Considerations of Second eCommerce Warehouse
After just one year of extraordinary growth, eCommerce companies’ executives are thrilled to be out of the garage and into a legitimate warehouse operation. There is no time for self-congratulatory applause, because the need to keep up with same-day/next-day consumer demand is requiring either the delegation of fulfillment to a 3PL or opening a second warehouse facility.
Several positive economic quarters of the first warehouse operation and a progressively growing customer base, gives a certain level of confidence having survived the naivete of a new eCommerce concept.
Unlike brick and mortar retail, where the counsel is usually, “Don’t rush in too quickly,” in the eCommerce space, the rate of competition is measured not only in sales data, but in customer acquisition and reorders. Disgruntled eCommerce shoppers will go elsewhere and unlike standard retail, eCommerce is quantified in rapidity and accuracy of order delivery.
In brick and mortar, there is no guarantee that a second location will garner the same success as the first. An existing retail location has no indication or correlation to the potential profitability or success of a second store.
With the current warehouse or distribution center “MAXED OUT,” it may be time to consider a second location. Adding another warehouse location means reaching more customers; it also means higher inventory levels and multiple locations to manage. Setting up a new warehouse requires planning and preparation. Hoj Engineering customers using WarehouseOS® (WOS®) have added warehouse locations based on market needs. The proper software technology at the existing warehouse has made it easier for clients to add warehouse locations, utilize a transfer warehouse, and run reporting functions. The collection of useful customer data from existing markets may direct the evaluation of a second warehouse location.
eCommerce Companies Already Preparing Second Warehouse for 2018 Holiday Season
eCommerce companies discovered over the past holiday season that customers were willing to pay for premium shipping to meet holiday deadlines, yet the location of the first warehouse still made guaranteed delivery of merchandise impossible. Alternatively, if free shipping is included and a large percentage of orders resulted in 2+ days since an online order was received, the new customer was disappointed. This missed economic opportunity must be weighed against the cost of a second warehouse location.
Hoj Engineering works to ensure the decision to proceed with a second warehouse is based on a comprehensive understanding of all operational expenses, including rent, staff, time, training, and equipment.
Considerations of a Second eCommerce Warehouse
Analyzing current sales data will reveal which regions are underserved. Ensuring product is stored in a region near customers is important for prompt deliveries and impacts costs. Calculating precise landed transportation costs to a warehouse facility from manufacturing locations as well as expected transportation costs from facility to end customer, will drive the affordability of one potential warehouse location versus another.
The location’s proximity to carrier facilities should also be considered; the new storage facility must be as close to the carrier as possible.