storage locker to about the size of one garage. It's worth browsing something like sparefoot storage unit sizes before making reservations. Many vendors drastically over estimate the amount of space their products occupy. Boxes full of products that take up an entire living room will usually shrink down to a much smaller sized unit when shelved/stacked.

Neither are you by the way. Approximately 38% of small retailers selling online with annual revenues of less than $500,000 store their inventory in self storage instead of a warehouse.

The true benefit is that mini storage units are scalable to your needs. Need more space? Outgrow one unit and you upgrade a size or add a second unit down the hall. Have an off quarter? You scale right back down. Try that with a commercial lease.

Things worth checking before you sign:

• Climate control -- essential for cosmetics, electronics, candles and anything paper based

• 24-hour access -- so you can pack orders after your day job

• Ground floor units -- carrying boxes up stairs gets old very fast

• Trolleys and loading bays -- usually free, and they save your back

• Business use policy -- some sites allow it happily, others don't

That last point is important. Ask if the site is happy for you to run a business from the unit and have deliveries made there.

3PL Fulfilment: Let Someone Else Hold The Stock

Don't want to touch a box ever again?

They store your inventory, pick your orders, pack them and ship them out. All you do is send them your inventory.

The drawback? Price. You're paying storage fees, pick fees, pack fees and often surcharges on top of that. Margins become slim when dealing with cheap or bulky goods. It also requires a fairly consistent volume of orders.

However if you're spending nights stuffing boxes instead of chasing new business, a 3PL purchases your time back.

Your Garage, Loft Or Spare Room

Free is hard to beat.

Garages are where many successful companies begin. Don't feel embarrassed by this. Take advantage of it if you have the room and stock that is small and durable. Just be aware of certain limitations:

Moisture, heat and pests will ruin inventory. Homeowners insurance typically doesn't cover business stock. Working in your home becomes tiresome quickly.

Treat it as a starting point, not a plan.

Flex Space And Small-Bay Industrial

Small-bay flex space exists somewhere between a PODS locker and a warehouse. Picture a little industrial building with a roller shutter, some office space and space for a workbench.

It makes sense once you're consistently shipping high volumes, but don't think of it as a steal. Small-bay spaces are coveted ― vacancy rates in small industrial spaces are much lower than they are for large warehouses ― so you won't have many options, and prices aren't going to be low.

Eventually though if you require equipment, truck or pallet deliveries this is your last stop.

How To Choose The Right Option

Forget what other sellers are doing and look at your own numbers.

Ask yourself three questions:

1. At the peak of your season, what is your maximum stock level?

2. How many orders are you shipping each day right now?

3. How much time do you want to spend picking and packing?

When you have a small amount of stock and are filling orders yourself, mini storage units almost always comes out ahead. Inexpensive, flexible and available just about anywhere — it's no wonder the self storage industry will generate roughly $73.5 billion in revenue this year.

If you are shipping heavy volume on the regular and would rather focus time and energy selling instead of operating, then a 3PL is your best option. If you need staff, equipment and immediate access to pallet flow all in one location, that's where flex space or an actual warehouse pays off.

Jumping directly to the largest option because it feels like a more "serious" choice is the error. It's not serious at all. It's just more costly.

Locking In Your Storage Setup

A warehouse is not a badge of honour. It's a cost.

Start small and stay agile. That's what success with ecommerce as a small seller is all about. These alternatives were designed with that in mind. Begin with the lowest cost option that can safely store your inventory, and upgrade only when necessary.

A quick recap:

• Warehouse leases are long, costly and rarely suit small sellers

• Mini storage units offer secure, month-to-month space that scales

• 3PLs buy back your time, but eat into your margins

• Home space is free, but risky and temporary

• Flex space is the step up once you need staff and pallets

Know what you're storing. Choose the smallest area that allows you to store your goods comfortably. Invest the savings back into merchandise and advertising. That's how you really expand a store.