E-commerce business challenges: when and how to get a business premises

Many ecommerce businesses start small, but as your operation grows, you might find yourself outgrowing your home office or garage. At that point, you move into the realm of how to find dedicated premises for your ecommerce business if you want to continue to scale and thrive.

Transitioning to a new business premises is a significant milestone. On the one hand, it can bring numerous benefits, including increased storage space, room to grow and enhanced business credibility. 

However, it also comes with its own set of challenges, especially in high-demand areas. Ecommerce is now the fastest-growing area for third-party storage, with online retailers increasing their warehouse footprint from 813% in recent years.

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Why would you need a premises for ecommerce?

One of the main advantages for ecommerce businesses, at least early on, is simplicity. 

With a website or marketplace store and some inventory, you can start selling right away (or even start an ecommerce store without inventory. However, as ecommerce businesses grow, it’s not uncommon to hit challenges.

You want to order more stock, but you haven’t got the room to store it. Partners start looking up your address to assess your business status. You find yourself with new customers living far from where you’re based, driving up postage costs. 

In any of these scenarios, operating from your home can be a drawback. But having a dedicated ecommerce business premises can help.

Enhanced credibility and professionalism

One of the primary reasons for moving your e-commerce business to a dedicated premises is the boost in credibility. Home addresses for your business indicate you’re still operating at a small scale – and suppliers may think you’re not as serious about large orders. 

• A business address on an industrial estate or in a commercial area not only builds confidence for your customers but also presents your company as more established. 
• For some partners, larger premises can add prestige, since it shows investment. A warehouse or business unit also provides a formal setting to meet clients that can attract more significant business opportunities.

Scalability and efficiency

With more space, you can manage your inventory more effectively, which is crucial as your business scales. 

• A dedicated commercial space allows for better organisation, quicker order fulfilment, and the ability to handle larger volumes of stock. 
• This operational efficiency can directly impact your bottom line by reducing errors and speeding up your supply chain.

What are the options for ecommerce premises?

1. Storage units

Storage units are secure spaces within larger facilities, typically used for storing personal or business items. They are often located in industrial or commercial areas and can vary in size. 

• Affordability: Storage units are usually the most cost-effective option, making them ideal for businesses looking to minimise overhead costs and a good way to dip your toe into formal premises.
• Flexibility: With flexible rental agreements, you can easily adjust the size of your unit based on your business needs without being locked into long-term contracts.
• Security: Many storage facilities offer robust security features, including surveillance cameras and secure access, ensuring your inventory is protected.

Disadvantages:

• Limited access: Access to storage units may be restricted to certain hours, potentially hindering your ability to fulfil orders quickly.
• Lack of professional image: Using a storage unit as your business address might not present the most professional image to customers or partners.
• No customisation: Storage units generally do not allow for significant modifications or custom setups, which can limit how effectively you organise your inventory – they may also lack special features such as refrigeration or humidity control.

2. Containers

Containers are an upgrade on storage units in terms of flexibility, often repurposed shipping containers, used for storing goods. They can be placed on various sites, offering a portable and secure storage solution.

• Low cost: Containers are a budget-friendly option, often cheaper than traditional premises, making them suitable for businesses with tight budgets.
• Portability: Containers can be moved easily, providing flexibility if your business location changes or if you need to transport goods directly.
• Quick setup: Setting up a container is relatively straightforward, requiring minimal preparation or installation.

Disadvantages:

• Temperature control: Containers can be affected by extreme temperatures, which may not be suitable for all types of goods, especially temperature-sensitive inventory.
• Limited space: The compact nature of containers might restrict how much stock you can store and how efficiently you can operate within the space.
• Professional appearance: Similar to storage units, containers may not offer the polished, professional image necessary for business credibility.

3. Lock-Up shops

Lock-up shops are small retail units with secure, lockable doors, typically located in shopping districts or on high streets. They offer a physical space for both retail and storage purposes. This can be an advantage if your area has a lot of unused space on the high street, potentially saving you money.

Advantages:

• Retail presence: Lock-up shops provide a visible storefront, which can help attract walk-in customers and enhance brand visibility in the community.
• Versatility: These spaces often combine retail areas with storage, allowing you to manage sales and inventory in one location.
• Community engagement: Being situated in a retail area helps you engage with local customers, fostering relationships and increasing sales opportunities.

Disadvantages:

• Higher costs: Lock-up shops tend to be more expensive than storage units or containers, particularly in popular retail areas.
• Fixed hours: Operating hours may be subject to local regulations, limiting your ability to access your premises or fulfil orders outside of standard business hours.
• Potential overhead: Additional costs, such as utilities and maintenance, can add to the financial burden of operating a lock-up shop.

4. Warehouse units

Warehouse units are large industrial spaces designed for storing and managing inventory. They are typically located in industrial estates and can range from small units to massive facilities.

Advantages:

• Ample space: Warehouses provide the most space, making them ideal for businesses with significant inventory or plans for rapid growth.
• Customisation: Warehouses can be tailored to your specific needs, including installing shelving, setting up fulfilment stations, and creating office areas.
• Professional image: A warehouse in an industrial estate enhances your business’s credibility, offering a professional address and a dedicated space for operations.

Disadvantages:

• Higher costs: Warehouses, especially in high-demand areas like London, come with a higher price tag. For example, a 1500 sq ft unit in London might cost around £1700 per month plus bills, compared to £1100 in the north.
• Long-term commitment: Warehouse leases often require long-term commitments, which can be a significant consideration for smaller or rapidly changing businesses.
• Operational complexity: Managing a warehouse involves more responsibilities, such as compliance with health and safety regulations and handling higher utility costs.

How to choose your business premises

Location, location, location

When looking for a warehouse or business unit, the location is crucial. This will depend on your relationship with the space. For example, will you be commuting to the space to handle your orders or could you outsource the warehouse management, picking and packaging to others.

Location also has a major effect on price, especially in large urban areas. To mitigate these costs, consider the following strategies:

1. Explore nearby alternatives: Look into surrounding areas with lower rental costs but still within a reasonable distance from your customer base.
2. Shared spaces: Consider sharing a larger warehouse with another business to split the costs.
3. Negotiation: Don’t hesitate to negotiate lease terms with landlords, particularly if you can commit to a longer lease.

Financial planning and budgeting

Taking on a new space is a major financial commitment. Understanding and planning for the financial implications of moving to a dedicated premises is critical. 

Beyond rent, consider the additional costs such as utilities, insurance, and potential modifications to the space to suit your needs. Ensuring you have a clear financial plan can prevent cash flow issues down the line.

One of the ways to finance your expansion and invest in growth could with a short term business loan that enables you to start growing your business,

How to choose the right ecommerce business premises

1. Research and shortlist potential locations

Start by identifying locations that offer the best balance between cost, convenience, and suitability for your business. Consider the proximity to suppliers and customers, transport links, and the local business environment.

2. Evaluate the space and terms

Visit the shortlisted properties to assess their suitability. Look at the layout, condition, and any additional facilities such as loading docks or office space. When reviewing the lease terms, pay close attention to the length of the lease, rent reviews, and any maintenance responsibilities.

3. Make a financial plan

Your move to a dedicated premises should be a strategic move to increase the value and performance of your business. If you are sure that your move will allow you to increase your revenue in the long term, then a small business loan to finance the move can be a way to accelerate your plans.

With an iwoca Flexi-loan, you can borrow up to £500,000 with flexible terms and without the need for collateral. This can be your springboard to upsizing your business without needing to wait for free cash flow.

4. Plan the move

Once you've secured your premises, plan the move carefully to minimise disruption to your operations. This includes setting up utilities, internet, and security, as well as organising the physical move of your inventory.

5. Update your business address

Finally, update your business address on all legal documents, websites, and marketing materials, including third-party listings such as your Google Business Profile. Inform your suppliers and customers of the change to ensure a smooth transition.

Tips for ecommerce businesses seeking new premises

Talk to the experts

Engage with commercial real estate agents who specialise in industrial properties. They can provide valuable insights into market trends and may have access to off-market deals that aren’t widely advertised.

Check local business networks

Join local business networks in your target area. These networks can offer support, advice, and potentially lead to partnerships or shared space opportunities.

Stay competitive

While securing a premises in a high-cost area like London can increase operational costs, maintaining competitive pricing is crucial. Optimising your supply chain, reducing waste, and leveraging technology can help offset these higher costs, ensuring your prices remain attractive to customers.

Invest in your long-term growth

Securing the right business premises is a strategic move that can significantly impact your ecommerce business's growth and success. 

While the costs and logistics, especially in competitive areas, may seem daunting, careful planning, budgeting, and the right support can make this transition smooth and beneficial. 

If you’re looking for financing to help you make the transition to a dedicated premises, iwoca has helped over 90,000 small businesses since 2012. 

• Apply in minutes and get approved within 24 hours

• Tailor loan terms to your circumstances – borrow funds from 1 day to 2 years
• Transparent interest rates to help you plan your borrowing 
• No fees for early repayments

Find out more about our range of business loans and learn how to apply for funding with iwoca.