Many small- to medium-sized enterprises (SMEs) invested in traditional warehousing for decades, believing it was the only way to achieve retail success. This meant signing a long-term lease on a workspace, typically ranging from three to ten years, and spending a considerable amount of money on equipment, racking, security, utilities, and more.
While traditional warehousing offers various benefits, many modern companies are experiencing fluctuating sales and supply chain disruptions, causing them to question if it’s the right option. Continue reading to learn whether traditional warehousing still meets SMEs’ needs or whether a better solution is available.
Traditional warehouse leasing works for certain business models
Traditional warehousing may be a wise choice for companies with predictable inventory and sales. While a business must commit to a long-term lease, which requires a large deposit and investment in equipment, it will enjoy full control of the premises, from its layout to its branding.
The downside is that the fixed lease makes it harder to downsize or expand the business when necessary, which can stifle revenue and profit margins. If your business is willing to take the risk or is happy to open another premises to scale operations, traditional warehousing might be the right option.
However, if you are more concerned about fluctuating stock, you are a startup with financial constraints, or you want something with a bit more flexibility, you should consider other options.
Renting warehousing space is best for greater agility
As the retail industry is crowded with SMEs and large brands, many companies are competing for customers on and offline. Unfortunately, changes in consumer demand or interest often cause fluctuations in sales and inventory, posing a threat to the company’s revenue and profit margins. For this reason, many companies, such as businesses operating in wholesale, trade distribution or ecommerce are renting warehousing to remove risk from their operations, as they provide short-term, flexible leases or license agreements. Across the UK, companies such as Workspace Group, BizSpace, Basepoint and Capital Space all offer suitable solutions you can consider.
It’s a wise choice for budding brands, as they aren’t financially committed to the traditional warehouse space if the business or an expansion fails. As a company isn’t tied to a warehouse on a long-term basis, it can relocate operations to meet shifting customer demand or business needs. As a result, it allows an entrepreneur to take greater control of the company’s costs, growth, and customer service.
Locations matter more
Traditional warehouses were built in strategic locations to fulfil operational and distribution needs. Often located near supply chains, manufacturers, and major transport networks in the UK, this placement resulted in efficient operations. However, due to the size required to accommodate such a building, they are also usually located on cheaper land that isn’t anywhere near the city centres.
For businesses selling stock all over the country, such as a popular beauty brand, having a steady warehouse located outside the city near transport networks is ideal, but for smaller beauty brands, perhaps those that only sell online, in independent boutiques, or a few department stores, this type of setup and size of warehouse isn’t needed. Flexible warehousing is better suited in this instance.
Why many people dismiss flexible warehousing over traditional warehousing is that they think the latter only offers the best locations. This isn’t the case. Both options can provide you with ideal locations near major transport networks in the UK, reducing an SME’s transit times and enabling faster shipping for customers.
Smaller beauty brands can find studio warehouses that position their stock much closer to cities, enabling faster fulfilment, such as next-day delivery. They can also enjoy:
- Improved productivity
- Customer satisfaction
- Better reputation
- Better courier access
Both setups offer location benefits, so it often comes down to the volume of stock and where you ship to that can help you make the final decision.
Seasonal stock surges need eolutions
Many retailers experience surges in stock sales at particular times of year rather than steady sales. Most anticipate selling more during the Christmas period, Valentine’s Day, Easter, Halloween, and even Mother’s and Father’s Day. Major holidays like this can often help businesses balance profits during quieter periods, as can well-known promotions that almost every retailer runs, like Black Friday, sustaining a traditional warehouse.
However, stock surges can also occur outside these holidays. A clothing retailer might have a new summer collection that they want to launch and advertise on influencer platforms like TikTok. If this collection goes viral during promotion, this demand will drive greater production of the product. There comes your problem: where to store this sudden surge. Flexible warehouses let you temporarily expand your storage capacity without committing to a long-term lease or to space you won’t need once this promotion ends.
Whether you are expanding to prepare for seasonal spikes like Christmas or Black Friday, or you need a fast solution to handle sudden expansion that helps improve scalability and profitability, you can step away from your warehouse and return when it ramps up again without risk.
Ecommerce fulfilment pressures solved
In recent years, customer expectations have changed, putting more pressure on retailers than ever before. Most customers expect next-day delivery, but the demand for same-day delivery is resulting in many retailers trying to find solutions, and quickly, before their competitors do. They want to be able to pack and dispatch orders quickly. Flexible warehousing is a great solution to this. Both big and small retailers can make use of this by selecting a warehouse studio or space that is located near the city centre.
For bigger businesses, the traditional warehouse can be the main hub for all products, but for a select few, perhaps your most popular products, you can set up flexible warehouses all over the country that enable you to ship and deliver much faster.
This setup also enables you to handle returns more quickly. For customers who like to order clothes in multiple sizes, colours, or styles, the likelihood of returns is extremely high, yet they still want a good experience. So, rather than having your customers located in the south ship their clothing returns to your warehouse up north, they can ship them to their nearest warehouse and get their money back faster. Having such a great customer experience will make them want to shop with you again, and they might even spread the word about you.
What works best for wholesale trials
There are plenty of retailers who are now seeing the benefits of wholesale. You can sell more, improve cash flow, reach a wider market, and increase brand visibility. This doesn’t mean that it doesn’t come with risks, though. Stepping into the wholesale market doesn’t work for everyone. A trial period is the best way to see if you are one of the retailers who find this works for them.
You will naturally have a lot more stock to store, so traditional warehousing might seem like the most sensible option, but you risk the wholesale venture not working out and then being tied into a long-term contract. On the other hand, flexible warehouse solutions could enable you to manage these larger product volumes and fulfill orders most efficiently. If you find you don’t get on with the wholesale game, you can stop renting the space and move on.
Flexible vs traditional warehousing: Who wins?
Traditional warehousing seems like the right choice for retail giants, as it offers greater stability and control year after year. However, a long-term contract, expensive deposit, and scalability issues can limit major retailers and SMEs’ growth and offer significant financial risk.
Warehouse rentals are arguably a smarter alternative, as they offer short-term leases, the option to expand or downsize as needed, modern amenities, and access to major transport networks, helping companies grow their revenue, profits, and reputation. This allows startups and growing businesses to scale their operations throughout the seasons without major financial repercussions.
