E-commerce Warehousing Guide | Key Strategies for Growth 2025

Key takeaways

1. E-commerce warehousing faces unique challenges due to the demands of online retail, including managing a high volume of individual customer orders and diverse product categories.
2. Inefficient warehousing can lead to higher costs, poor customer experiences, and limitations on business growth.
3. Technology and automation, such as AutoStore, can significantly improve warehouse efficiency and order fulfillment.
4. Implementing agile operations allows for scalability and flexibility, enabling e-commerce businesses to adapt to changing market demands and customer needs.
5. 3PLs offer an alternative fulfillment strategy, providing flexibility, scalability, and reduced upfront costs, particularly for businesses entering new markets or experiencing rapid growth

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Intro: What is e-commerce warehousing?

E-commerce warehousing refers to the storage, management and distribution of goods specifically for online retail businesses. Unlike other categories of warehousing, which might more likely handle bulk shipments and long-term storage, e-commerce warehousing is focused on fulfilling a high volume of individual customer orders, rapid order fulfillment, dynamic inventory management and larger volumes of returns management.

The unique operational challenges of e-commerce warehousing

E-commerce warehousing is distinct from other types of warehousing due to the specific demands of online retail While other types of warehouses will sometimes have comparable throughput rates, order fulfillment will usually look very different in an e-commerce operation.

Other warehouses > Often work on bulk orders and storage; likely to process fewer total orders but consisting of a (much) higher average number of order lines. And while there may be different SKUs making up the order line, orders will usually consist of similar or related products and categories.

E-commerce warehouses > Typically process high numbers of individual customer orders with only one or two order lines in an average order. E-commerce retailers usually have extensive SKU selections and diversity in their product categories. As a result, there is often a much higher level of diverse product mix in individual e-commerce orders. High volumes of unrelated product categories need to be consolidated in the same order, at high speed, while taking care to handle, pick, and pack a huge variety of items to high standard. The unique combination of operational challenges in retail, then, require a different overall approach to storage, inventory management, and order fulfillment.

Managing complex picking needs efficiently without being slowed down

Optimizing storage for high volume, low order lines

E-commerce warehouses usually need strong capabilities for high-speed, high-volume piece-picking of individual items. Storage setups should be able to offer these capabilities for (very) wide ranges of products. Ideally, storage should make efficient use of space, and crucially, provide easy access to your full SKU selection

Efficient fulfillment with wide product variety

The challenge isn’t just in storing and picking individual items at speed. It’s also a potentially huge variety of products and categories with different requirements in terms of safe storage, handling and packing. These diverse needs can make consolidation more complex in efficiently bringing order lines together from such a wide assortment of categories. The fewer workflows you can have, the more efficient you’ll be overall, and able to deliver consistent, accurate fulfillment.

Streamlining inventory management for regular SKU turnover & seasonality

E-commerce retailers commonly face higher inventory turnover than other types of warehouses with demand that can constantly change, driven by seasonal trends or rotation, promotions, holiday periods, and so on. Optimizing storage and SKU distribution for high-speed picking can be challenging when inventory selection is constantly updating and demand patterns for individual SKUs and categories constantly shifts. It needs highly adaptable, dynamic operations designed to respond to regular market changes and consumer behavior.

Dealing with higher return rates

E-commerce retailers experience much higher return rates due to the nature and convenience of online shopping— without being able to see an item in person, or try it on for size, and hear how it sounds, etc., customers can easily order multiple sizes, colors, or styles, and send back what doesn’t fit or suit their needs. Managing returns efficiently, therefore, is not only an operational concern, but a key business strategy. Online buyers increasingly look for smooth returns processes as a factor when choosing where to order from. Robust reverse logistics processes are required to handle the flow of returned goods, and quickly re-enter them into inventory rotation.

Learn more: Enhancing returns management in retail →

The consequences of inefficient warehousing for e-commerce companies

The impact of Inefficient warehousing processes, especially those lacking modern solutions can cascade through an e-commerce business, impacting far beyond daily warehousing operations. Warehouses perform a lot of repetitive tasks such as counting, sorting, labeling, and so on. Because of the nature of e-commerce fulfillment, the burden of these types of tasks can be magnified, as you're more likely to be dealing with 24 x single items, rather than a single case of 24 items. Manual processes or outdated systems are prone to errors and struggle combining the rapid speed required in modern e-commerce with consistent accuracy.  

1. Inadequate customer experiences leave you lagging behind your competition Online shoppers can switch you out at the click of a button. Buyers can punish poor buying experiences with barely a second thought; they can punish perfectly good customer experiences simply because a competitor now offers more convenience and expanded choice. Slow and inconvenient delivery options or high friction returns processes don’t just risk individual sales, but have a cumulative impact on growth and retention,

2. Higher operational costs Without automation and updated technology, labor costs will be higher than necessary. Errors are more frequent and repetitive tasks take much longer. Managing peak demand is more costly as increasing volumes of manual tasks need more labor, with diminishing returns likely the more workers you add.  

3. Lack of data control & inefficient inventory management Outdated or limited inventory tracking can lead to inaccurate stock levels. It can make it harder to understand fully changing demand, making forecasting less precise. This can lead to stockouts and lost sales, or overstocking with expensive inventory sat unsold in storage for long periods. Without reliable real-time visibility, providing correct inventory availability to buyers as they browse is more difficult.

4. Growth limitations Scaling manual processes and manual handling is much harder than scaling automation and technology in terms of space requirements and execution. Having to throttle business growth because your fulfillment operations can’t scale quickly enough risks. As your existing storage capacity and productivity hit the limits of the available space, you miss out on potential new customers and markets that expanded product ranges would have attracted.  

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Delivering e-commerce success: Strategies for optimizing warehouse efficiency

Optimize overall efficiency with high-speed technology to delight customers, ship faster than ever, and reduce costs.

Now we’ve examined some of the key risks, what can you do about it? Automation and technology are not the answer on their own. But when implemented as part of carefully considered strategies, they can transform your warehouse operations.

Leverage technology to enhance customer experience & drive revenue growth

Modern automation can transform your order fulfillment by maximizing both speed and efficiency. Technology such as automated storage and retrieval systems (AS/RS) and robotic picking can automate the task of retrieving items from storage for rapid picking capabilities. By integrating automated storage with real-time tracking and customer communication tools, businesses can further enhance customer experience, to support better retention and win new customers.

• Automated picking massively speeds up order fulfillment by removing manual labor to help decrease shipping times, and without increasing labor costs.
• Automated order fulfillment eliminates human errors for more accurate picking.
• Gives you the ability to extend cut-off times and process express or priority orders far beyond what’s possible with manual setups since orders can be consolidated in just a few minutes.

Lower the burden of operating costs to improve profit margins

Automate low-value, high-repetition tasks to scale up the benefits of efficiency gains. Leverage enhanced data visibility to proactively identify inefficiencies and errors to resolve them before they escalate and streamline inventory.

Automate for optimal efficiency

Many manual tasks can be replaced by automation. Focus on tasks that occur with high frequency, and can scale effectively as demand increases, such as labeling, sorting, retrieval and so on. This can drastically cut down on labor expenses by allowing you to ramp up significantly productivity without more workers. These types of processes also scale easily and cheaply, as there is no change in quality and minimal expense incurred for systems to increase their output.

Improve decision making with better data visibility

Speed and reliability are key differentiators for e-commerce providers. Enriching your warehouse management systems (WMS) with real-time data analytics from across your warehouse systems enables more informed decision-making. Automation technologies such as AI-driven demand forecasting and predictive analytics, allowing e-commerce businesses with regular inventory turnover to better anticipate and adjust to changing demand and customer needs,

• Always updated inventory data helps to avoid stockouts and lost sales with better forecasting
• Improves ordering experiences for customers across all order channels with accurate availability.
• Helps to avoid unnecessary over-stocking and unsold inventory tying up capital lying in storage.
• Warehouse management systems (WMS) can help optimize storage layouts to reduce the time needed to retrieve and return items.
• RFID tracking and automated inventory management systems are simple, reliable ways to increase the accuracy and quality of inventory data. They can be easily integrated into different processes, allowing you to easily track every SKU as it moves through your warehouse.

Implement agile operations to scale more effectively

E-commerce businesses can see rapid growth over short periods. It would be both inefficient and expensive to have big implementations every time you need to expand. Equally, investing in spare capacity you don’t yet need exposes you to increased business risks and ties up more capital.

The answer is to create agile operations that are designed to scale with you, by using technology and solutions with flexibility at their core. The AutoStore System is a great illustration of this, as it’s designed to be modular, so that scaling can be fast, simple, and inexpensive

• The system can be easily expanded by adding individual components based on your needs, not expanding the whole system.
• Expanding an AutoStore Grid to add more total storage capacity can be done in just a few days and doesn’t require any system shutdown.

You should also look for technical flexibility beyond physical expansion.

• For example, cloud-based WMS platforms can manage multiple warehouse locations and support increasing order volumes without needing large technical implementations whenever you need to expand.
• Solutions with open APIs will provide the ability to integrate new technology in the future, so you’re not slowed down by specific or non-compatibility later.

By leveraging scalable technologies and strategies, businesses can accommodate growth without significant disruptions or inefficiencies, ensuring they remain agile in a rapidly changing market.

3PLs: An alternative fulfillment strategy to speed up time-to-market

Of course, improving existing warehouse operations is one thing, but having to build out new operations infrastructure from scratch can take a lot of time. With the speed that e-commerce businesses and market demand can move at, developing new warehousing infrastructure can slow down potential growth. But there is an alternative option that many e-commerce brands leverage, which is to outsource fulfillment and distribution to a third-party logistics provider, otherwise known as 3PLs.

Flexibility & scalability out of the box

Pros: Owning your own warehousing infrastructure is a large capital investment with an ongoing allocation of significant resources and operating costs. This means that owning extensive warehousing infrastructure is a strategy reserved for larger companies and established brands

3PLs offer logistics solutions to manage storage, picking, packing and shipping for third parties, a kind of warehousing infrastructure-as-a-service. This can be ideal for speeding up time to market or allowing brands to focus on the e-commerce elements when they have limited or no logistics experience or expertise internally.  

• Ideal for businesses that want flexibility, scalability and reduced upfront costs.
• 3PLs can offer considerable experience and expertise, alongside advanced technology not available internally.
• 3PLs take care of all daily operations and resources and take on a lot of the risk of rising costs, such as energy.

Cons: While you gain enhanced flexibility and speed, you will lose some overall control over costs and execution.

• Less control over costs and execution can make it harder to maximize profit margins
• While many 3PLs specialize in specific industries and segments, you have less flexibility over customizing your order fulfillment processes exactly to your customer needs and products

Learn more about AutoStore for 3PL →

You can use both approaches for different business needs

You don’t always need to choose one strategy over the other. Many e-commerce retailers take a hybrid approach, combining owned warehouses with 3PL services.The flexibility and fast scaling of using 3PLs make them perfect for entering new markets and territories quickly to start generating revenue much faster.

Here are a couple of typical scenarios where we see a hybrid approach being adopted

i) A brand has existing warehousing in a market they are well established in, but they have zero local infrastructure when wanting to enter a new market.

• A local 3PL service allows them to expand with great agility and flexibility, helping accelerate the time to market and generate new revenue much quicker.
• It can also remove some of the risk of investing in their own warehouses if there is any kind of uncertainty about a new market.

ii) Using 3PLs to take the pressure off internal warehouses.

• The bulk of fulfillment is still executed internally
• But “overflow” business is handled by a 3PL service to remove friction from your operations and continue to support new customers while you scale operations.

How the AutoStore System can revolutionize your e-commerce warehouse.

AutoStore Cube Storage provides high-speed automated order fulfillment with ultra-dense storage to maximize space utilization and capacity. Unlike other AS/RS systems that are shelving-based, it employs a Grid layout, with Bins tightly stacked in rows vertically and horizontally. By eliminating shelving and aisle space, a much higher number of SKUs can be stored in the same floor area. Robots retrieve items from Bins brought to the top of the Grid and bring them to designated workstations, known as Ports, hugely decreasing average picking times.

Key capabilities for e-commerce fulfillment

The system is “product agnostic”, meaning it’s suitable for storing and picking almost any kind of product category. Additionally, the dense layout of the Bins makes it ideal for high-speed piece-picking of very diverse SKUs.

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Benefits of the AutoStore System for e-commerce fulfillment.

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Maximum space efficiency & dynamic storage:

→ It can increase storage capacity by up to 4x compared to manual storage.

→ The innovative Grid design provides dynamic SKU distribution, meaning that storage is always optimized for the most efficient picking speeds based on current demand.

→ Works with any order profile. Current fast movers are always naturally located in the top rows of the Grid, as SKU placement adapts to changing demand.

Streamlines inventory management with high turnover and regular rotation.

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Speed and accuracy:

→ Offers a single, consistent picking workflow for all your SKUs, virtually eliminating human errors.

→Ports can increase human worker speed by up to 5x

→High throughput: a single system has the potential to be configured for picking 1000s of line items/hr

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Scalability

→ The modular design can be easily expanded, so you can increase total storage capacity as you grow.

→ New modules can be added to the existing Grid without any interruption to current operations.

→ Flexible, powerful open APIs simplify integrating with current and future third-party technology

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Reliable & smooth daily operations

→ AutoStore offers best-in-class system uptime of 99.7% and can be maintained and managed by a single super user.

→ Very energy efficient. The Robots are engineered to be lightweight with minimal power consumption, with 10 Robots using the equivalent power of one vacuum cleaner.

Conclusion

E-commerce warehousing is crucial to online retail success. From managing inventory to handling high return rates, the challenges are significant. However, by adopting technology and automation, businesses can turn these challenges into opportunities for greater efficiency and customer satisfaction. Whether opting for owned warehouses, 3PL solutions, or a hybrid approach, the right strategy can drive competitive advantage and long-term growth.

FAQs

H3: What is an e-commerce warehouse?

An e-commerce warehouse is a facility designed to store, manage and fulfill orders for online retail businesses. It involves receiving inventory, managing stock levels, picking and packing orders and shipping them to customers.

H3: How to set up an e-commerce warehouse?

Setting up an e-commerce warehouse involves several steps:

1. Choose the right location.

2. Design an efficient layout.

3. Implement a warehouse management system (WMS).

4. Hire and train staff.

5. Establish inventory management processes.

6. Ensure compliance with safety and regulatory standards.

H3: What is the role of an e-commerce warehouse executive?

An e-commerce warehouse executive oversees warehouse operations, including inventory management, order fulfillment, staff supervision and ensuring adherence to safety and compliance standards. They play a key role in optimizing warehouse efficiency and performance.

H3: Are there any best practices for efficient e-commerce warehousing?

1. Use appropriate Inventory management techniques Employ techniques like ABC analysis and Just-In-Time (JIT) inventory to optimize stock levels and reduce costs.

‍2. Optimize warehouse layout Optimize warehouse layout with slotting and cross-docking to minimize travel time and maximize storage.

3. Deploy technology and automation Integrate technology like WMS, automated picking, and robotics to enhance efficiency, accuracy, and throughput.‍

4. Implement effective safety and compliance measures Implement safety protocols, training, and compliance measures to protect workers and avoid legal issues.

5. Use appropriate visual aids to help efficiency Use visuals like diagrams and infographics to enhance understanding of processes and task execution, especially for employee onboarding.