How Ecommerce Companies with Warehouses Can Save Money

Having a warehouse can be a huge cost for a small ecommerce business. Read on to learn some effective strategies to save money on storing inventory.

The cost of having an operational warehouse for your ecommerce business is anything but cheap. In fact, if you’re trying to optimize your budget or cash flow, this could be one of the best areas to begin with.

According to data from 2025, the national average warehouse rental rate is approximately $9 per square foot. However, the actual numbers vary significantly, ranging from $5 per square foot to $20 per square foot in high-demand urban areas.

Add to this all the additional expenses, such as maintenance fees, taxes, insurance, utilities, labor costs, equipment, machinery, and the cost of simply buying and holding inventory, and you quickly arrive at a significant sum. For a typical SMB, the numbers can range from $3,000 to $50,000+ per month — especially if the facility requires labor investments.

With this in mind, it’s only natural that you’re looking for opportunities to cut costs. Here’s how ecommerce companies with warehouses can save money, along with a few interesting examples of specific warehouse budgeting strategies brands can take to optimize cash flow and boost profits.

Understand the Balance Between Stock and Deadweight

One of the biggest challenges of starting an ecommerce business (and ensuring its sustainable growth) is the fact that making money necessitates an upfront investment.

After all, if you’re going to make money selling products, you first have to purchase those products, ideally at an affordable price, so that you can make a profit. That is, of course, unless you run a dropshipping business, which operates in a completely different manner.

For most business owners, the best way to accomplish this is to invest in higher volumes of product, which reduces the unit cost.

But here’s the deal: having more stock on your hands isn’t always a positive thing. Even if you get your products at a more affordable price, storing them is still a significant expense.

So, one of the first things you need to do to save money on your warehouse is understand the balance between stock and deadweight.

Ideally, you don’t want to have too many units of the same product on your hands. That way, they won’t take up too much space. Plus, this strategy allows you to mitigate the risk of being unable to sell your inventory.

Now, if you are still worried about having sufficient products to ensure the seamless operation of your ecommerce brand, don’t waste your money on warehouse rental costs. Instead, adopt web UX hacks that will allow you to keep only what you need in your inventory, without risking the scenario where your customers can’t get what they need from your brand.

One excellent method to do this would be to base (at least a portion of) your sales on pre-orders. These give you an exceptionally valuable opportunity to correctly predict how much stock you need.

Alternatively, if you prefer to work with smaller quantities, you can use UX design elements like “low stock” (a.k.a. last call quantity copy) notifications or similar, like the one used by Dessaint. They’ll give a much-needed dose of stock-related transparency to your audience and help shorten the sales cycle, which is great for your conversion rates.

Source: dessaintstudio.com

Use Ecommerce KPI Data to Comprehend Typical Demand

Another huge aspect of saving money on warehouse costs is simply not buying more stock than you can actually sell.

According to expert evaluations, approximately 20-30% of all inventory is dead stock.

Now, some ecommerce businesses can and do extract maximum value out of their dead stock. However, many still cave under the financial pressures of poor planning, explaining why so many startup businesses fail within just a couple of years of existence.

One effective strategy to prevent this from happening (and save on warehouse costs) is to closely monitor your sales metrics to understand the typical demand for your products.

At the end of the day, it doesn’t matter whether you use Google Analytics or a more advanced ecommerce solution — like Sellbery — to get your data. As long as you identify slow-moving inventory and come up with ways to stop it from killing your profits, you’ll see significant savings on warehouse expenses.

Optimize Cash Flow and Taxes with Cost Segregation

If you’re renting warehouse space, then the logical way to save money is to minimize the amount of non-profitable space you pay for each month.

But what if you own the real estate your business uses to store inventory? You can still save significant amounts. You just have to know where to look.

In addition to commonly used tactics like reducing energy costs and automating resource-intensive processes, there is a lesser-known opportunity for warehouse savings. And it has to do with your taxes.

At the end of the day, taxes make up a big portion of your warehouse-related expenses. So, if you can minimize how much you spend in this way, you can unlock significant savings (and optimize your cash flow to help grow your business).

But how do you do this?

Well, it all has to do with real estate depreciation and cost segregation.

Essentially, by identifying and reclassifying assets that depreciate quickly, you can reduce your taxable income and easily increase profitability.

The downside of the process is that it can be highly technical (and tricky if you want to do it right). However, there are cost segregation businesses that can help you through the process with expertise and safety, and even conduct free savings calculations so that you know precisely how much you stand to save by using this tactic.

Explore Alternative Shipping Options (Or Negotiate for Better Deals)

The reality of running an ecommerce business that holds a lot of inventory is that your expenses don’t only include the space where you keep your products. You also have to pay for those products to get to your buyers, which can often be very expensive.

There are a few reasons for this.

On the one hand, consumers demand exceptional shopping experiences in 2025 and beyond.

According to research, 62% of people won’t buy from a brand that doesn’t offer free shipping. And many aren’t willing to wait more than three days for a delivery — especially when it comes to products like consumables.

On the other hand, it’s crucial to note that shipping costs have risen dramatically over the past few years.

So, if you’re exploring opportunities to minimize the expenses related to your ecommerce inventory, it’s essential that you remember your shipping costs. You don’t necessarily have to change your provider (though it’s always a good idea to shop around for better, more reliable shipping companies).

However, simple hacks like offering in-store pickup (in case you have a physical location), which is what brands like Nordstrom do, can provide an effective way to move your inventory faster and convince more customers to click the “Buy” button. The end result? You’ll minimize the amount of money you lose every month on keeping stock you can’t sell due to poor shipping policies.

Source: nordstrom.com

Encourage Bulk Orders or Monthly Subscriptions to Boost Product Turnover

In some cases, the best way to save money on warehouse-related expenses isn’t to focus on your physical storage space. Instead, it’s to find creative ways to minimize the amount of time you need to hold onto stock, ideally by maximizing product sales.

For example, something as elementary as upgrading your site’s UI design to encourage bulk orders or monthly subscriptions can be a marvelous method to retain (or grow) your existing conversion rates without having to increase your inventory.

Including incentivized monthly subscription options on your product pages can be more than sufficient to help optimize your warehouse. For a great example, check out this product page from Brain Ritual:

Source: brainritual.com

Alternatively, you could simply use highly visible sections of your ecommerce website to highlight multi-product packs, something that True Classic does in its Top Deals & Gifts homepage section.

Source: trueclassictees.com

Avoid Preventable Liabilities Through Diversification

Sometimes, the biggest loss related to your warehouse inventory won’t be the costs of renting and operating such a space. Instead, your biggest liability may be the fact that something unexpected can happen to your valuable stock, effectively erasing your brand’s profits in an instant.

According to data from U.S. fire departments, approximately 1,500 warehouse structures catch fire annually, causing hundreds of millions in property damages. And that doesn’t even account for the potential cost of workplace injuries.

Of course, fire is just one potential scenario that could open you up to risk. There’s also flooding, theft, pest infestations, and the inevitable factor of human error.

If you want to minimize the damage your business would suffer in any of these scenarios, the best thing you can do is diversify the locations and methods of your inventory storage.

It’s a simple tactic, yet it works marvelously well — and not just when it comes to your warehouse, but any of the essential elements of your business’s operations.

For example, businesses like medical alert system providers often work with multiple monitoring partners to create an always-available network of emergency response centers that won’t fail due to an error in a single location.

Moreover, it’s worth noting that diversifying your warehouse network may allow you to optimize shipping times, which is an effective way to elevate customer experience through faster shipping.

Final Thoughts

Having a warehouse for your inventory can be a large expense for a small business. But while there are some things you shouldn’t try to save money on — namely, employee safety and inventory security — there are ways to minimize the dent in your pocket this aspect of your business operations can make.

The strategies above are excellent ways to cut costs on your ecommerce warehouse. So, study them closely, identify the tactics that seem applicable to your business, and start implementing them right away.

Sure, none of these tricks will revive a bad cash flow or make up for poor financial decisions. But they can save you some money, which you can then take out as profits or invest back into your business to boost its growth potential.