Between 2014 and 2017, retail ecommerce sales boomed as they grew 25% annually worldwide, with warehouses playing a crucial role in ecommerce’s growth.
So, what exactly is a warehouse, and how is it used?
If you’ve never seen or been inside one, performing a quick Google search for its definition finds that it’s “a large building where raw materials or manufactured goods may be stored before their export or distribution for sale.” Its primary purpose is to serve as an epicenter between local distribution points and better fulfill orders.
What is a retail warehouse?
In the past, a warehouse was regarded as a separate part of the retail business. It had nothing to do with sales nor did it take part in business processes. However, with the advent of the 21st century, that dynamic has changed.
In mid-2015, retailers in the U.S. faced a shortage of traditional warehouse spaces, causing businesses to scramble. However, with the success of the ecommerce industry, the warehouse industry was rejuvenated. Developers across the country saw an opportunity to evolve the concept of the warehouse.
A retail warehouse is just like any other warehouse—they are large, generally built on the outskirts of a metropolitan area, and cover thousands of square meters of floor space. According to one report, warehouses are “143% bigger, thanks to ecommerce.” Not only did the size of the warehouse change, the name of the building that stored goods was updated too, namely as the retail warehouse.
The retail warehouse serves as a centralized area for all your storage needs, as well as a time and money saving distribution center for all retailers.
Evolution of the retail warehouse
According to Entrepreneur magazine, the following are ways in which the warehouse has evolved in the past two decades. The changes include:
- Innovative storage systems: placing new items on the first shelf in the warehouse. Using these kinds of systems can be tricky, but with the help of modern technological tracking systems, efficiency is definitely within reach.
- Better tracking systems: When scanning a product, all the product information is available instantly. A retailer can communicate information on a product’s price, function, expiry date, etc., to suppliers and customers within seconds.
- Better training and technology: Well-trained warehouse and inventory managers can better plan when to reorder products. On top of that, they are backed up by modern-day inventory management software that helps maximize the chance that the product will be available when customers want it.
Benefits of a retail warehouse
According to Matt Leonard via Supply Chain Dive, “The retail warehouse is an excellent opportunity for companies looking to embrace the ecommerce revolution and expanded supply chain.”
A few benefits of retail warehouses include:
- Utilization of existing facilities as a blank canvas for your retail warehouse.
- Retail warehouses serving as local and regional store distribution centers.
- Freestanding facilities offer dock doors, clear heights compatible with industrial use, and ample parking.
- Redeveloping struggling urban areas where big box retailers may have left.
Challenges and solutions of retail warehouse
The warehouse is not some place just to store products and could hamper your business operations if not given proper attention. Two of the main challenges that retail warehouses face are returns and managing supply chains while maintaining inventory visibility.
1. Managing returns
Returns in any retail business are inevitable (with some retailers seeing as high as a 22% return rate), and managing return logistics is a complicated process by itself, in addition to overseeing core warehousing and distribution operations.
Each returned product must be treated as a valuable item requiring proper storage until it has been quality-checked or destroyed/returned to the manufacturer as an unsellable product.
Present-day retail warehouses must be capable of handling multiple returns or linking each returned product to its initial order, thereby maintaining an audit trail.
2. Managing supply chains while maintaining inventory visibility
The rise in international trade has added to the complexity of supply chains. The wider the supply chains, the greater the potential for complications to arise (particularly where important transactional data is collected and processed on various systems and networks).
For example, multi-layer procedures are required to operate across multiple supply partners and different time zones.
With these challenges, though, there are solutions like the following:
- Be the retailer who recognizes the need to connect insular systems for stock transparency and to maintain the procurement and fulfillment system more accurately.
- Utilize systems that combine all related processes, like ERPs, WMS, etc., and offer complete traceability and auditability, giving the consumer access to the origin of their products as well as the ability to track them across the supply chain.
- Gain the competitive advantage through data collection and monitoring across the entire supply chain. Collaboration amongst supply chain partners becomes necessary to provide a comprehensive picture of all the items in-store as well as while they are in transit.
Future of retail warehousing
The future of retail warehouses involves floor space, design, and function. New warehouses can be designed to facilitate this change, while retailers with existing structures must invest in technological solutions to gain the edge in competition. These solutions can range from robots helping in stock picking to the software enabling workers to efficiently maximize space availability.
Deloitte’s report, “Global Powers of Retailing,” shows how technology is going to be the building block for the future of the retail industry and create awareness of products, both in the context of retail and supply.
One such application is the use of RFID technology. It is primarily used for tagging items to collect and store data about individual products. Technology in the retail warehouses can be used for two things to boost your business:
- Keeping track of stock throughout the supply chain.
- Allowing consumers to access product information, origin, and tracking until delivery.
Technology not only has the capability of helping to increase sales, it also engenders trust among your customers.
Integration of various sales channels to the supply chain is definitely a challenge. For seamless operations of physical retailing and online channels, retailers and their supply partners must have far greater stock visibility more than ever.
The solution to this challenge involves the use of “big data” and associated technology to enable a better, more holistic understanding of the location of inventory. To achieve this granular level of product identification, investments in technology are necessary.
Rise of urban sheds
The key aspect of every retail operation is to smoothen the process of product delivery to its consumers. What could be a better way than having a warehouse near to your consumers?
The most significant change in retail warehouses in the not-too-distant future is the rise of small urban warehouses. A retail warehouse’s close proximity to customers will only ensure the on-time delivery of products.
Helpful Hint: Small urban warehouses also help in understanding the buying trends on a micro level and fill its limited stocks based on local purchasing preferences.
Improve your warehousing using DEAR Systems
The retail industry is always evolving and undergoing enormous transformation. The National Retail Federation (NRF) forecasted that by 2020, retail sales would grow from 3.5 percent to 4.1 percent. As the retail business blooms, it is certain that retail warehouses are also going to flourish.
With DEAR Systems, you can implement a warehouse management system leading to improvement in your warehouse’s efficiency. You can record inventory using barcode scanners, get real time visibility, and print labels.
To get a better understanding of how DEAR Systems can cater to your specific business needs, try our 14-day free trial, and see how DEAR Systems is the solution to your warehousing needs.