How can storage solutions support e-commerce and growing online businesses?

The online retail industry in Australia continues to grow strongly with total retail online sales up 7.8% to $63.6 billion in 2023. With online retail increasing at a rapid pace many e-commerce businesses are struggling to find adequate storage space for their expanding inventory of products.

The storage bottleneck in e-commerce growth

The storage bottleneck for online growth has traditionally been within residential garages or small commercial warehouses where the online retailer starts off. These spaces enable the online business to grow successfully for a time, but problems start to surface that can negatively affect the online sales and growth of the business.

A business that starts selling 50 units a month to begin with will require about 20 square meters of space to run their business from. As the business grows to 500 units a month, they will not require 10 times the amount of space to store their inventory. As a business in growth, the amount of storage space that a business will require will increase in peaks as well as averages. This space will be required to hold increased amounts of inventory in peak times as well as to take advantage of the bulk purchasing discounts offered by suppliers. The space required by a business in growth to store all of their products will also increase exponentially as more and more products are added to the range of products that the business sells.

For businesses that operate online the peak periods for them will typically see a rise in the required inventory by up to three times that of normal periods. (ie. Black Friday and the Christmas period).

Strategic advantages of external storage

External storage for your online business can bring so many advantages. By storing your stock in a professional, purpose-built facility you can have climate-controlled storage, 24/7 access, security and much more. The biggest advantage of external storage is that it is scalable without the need to sign a long lease on a property. Financial advantages also include a number of cost savings. Separate storage from your main business premises and optimize each space. Your office can then be more productive without the clutter of stock and customers can perceive more professionalism from your business in a dedicated retail space rather than from behind a clutter of packing materials in a residential garage.

There are many additional benefits including saving money and increasing profits by not using part of your office to store your stock of products. Once you have your storage in a separate facility you can utilize the space of your office to maximum benefit as you would no longer need to store excess inventory. You would also find that your customer facing area would look better than before, as opposed to when you would have had a hurried clearance sale and had piles of stock around your showroom.

A further benefit of external storage is the ability to organize your stock in the best way possible. With a good external storage space and the appropriate amount of shelving and adequate aisle space, you can create the perfect picking and packing area for your online orders. External storage also creates a quality picking environment which will save your business loads of time in processing hundreds of online orders every month.

As a business grows it can also become more complex. This is certainly true when it comes to the logistics of online retail. For some businesses taking the step to move to industrial storage units has meant they have been able to establish a number of more complex logistics processes including batch processing. In addition it has also enabled a number of complex quality control processes to be put in place as volumes have increased.

Operational efficiency gains

On another note, external storage solutions, such as a warehouse or storage facility, can also be used to create batch processing orders. For instance, instead of filling and sending out individual orders as they are received online, orders can be grouped by batch and all filled and packaged at the same time. This can not only save a lot of time in filling individual orders, and save on packaging as well.

Having separate storage and order fulfillment areas allows for better work flow management. People can focus on single tasks such as customer service, stock management and order processing rather than constantly having to switch between the various tasks that are required when storing and fulfilling orders from a single area.

In all likelihood, a professional storage space will be a lot more secure than your residential premises. It’s essential to have your stock in a storage space where it will be safe from potential losses. Many businesses hold valuable stock and for those businesses, the threat of inventory loss is huge. A professional storage space will help to minimize losses such as these. In addition, you may well find that you can reduce your insurance premiums too as the risk of loss will have been minimized. All of this will bring you great peace of mind.

Scaling logistics operations

Storage solutions can be the starting point for a business’s more complex logistics. As a business grows and matures, it can use multiple storage locations to serve different areas of the country and reduce its shipping costs and delivery times.

There are many benefits of having multiple storage locations or ‘pick points’ around the country for businesses in national markets. For starters, it can be very cost effective when distributing to customers all over the country, rather than from the one location. Also, sending goods from a local store means that there are saving made on shipping, and also the delivery time will be greatly reduced, which are two very important factors for online retailers, as customer’s expect fast delivery and also expect to pay less for shipping.

External storage on the other hand can be increased in size during periods of high demand, and can be decreased during the off season, freeing up working capital that can be better spent on things to help grow the business such as on-line marketing, and product development.

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Implementation considerations

If your company has stock that it sells, you will first need to categorize your products, i.e. how you group your stock.

Also note the factors that you need to consider when choosing an external storage facility to house your external storage inventory. Sure it is more convenient to store your external storage at a storage facility near to your business however other strategic factors also need to be taken into account. The cost per square meter to store your goods and that against the extra cost of transporting your external storage from a more remote storage facility. For example if you were to store your external storage at a 30 minute drive from the city as opposed to 5 minutes from the city then the storage facility could be offering you halved rental space costs against only a marginal extra cost for the transportation of your external storage.

However there are a number of technology issues that you need to consider when deciding whether external storage is for you. Perhaps the biggest consideration is how you are going to manage your inventory. This will mean that you are going to need a system that can be set up to deal with your off-site storage. For example this could be a system that updates your stock levels in real time and automatically orders more when required. There are many different systems available on the market and the most important thing is to find a system that is able to meet the needs of your business. It is also very important that the system is easy to use. One of the main reasons that businesses move to external storage is to simplify their inventory management. If you find a system that is going to add more complexity then this would not be beneficial to you.

This transition from home-based storage at DIY, makeshift storage facilities to external storage facilities marks a point in a business’s life where it has outgrown such simple storage systems and has matured to a point where it requires more professional, more effective and flexible systems to support its ongoing growth.