Logistics
Warehouse Costs Guide for B2B & B2C Fulfilment
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Cathy Carpetta
May 30, 2024
Did you know London has the highest warehousing costs globally, followed by Hong Kong and Tokyo?
Understanding these costs is crucial for optimising your fulfilment strategy and ensuring healthy profit margins.
This guide provides a comprehensive breakdown of the key components of warehouse costs. Including: storage, inbound receiving, picking, packing, shipping, and processing returns.
1. What are warehouse costs?
Warehouse costs group all the fees associated with warehouse operations to store and fulfil orders.
There are two main types of warehousing fees.
✔️ Operational costs cover renting the warehouse space, utilities like electricity and heating, property taxes, security, and insurance.
✔️ Storage costs are the expenses directly related to handling your goods, including:
- Labour: This includes wages for warehouse personnel, forklift operators, and anyone moving and managing your inventory. The average warehouse worker salary in the United Kingdom is £11.74 per hour.
- Inbound receiving: Processing incoming shipments from suppliers, which can be charged per pallet, box, or a flat fee.
- Order fulfilment (pick and pack): Picking items from storage, packing them for shipment, and getting them ready to go out.
- Packaging: The cost of boxes, tape, labels, and other materials needed to pack your products.
- Shipping: The cost of sending your orders to customers depends on weight, dimensions, carriers, and destination.
Overall, warehouse costs can also vary significantly depending on several factors:
- Location: Warehouses or fulfilment centre in prime locations close to main cities will be more expensive than those in remote areas.
- Warehouse features: Warehouses with temperature control or advanced security may incur higher monthly operating costs.
- The type and size of your goods: Bulkier or heavier items will require more storage space and potentially more complex handling, impacting costs.
- Order volume: Warehouses often offer discounts for higher volumes, so if you fulfil many orders, you might get a better rate per item.
- 3PL vs. In-house fulfilment: Outsourcing to a 3PL (Third-Party Logistics) provider can be cost-effective, especially for complex B2B order fulfilment.
Let’s dive deeper into the operational costs so you can get a better understanding of how it impacts your bottom line and your order processing.
2. Storage: Maximising space utilisation
Warehousing costs soared 8.4% globally since 2021, with London being the priciest at an average of $35 per square foot (including rent, service charges, and taxes).
Storage is typically charged per square foot and month and the average basic storage cost in the UK can vary, ranging from around £5 to £9.
Beyond the size of the items, the type of storage required also impacts cost.
For instance, fragile items require specialised shelving, bubble wrap, or compartments, while high-value goods necessitate secure storage areas.
Similarly, temperature-controlled storage for cosmetics and food supplements or products like clothing on hangers requires dedicated space and comes at a premium.
Another key factor is inventory levels.
Seasonal businesses with slow-moving inventory during off-peak periods can see storage costs increase a lot.
B2B operations also face pallet storage costs ($10-$20 per month) and potential contractual storage requirements from partners.
Bigblue Tips
On the Bigblue app, you can easily check your stock levels and long-term inventory so you can adapt your strategy to optimise your costs effectively.
👉 Discover our dashboard
2. Inbound receiving: Managing complex orders
Inbound receiving costs, unlike storage which focuses on space utilisation, are associated with the processing of incoming shipments from your suppliers.
The cost is usually per pallet, per box, or a flat fee.
The key differentiator for costs is based on the shipment complexity or what it is called: homogeneous versus heterogeneous orders.
Inbound receiving becomes more efficient when dealing with homogeneous orders, where the shipment consists of the same items.
This allows for streamlined processing and reduced time spent checking, counting, and sorting individual items.
Conversely, heterogeneous orders, with a variety of items, require more effort and time from staff, leading to higher inbound receiving costs.
Some warehouses and fulfilment centres offer additional services during inbound receiving, such as quality checks, relabelling, or even basic assembly for complex products.
These add-on services provide valuable benefits but come with additional costs on top of the base inbound receiving fee.
Bigblue Tips
With the Bigblue app, you can easily track all of your inbound shipments. It shows if it is unloading, complete, or has any damaged items.
Plus, once your stock arrives at our warehouses, it will be processed and placed into stock within 2 to 5 days.
👉 Discover our app
3. Order fulfilment: The pick and pack processes
In 2024, for reference in the US and Canada: the average price pick & pack price for 1 item for a B2C order is $3.18 and for a B2B order is $4.79.
Source: Warehousing and Fulfillment
Pick and pack, a cornerstone of e-commerce fulfilment, refers to the process of selecting items from storage, packaging them for shipment, and preparing the order for dispatch.
While it might seem straightforward, understanding the nuances of pick and pack can significantly impact your fulfilment costs and efficiency, especially B2B vs. B2C orders.
B2B orders often involve picking a higher quantity of similar items.
This can be faster than picking a variety of items for B2C orders, potentially leading to lower pick-and-pack costs per unit.
However, the complexity of packing B2B orders can be higher.
B2B shipments frequently contain larger, bulkier items that require more robust packaging materials like sturdy boxes, filming for protection, or even pallets.
This can increase packing costs compared to B2C shipments with smaller, more standardised packaging.
Usually, retailers or marketplaces have specific packing requirements outlined in their contracts.
These could involve things like custom packaging or following strict labelling protocols, adding time and potentially cost to the pick-and-pack process.
Warehouses often charge a base fee per pick, with additional picks incurring extra costs.
Including flyers, custom boxes, or silk paper in the packaging can add to your pick-and-pack costs.
You should weigh the marketing benefits against the cost increase when making your packaging decisions.
Bigblue Tips
The Bigblue app tracks your orders in real time. See if they're being picked, packed, shipped, or delivered – all in one place.
Plus, identify any fulfilment or delivery issues quickly for a seamless customer experience.
👉 Discover our app
4. Packaging: Beyond the box, branding & sustainability
You can expect to pay under $1 for a basic folding carton, corrugated boxes with printing might cost $2-3, and rigid boxes can run $4-5 each.
While complex B2B orders with bulky items often require special packaging to ensure safe arrival, packaging has evolved beyond just functionality.
It's a branding opportunity – a chance to create a memorable unboxing experience that goes viral.
Custom boxes, flyers, and tissue paper can elevate the customer experience and solidify your brand image, but these add-ons come at a cost.
The growing focus on eco-friendly practices is influencing packaging choices. Recycled materials, plastic-free, or bloc box generally cost more than virgin materials.
But here's the good news: some customers appreciate these sustainable options and might be willing to pay a slight premium, potentially offsetting the increased cost for you.
Optimising packaging size to minimise wasted space can reduce material usage and associated costs. This approach is particularly relevant for B2C orders with smaller products.
For specific products, especially with recurring orders, exploring reusable packaging options like Hipli can be a long-term cost saver.
While the initial investment might be higher, it can significantly benefit your brand.
Bigblue Tips
We developed and improved our WMS Atlas to select automatically the best-suited box for your product and the number of products in the order.
We streamline packaging so you can cut costs!
👉 Discover Atlas
5. Shipping: Navigating the last-mile delivery
Shipping costs, the final leg of the e-commerce fulfilment journey, are determined by a complex interplay of factors.
Unsurprisingly, heavier and bulkier items cost more to ship. B2B shipments often involve larger quantities and bulkier products, leading to higher per-order shipping costs compared to most B2C shipments.
The choice of carriers significantly impacts shipping costs.
You can have some flexibility in choosing cost-effective options like standard shipping instead of express.
You can rely on pickup point delivery or partner with green delivery companies to target your customers' preferences, but keep in mind the associated costs.
B2B orders, on the other hand, may be restricted by retailers or marketplace receiving policies that dictate specific carriers.
Bigblue Tips
Bigblue smart carrier offer takes the guesswork out of shipping! They combine the best carriers based on speed, price, and customer satisfaction.
This means faster deliveries, happier customers, and competitive costs for you – all with a single click in the Bigblue app.
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6. Returns: The hidden cost of customer satisfaction
The average return costs on average $30 for a retailer, that's triple what it was before the online shopping surge during the pandemic.
Returns are a double-edged sword in e-commerce.
While a good return policy can boost customer confidence and satisfaction, it also comes with a hidden cost that can significantly impact your bottom line.
Processing returns involves dedicated staff for tasks like inspecting returned items, logging them into inventory systems, and issuing refunds or replacements.
These labour costs quickly add up, especially for fashion brands with high return volumes.
Also, all returned items need a thorough inspection to determine their condition (damaged, resellable, etc.).
Returned items need to be stored in designated areas for inspection, processing, and potential restocking.
Not all returned items are fit for immediate resale. Some might require repairs, cleaning, or relabelling, adding to your overall inventory management costs.
Severely damaged or unsellable returned items become dead stock, tying up capital and requiring disposal solutions, which incur additional costs.
Depending on your return policy, you might bear the cost of return shipping for customers. This can be a significant expense, especially for bulky or heavy items.
Bigblue Tips
Streamline your return process with Bigblue! We create and update your returns, you can see them in the Bigblue app, filter by type (customer/carrier), and export them as CSV.
👉 Discover Bigblue return experience
By understanding warehouse costs comprehensively, you've empowered yourself to make informed decisions and optimise your fulfilment strategy for both B2B and B2C orders.
Remember, factors such as warehouse location, features, inventory management, order volume, and B2B-specific considerations all play a crucial role in determining overall costs.
By leveraging this understanding, you can negotiate better rates, make strategic choices to streamline fulfilment, and ultimately achieve healthier profit margins.
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