What is a Retail Warehouse? Definition, Importance, Advantages & Challenges of Retail Warehouse in 2024

The world of retail warehousing is changing, constantly morphing to keep up with structural changes in the global eco-social system. Supply chain management is in flux. The constant changes here have amplified the crisis in supply chains. Demand is fluctuating YOY, and labour shortages have added to the turmoil.

With all these in the larger economic equation, firms struggle to meet even basic demand-supply. When you factor in the eCommerce boom with the above, you realise that retail logistics are at a defining moment in their history. The Guardian reports that in the first half of 2021, a record six billion pounds were invested in U.K. warehouses. What’s more, the global warehouse automation market is expected to be just under 31 billion USD by 2025. There comes the need for retail warehouse putaway.

As eCommerce warehouses, the retail backbone, change, only one option seems feasible. We need to respect the change, welcome it, and adapt to it. We need to see the challenge as an opportunity.

What is a Retail Warehouse?

The retail warehouse definition includes the following elements: 

• It involves storing a retailer’s goods
• Retail warehousing involves online order fulfillment
• For the above two points, warehouse space is used

Retail warehousing for eCommerce is a part of the retail supply chain. It is an essential part of it, directly affecting the efficiency and quality of every part of the supply chain activity that occurs after it.

To illustrate the above, imagine a disorganised storage process within the warehouse. Here, fulfillment will naturally slow down at the very first step due to the difficulty of product picking.

On the other hand, imagine an optimised, tidy warehouse. Pickers can now quickly pick and pack without botheration.

Warehousing can be done in one of the following ways, depending on the size of the business:

• Done from home
• Done from the store
• Rented warehousing
• 3PL warehousing

Currently, warehouse renting or 3PL partnering are considered cost-effective and plausible based on average retailer size.

Why is a Retail Warehouse Required?

Retail warehousing is required because it performs an essential function within the supply chain. It is responsible for crucial supply chain functions, including the following:

• Inventory Storage
• Customer Order Fulfillment
• Retail Store Order Fulfillment

Inventory Storage

This is a mission-critical process within the supply chain. It begins with procurement, wherein goods are ordered from the producer. After receiving the inventory, the warehouse organises and stores it.

The process involves unloading every item of inventory. This is then sorted by SKU and type. Inventory counts are done to determine a match between orders and delivery. Inventory levels are reestablished. Once this is done, the inventory is stored methodically within the types of warehouse.

Inventory organisation is essential. Popular SKUs are kept within easy reach. All SKUs have their location, and different SKUs are stored separately. For example, finished goods inventory is stored separately from production inventory.

Customer Order Fulfillment

A retail warehouse also functions as a fulfillment center, in which capacity they are also engaged in storage, picking, packing, and shipping preparation.

Maintaining order accuracy while keeping the operations swift is the challenge. The warehouse management system, eCommerce platform, and inventory management systems need to work in sync to achieve this. 

Retail Warehouse Order Fulfillment

Order fulfillment is done in various ways by the warehouse:

1. Retail warehouses often ship to retail stores rather than to the customer.
2. DTC brands ship directly to the customer.
3. Retailers can ship to both customers and stores.

The Evolution Of The Retail Warehouse

There have been four generations of retail warehouses so far.

• Generation 1: Conversion of industrial units for retail use
• Generation 2: Freestanding units built for a purpose
• Generation 3: Retail parks consisting of many units in one
• Generation 4: Fashion parks that were more complicated than standard retail parks. 

As retail warehouses have evolved, the following changes have occurred within their setup:

Well-trained employees: Due to the growing sophistication of the warehousing system, it is essential to keep employees well-trained. They need to know how to handle complicated software, like inventory management. They need to know when inventory needs to be restocked so as to always be ready for customer orders.

Improved tracking systems: In the present generation of the retail warehouse, product scanning enables instant access to product information. Suppliers and customers can know important product information within seconds.

Great storage systems: Modern tracking systems have made storage more efficient by optimizing available inventory spaces. This way, all the inventory space is utilized in the best possible way.

The Developing Models Of Warehouses And Fulfillment Centers

Warehouse management models are changing, and new bleeding-edge models are being born faster than ever before. Legacy systems are shifting. Let’s talk about the strategies of warehouse and fulfillment centers in pointers here. These strategies have completely changed how warehouses function. Some of them are:

Digital Warehouse Twinning

Post-pandemic, the world now realises the importance of preparing for an emergency. Using technology, you can create a “twin” digital warehouse to simulate your physical warehouse performance.

Twinning your warehouse (digitally) can provide a 20%-25% boost in your efficiency. New strategies for your warehouse can be tested on its digital twin. This can help make efficient business decisions regarding workflow and floor plan redesigns via simulation. 

Suggested Read: Factors affecting Warehouse KPIs

On-Demand Warehousing

Businesses face sudden spikes and declines in demand. This is why on-demand warehousing is gaining popularity. This model helps businesses meet short-term and immediate needs. Companies can now meet rapid fluctuations in demand without rigid and long-term contracts.

The Service Angle Of Warehousing And Distribution (WaaS, DaaS)

WaaS and DaaS are the new stars of the retail sector. Labour shortages and supply chain disruptions are tackled by shifting their management to competent partners. SMEs can now grow quickly with minimum risk. Firms can now focus on their competencies, free from logistical nightmares.

The Magic Of Micro-warehousing

As eCommerce has risen, so have consumer expectations. The need for quick home delivery has led businesses to decentralise into physically separate, digitally connected units. This has allowed for same-day delivery. Underutilised physical stores are now used as “dark stores” that exclusively service online buys.

Advantages of a Retail Warehouse For eCommerce Fulfillment

Retail distribution warehouses are great for eCommerce fulfillment. The reasons are many:

1. They use existing facilities optimally.
2. Urban areas that are struggling (like the loss of a mall) can be helped out.
3. They can serve niche markets competitively.
4. They offer high standards complying with industrial use as well as ample parking.
5. Furthermore, they add to regional and local floor fulfillment centers.

4 Main Challenges of Retail Warehousing Faced by Online Brands in 2024

If you want to scale your business online, retail warehouses are essential. As your business grows, warehouse management gets more complicated. As you scale, here are a few challenges you may face for the year 2024:

Lack of Expertise

Normal demand periods come with challenges of their own. When you are trying to scale, however, warehousing can overwhelm you. Small retailers often don’t know the nuances of warehousing as experts do. 

The lack of experience may mean retailers overpay for low-quality solutions. Easily preventable errors may cost you money, time, and resources. Similarly, badly-planned logistics can jeopardise company operations.

3PL experience and knowledge can be a lifesaver in these circumstances. 3PLs can streamline warehouse processes and increase efficiency. Shipping protocols, last-mile logistics, and seasonal blockages can easily be countered by partnering with a great 3PL fulfillment provider.

Inefficient/Outdated Technology

One of the challenges of retail warehousing that can be nipped at the outset is poor technology. Outdated technology can lower warehouse efficiency instead of increasing it. Poor technology may be better than manual operations, but it can’t scale to a high order quantity. 

To optimise warehouse operations, you need modern, relevant, and easy-to-learn Warehouse Management System Software. Invest in the best hardware (warehouse automation, robotics, labels, and barcode scanners). Also, invest in a modern IMS and WMS. Long-term, these will surely give you a high ROI.

Inventory Management

Inventory needs to be managed religiously for one reason – so that businesses can always cater to demand. When order volumes are high, inventory is replaced at a rapid pace. This means inventory needs to be replenished and scaled to ensure there is no shortage. 

These are the steps involved in successful inventory management:

• Regular inventory audits to keep accounting practices and inventory levels at pace.
• Regular inventory replenishments to avoid stockouts and backorders.
• Demand forecasting, using trends and seasonality to hold enough ready stock and avoid deadstock.
• Keeping safety stock ready for emergencies.
• Keeping inventory counts current for all SKUs.

Increased Order Volume

Sometimes order volumes spike. To keep in tandem with high demand, an order fulfillment strategy that can manage higher than expected order volume is needed. 

To meet customer needs, you need proper warehouse workflow systems, staff, and storage space. If you don’t have these optimised, it may result in low order volume, low returns or worse.

Study your supply chain before major growth periods. Ensure your processes, floor space, and storage space are adequate to meet all needs. Sometimes sudden, rapid growth calls for partnering with a 3PL.

WareIQ Warehousing Solutions for Growing Brands

Growing brands would do well to partner with WareIQ warehousing solutions. This full-stack e-com fulfillment platform helps brands increase sales. The cross-national network of last-mile couriers and fulfillment centers helps your business store goods closer to your customers. You are billed based on usage. The prediction engine based on machine learning optimises inventory placement and the design of the warehouse network. We offer the following services for growing brands:

Logistics Consulting

Logistics consulting will help you optimise both efficiency and cost of your operations. This service works for larger and well-established businesses by delivering a high ROI. Keep everything in-house with our logistics consulting services.

Warehouse Management Software

If you want to save time and money via automation, use warehouse management software. WMS gives you a high return on the effort by automating different warehouse processes. You can analyse the productivity of your warehouse by tracking data. Order fulfillment mistakes can be minimised using WMS. This software helps retailers manage day-to-day operations and run their retail warehouses efficiently.

Third-Party Logistics

Partnering with a 3PL is great, not just for DTC brands. It works well even for small businesses and large retailers, who can gain from the advanced technology and experience of 3PLs.

3PL outsourcing allows retailers to scale efficiently. They gain resources to grow their business with direct capital and real estate investments. 

Some retailers find it beneficial to store inventory in a centralised location. Others may find it better to distribute their goods across multiple warehouses throughout one nation. This lets retailers reach customers across pan-country locations efficiently. 

One route to do this is to buy or rent warehouses that require large investments. But the more efficient and cost-effective solution is to partner with a 3PL.

3PLs can minimise retailer costs by analysis, optimisation, and improvements in operations. 3PL also optimises time. For retailers who want to cut out planning, coordination, and execution of operations, partnering with a 3PL is a great way to go.

Fulfillment Solutions

WareIQ enables businesses to use cutting-edge technology to optimise their logistics. These include services from warehousing to eCommerce shipping, including storage and fulfillment. 

Prominent growing businesses, as well as smaller retailers, can benefit from partnering with WareIQ. You can reach more customers with WareIQ using multichannel retailing, B2B, and retail drop-shipping. A network of fulfillment centers and warehouses help you achieve fast shipping affordably. 

Expect uniform operations and order fulfillment regardless of where you store your products. Best eCommerce warehousing practices are observed in every warehouse. Use automation to the fullest to optimise, analyse, and make sense of your business. WareIQ’s top-class fulfillment solutions ensure that you are at the top of your game.

Retail Warehouse FAQs

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