Do You Need a Warehouse to Start an Online Retail Business?

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With the rapid growth of the Smartphone industry and the Internet across the globe, online trading has become more popular, and there are many business opportunities now than ever. Besides, consumers enjoy the convenience of shopping from their home, offices or anywhere else without the need of traveling for miles to buy products. For many start-ups, an online business can be more sensible as it offers numerous benefits ranging from cost reduction to simple entry process. If you are considering an online business, there are business-listing-sites like dealstream.com to find already established online entities for sale or get insights on how you can start your own e-commerce venture in different states in the USA.

Internet Business Opportunities in the US

Majority of the US consumers are turning to the internet to purchase nearly every product or service including household goods, electronics and fashion products among others. With the giant eCommerce traders such as Amazon recording better profits every year, and the project growth of online transactions, the online arena still offers the greatest opportunities for US investors across all sectors. The need of having a warehouse for an online business has been a major concern for majority of new investors, especially if they are planning to retail physical products online. This post evaluates whether or not a warehouse is a necessity for your internet entity.

Is a warehouse necessary when starting an online retail business?

Warehouse has always played an important role in storage products for future consumptions in traditional retail brick and mortar stores. It facilitates convenient exchange of goods offering a storage space and increasing efficiency of the distribution process. Is it still useful in online retail trading? Before you think of a warehouse, it is critical to consider the following elements:

  1. Consider the Business Operational Cost

One of the main advantages of online business is the low starting and operational costs. There is a huge cost associated with warehousing including renting a large room, inventory management, and probably extra wages for the warehouse staff. Additionally, you need the money to buy products in bulks to stock the warehouse, not to mention high utility bills and any possible damages on the inventory. Therefore, it is important to factor in your budget before establishing a warehouse for your new venture. Besides, if you want to minimize your business expenditure, you need to consider business models that allow you to run your business smoothly without a warehouse.

  1. Brands have Excelled in E-commerce Without Inventory

If you are wondering whether it is possible to sell products online without inventory, it encouraging to know that some of the popular e-commerce brands have done it before. For instance Uber, one of the largest global taxi operators doesn’t physically own a fleet of cars and Alibaba, a renowned international online retail company doesn’t keep any stock. Many others are doing well without a warehouse meaning you too can succeed without one.

  1. What are the available Options?

You can legally sell products online without stocking any inventory, thus no need to have a warehouse. Here are a few options:

  • Affiliate Online Store – This is an online business model in which you promote products and earn commission fee, when your audience purchases the products. You can join several of the available affiliate programs to promote their products on various online resources such as affiliate site, social networks, email list, blogs and many more. However, the returns for this model are low, and you may not make enough earnings but it can be a good source of extra income.
  • 3PL Model – This involves working with a 3rd party logistic company (3PL) that handles the storage and delivery of products. In some cases, the 3PL also deals with customer support and returns. In this case you need to ship your products to the 3PL and whenever a customer places an order, you forward the order to them for shipment. You only pay a monthly fee depending on the number of orders fulfilled.
  • The Drop-shipping Model – In this model, you forward customer orders to your wholesale supplier who will ship the products directly to the customers. This is more convenient since you only pay for products, when you receive an order and you don’t have to store any products.

However, it doesn’t mean that you cannot have a warehouse for your business, though it is advisable to consider the potential gains and your startup cost.

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