eCommerce Storage: 5 Ways to Cut Wholesaling Costs

In eCommerce wholesaling, handling inventory and storage well means you save time and money. The recent supply chain issues have shown how important managing inventory and storage is for eCommerce businesses.

Effective management of inventory and storage is essential for success in eCommerce wholesaling. Making decisions to cut storage requirements requires thoughtful consideration and time investment. Despite ongoing supply chain challenges, there are many strategies available to cut storage needs. These can also help to save costs and enhance operational efficiency.

This guide will show you how to make your tech setup better and simpler, covering everything you need to know for success. We'll also discuss outsourcing to grow faster and ways to cut spoilage and risks.

Finally, we'll share a few insightful lessons we've learned from the pandemic.

Let's get started.

eCommerce Storage Tip #1: Enhance Your Tech Setup

Running a successful eCommerce business is impossible without delivery software to help with management.

If you're using a spreadsheet to track inventory, it's time to switch to an app that automates tasks. Even if you already have inventory management software, upgrading your tech tools can save you money.

Upgrading your inventory management software is a smart investment. It helps you understand and optimize your eCommerce storage needs.

For instance, apps that track inventory and generate real-time reports aid in making better purchasing decisions.

Certain software enables the automated generation of purchase orders when the stock reaches the reorder level. Improved inventory management tools lead to better outcomes. They ensure more accurate counts and analysis.

Accurate inventory data is vital for creating precise inventory forecasts. The closer your projections match reality, the more effectively you can manage your inventory and eCommerce storage requirements.

If you want to cut down on eCommerce storage and save money on wholesale warehousing, improving your tech tools is a great first step.

Even small improvements in forecasting accuracy can make a big difference in eCommerce operations.

eCommerce Storage Tip #2: Simplify Your Product Choices

Use your updated inventory management software to cut down on storage requirements. You can do that through data-driven product analysis.

Check sales performance to identify top-selling items and cut slow-moving ones.

Streamlining your product selections could involve offering fewer sizes in your clothing line, focusing on the most popular ones. You might also focus on best-selling colors and phase out slower-moving options.

Sometimes, you might discover that a whole product line no longer appeals to consumers and should be discontinued.

Production delays and stockouts in manufacturing are also reasons to remove a product or an entire line.

If you struggle to keep an item in stock, assess whether it benefits or harms your business. Seek a more dependable supplier or use the opportunity to concentrate on your top-selling items.

Your product line isn't just about numbers. For instance, even if you sell only a few expensive models, they may have value beyond sales volume.

Imagine you have a $500 food processor and a $200 food processor. Offering the higher-priced item can make the lower-priced one seem like a bargain, which can boost sales.

eCommerce Storage Tip #3: Explore Multiple Warehouse Locations

Shipping products from multiple warehouses has its advantages and disadvantages.

Operating from a single warehouse simplifies inventory management and reduces the stock needed to fulfill orders.

Conversely, distributing your products across many warehouse locations can offer cost-saving benefits:

For one, it requires less space at each site, providing flexibility in warehousing options. You can opt for smaller warehouse leases or rent space within a warehouse instead of the entire facility, thereby reducing location-specific costs.

Secondly, having your products closer to your customers reduces order fulfillment costs.

When packages cross fewer shipping zones, you spend less on shipping and can deliver orders faster.

eCommerce Storage Tip #4: Accelerate Growth through Outsourcing

Outsourcing your fulfillment might seem costly at first glance. Yet, eCommerce firms can save money by employing a third-party logistics service.

There are two outsourcing models for warehousing and fulfillment, each offering unique cost-saving benefits.

The right model for you depends on your business operations and objectives.

Let's explore both options:

1. Direct Shipment from Factory to Customer

You might have heard of dropshipping. In this eCommerce model, you don't buy or store inventory upfront. Instead, the manufacturer holds the items, and you buy them only when you make a sale.

This eCommerce model is great for startups and entrepreneurs who bootstrap their businesses. With minimal upfront investment, no inventory management, and no risk of unsold products, it's an ideal choice.

Yet, when the manufacturer manages your eCommerce storage, you'll likely pay a higher wholesale price for your merchandise. This may result in lower profit margins.

Moreover, you'll be reliant on the manufacturers' production and delivery schedules.

In summary, the direct from factory model offers lower initial costs. It also removes the burden of inventory forecasting and storage. Yet, it comes with the trade-off of higher wholesale pricing and reduced control over your inventory.

2. Opt for a 3PL for Versatile Logistics Assistance

Many eCommerce brands opt for the second choice: storing their products and handling orders through a third-party logistics company (3PL).

With a 3PL, you supply the products and send them to the fulfillment center for storage.

In this model, you can maintain lower wholesale costs. However, you'll incur fees for warehouse services like storage, picking, and packing.

You might discover that the expenses associated with subcontracting your fulfillment can be balanced out by advantages like discounted shipping and reduced return frequencies.

So, what are the benefits of partnering with a 3PL? There are many.

To begin, your orders are handled by professionals who provide precise fulfillment. That saves you money on returns.

Proficient inventory management can decrease product loss (shrinkage) by reducing the number of damaged or misplaced items in the warehouse.

One of the most significant benefits of partnering with a 3PL as you grow and scale your business is their flexible storage options. That can help in keeping storage costs low.

What does "flexible storage" mean? Flexible storage means that the warehousing you use isn't a fixed cost; instead, you only pay for the space you need. This means your storage expenses decrease during slower seasons when there's less inventory, and increase when you add more SKUs.

This allows for rapid expansion during sales peaks or temporary contraction to save on costs during slower periods. Fulfillment companies maintain low storage costs by utilizing large warehouses shared among many clients.

eCommerce Storage Tip #5: Reduce Spoilage and Risk of Failure

Ensuring your products remain free from spoilage and damage is key to minimizing storage requirements.

For instance, eCommerce platforms selling perishable items often put in place systems to track expiration dates.

Ensure you use first in, first out (FIFO) inventory management, prioritizing the items placed on the shelf first to fulfill orders first.

Inventory software should automatically track expiration dates and alert you about products nearing their sell-by dates. This prevents outdated and unsellable products from piling up, taking up space, and costing you money. It ensures proper inventory management.

To truly reduce spoilage, you must examine other practices in your warehouse that increase the risk of merchandise loss.

So, what exactly is shrinkage?

Imagine shrinkage as ghost inventory: items idling on your shelves, expanding your storage requirements without benefiting your business. Enhancing your storage methods lowers your cost of goods sold and storage expenses.

Stacking certain items may cause compression and damage. Establish a procedure for shelving each product to ensure safe inventory storage.

Insights from the Pandemic

Just-in-time (JIT) inventory management is effective for many companies. It reduces storage and inventory costs while ensuring fast stock turnover.

Yet, amid the pandemic, many brands stocked up their warehouses with extra merchandise to prepare for potential supply disruptions. This transitioned them from a JIT inventory model, which minimizes on-hand stock, to the just-in-case (JIC) model.

Regrettably, adopting a just-in-case (JIC) inventory management approach can adversely affect your business. Firstly, it locks up a significant part of your working capital in inventory. While rapid turnover of products may be desirable, it should be a deliberate choice.

Keep an eye on products lingering on shelves for months and becoming overstocked. This can lead to various issues, such as:

• Being stuck with expired or outdated products, forcing you to sell them at a discount or dispose of them, resulting in a total loss.
• Holding excess stock and paying for extra storage space.
• Facing long-term storage fees from third-party warehouses for items stored beyond six months or a year, increasing your inventory storage costs.

A more effective storage approach often falls between JIT and JIC.

Use your business data to determine the best possible balance. Track manufacturing, transportation, inventory, fulfillment, delivery, and sales data. Also, use data analytics to discern supply and demand trends.

The crucial factor is making decisions based on evidence.

Conclusion: eCommerce Storage Matters

In today's volatile world, effective inventory and storage management are more crucial than ever. By enhancing your practices, you can reduce your storage requirements, control costs, and maintain a competitive edge.