Whether you’ve just started running a business or have been at it a few years, you constantly have to make big choices that could make or break your company. One such choice that has gotten pretty popular in the last few years is the decision to buy a warehouse for distributing your product.
However, just because it’s trendy doesn’t mean it’s a smart business move. That’s why we’re taking the time today to answer the question “Do you need to own your own warehouse for e-commerce?” once and for all.
By far, the biggest upside to owning your own warehouse is the fact it gives you a level of control you can’t get from distributing through an outside source. Obviously, the good third-party warehouses give you some level of choice, but never to the level you can achieve by having your own.
When you have one, you can easily ship products out as often as you please or change smaller details like the equipment you use. For example, you could implement the use of pallet jack scales. These have quite a few advantages, but the most notable is their ability to weigh shipments while moving to the trucks.
Another perk is the fact that your variable costs won’t go up as much as you expand. Since you’re in control, you can streamline processes in order to keep your operating expenditures low. With third parties, those costs only continue to increase.
While there are financial benefits to owning a warehouse, there are some downsides as well. The main one is the fixed costs. Not only do you have to put a large amount of money down to buy the warehouse, but you need to pay property taxes. If you ever have a dip in sales, these costs don’t decrease with them, taking more out of your pocket.
On top of that, you’ll have to hire a workforce to run it, get insurance to cover possible damages, and pay for the utilities to keep the place running. Because of this, you’ll need to keep a careful budget and have a solid plan for future growth. While this is difficult, it’s certainly not impossible.
Now that we’ve given you the pros and cons of owning one of these facilities, it’s time for us to provide you with our input on if you need to own your own warehouse for e-commerce. In most cases, we’re going to suggest that you don’t—at least not right away. There are a lot of financial risks involved with this purchase. While the control you get with one is a great perk, there’s not a whole lot of control left if your company takes a sudden dive.
However, if you’ve been in business for a few years and have seen steady growth, then maybe this is an option for you to look into. The larger your sales numbers are, the more this investment will start to pay for itself. It’s still a risk at this point, but not as big of one.