Your E-commerce business is growing rapidly, and you’ve started to run out of space to keep the stock intact. Or, your current setup isn’t helping in terms of location and is hindering your team’s efficiency, and you are on an explicit hunt for better storage solutions.
Whatever the reason, if you are seriously searching for a suitable warehouse storage facility for your business and are already foraging options—you’ll need to consider many factors before making the final decision. And the crucial factor that’ll come into play would be accounting and measuring the total cost that’d go into renting a warehouse and comparing alternate options to see what would work best for your business.
This article will help you weigh through the warehousing costs and calculations in-depth and the alternative solutions associated with it—to help you make the right decision. Keep following:
Warehousing costs are all the expenses that are incurred and linked while running a warehouse. Expenses can be of any type, like rent, utilities, labor, insurance, maintenance, taxes, and inventory control. The costs incurred as an expense depend on the warehouses and the factors relying on them, like size, location, services offered, goods stored, etc.
It is no secret that landowners and brokers often make renting a warehouse complex by using complex jargon instead of plain English to communicate their pricing options. But in reality, warehouse cost is based on three main criteria – the floor area (square footage), base rental rate, and estimated operating cost.
The floor area depends on how much space you need for your business and is usually measured in square footage. The area you use for inventory impacts the cost of renting a warehouse.
Note: You can further cut down costs on warehousing by optimizing and making the best use of the available vertical space—reducing total rental costs, big time.
The base rental rate is the amount you’ll pay the landlord, excluding additional operating costs. A base rate is usually charged per square foot on a monthly, quarterly, or yearly basis—as per your lease agreement.
There are two types of operating costs you’ll need to consider before renting a warehouse – Triple Net Lease, also known as Net Net Net (NNN), and Common Area Maintenance (CAM) fees.
Net Net Net, also known as a triple net lease, refers to the property taxes and insurance fees that you, as a lessee, are supposed to pay besides the base rent—since you are responsible for all the operations happening at the rented property.
Common Area Maintenance (CAM) is the maintenance costs passed down from the landlord to the lessee. Maintenance fees include everything—from management to maintenance of the commercial property.
Must Read: Tips to remember while choosing an E-commerce Warehouse
Warehouse costs are affected by factors like:
Did you know in the financial year 2022, the average warehousing rent was 258 Indian rupees per square meter per month in Pune, which was ranked the most expensive among all major cities in India? We’re breaking down the calculations below into three different rental options: monthly rate, quarterly rate, and annual rate–to help you better estimate the warehousing costs specific to your brand:
Let’s say your business gets billed every month for warehousing and assume the following:
The storage space you use for warehousing = 1000 sq ft
The base rate = Rs 50 per sq ft per month
NNN = Rs 20 per sq ft per month
Adding up the base rate and NNN (Rs 50+Rs20), you’ll see that your total asking lease becomes Rs 70 per sq ft per month. Just multiply this amount by the square footage of storage, i.e., Rs 1000 X Rs 70= Rs 70,000.
This means you would become liable to pay Rs 70,000 as rent every month at the chosen warehousing space.
Let’s assume the following for quarterly rental rates:
Storage space you use for warehousing: 1000 sq ft
Base rate: Rs 100 per sq ft per quarter
NNN: Rs 50 per sq ft per quarter
Adding up the base rate and NNN(Rs100+Rs50), you’ll see that your total asking lease becomes Rs 150 per sq ft per quarter. Just multiply this amount by the square footage of storage, i.e., Rs 1000 X Rs 150= Rs 1,50,000.
In this case, you would become liable to pay Rs 1,50,000 as rent every quarter or Rs 1,50,000/12 = 12,500 per month.
Let’s say you choose the option of yearly billing for warehousing and assume the following:
Storage space you use for warehousing: 1000 sq ft
base rate: Rs 200 per sq ft per year
NNN: Rs 100 per sq ft per year
Adding up the base rate and NNN(Rs 200+Rs100), you’ll see that your total asking lease becomes Rs 300 per sq ft per year. Just multiply this amount with the square footage of storage, i.e., Rs 1000 X Rs 300= Rs 3,00,000.
This means you would become liable to pay Rs 3,00,000 as rent every year for the chosen warehousing space.
Generally, annual billing gives you the most beneficial rate structure, and you’d definitely want to consider this before choosing a warehouse.
Apart from this, make sure to ask your landlord about the additional expenses you might incur, such as electricity, HVAC maintenance, and other operational & repair expenses.
If you also own a warehouse and incur a lot of expenditure on just the warehouse costs, let me help you with the way to manage your budget. You can easily reduce the warehouse storage costs by:
The simple answer is ‘No.’ Renting a warehousing space is not the only option. While buying your own warehouse can seem very alluring, it’s certainly not possible for most E-commerce brands to make this big of an investment.
You’ll not just become responsible for the maintenance and upkeep of the warehouse but will also be trapped to pay off huge amounts of down payments.
Alternatively, many businesses work with trusted third-party logistics (3PL) providers if renting or owning a warehouse becomes out of the question. 3PL does all the heavy lifting on your behalf by taking care of all your storage and warehousing needs while being cost-effective.
The main factor that one should consider while renting or purchasing the warehouse is the budget. If one has a sufficient amount, they should own the warehouse, as after a certain duration they won't have to bear the warehouse storage costs. Another thing that needs to be taken into consideration is duration. If you need it for a short time, there is no point in owning the warehouse, as it will cost you more. One should also understand the requirements of employees in their warehouse; it should not be less as it would not give more output, nor should it be more as it would just hamper your budget.
Partnering with third-party logistics providers gives you the flexibility to focus on more important things and take care of all your logistics requirements end-to-end.
If you are looking for warehousing and logistics solutions for your E-commerce business, work with the best in the business. We at ANS Commerce provide fully equipped warehouse facilities across India with cutting-edge warehouse management systems (WMS) and order fulfillment capabilities – pick, pack, dispatch, and return management.
To know more about how ANS Commerce can help you with warehousing and logistics support, book a free consultation today!
If you're planning to calculate the expenses for warehousing, let me make it easy for you. You can consider the following factors:
Apart from this, you can also consider other factors that play a significant role, like:
The fixed budget of a warehouse depends on multiple factors, like the place where the warehouse is located, the size of the warehouse, the services it provides, the goods it stores, and the duration to which it has been entitled.
The expenses incurred at the time of shifting the items in a warehouse are:
The warehouse storage costs depend on multiple factors, like the flooring, structure, location, etc. More specifically, it looks after the amenities that are required by the customer. As the load can be carried in a porous area, it plays a significant role in terms of cost. However, as per the present data, the average warehousing cost ranges from several lakhs to several crores of Indian rupees.
The most significant factors involved in warehouse storage costs are:
The total cost of running a warehouse depends on a few things: where it's located, how big it is, what services it offers, what kind of goods it holds, and how long it's being used.
The warehouse storage incurs multiple expenses at the time of shifting the items in the warehouse, like:
The price of a warehouse storage space can vary based on factors like its flooring, structure, and location, and also on the amenities it offers. The load-bearing capacity of the area also affects the cost. Currently, warehouse prices in India range from several lakhs to several crores of Indian rupees.
