Warehousing Guide: Types and Tips for Ecommerce Businesses

Learn what warehousing involves, the types of warehousing options available to businesses, and how to use Shopify to manage your warehousing operations.

Warehousing is the process of storing goods before they’re sold, shipped, or used in production. In both ecommerce and physical retail, your warehousing choices can significantly affect how easily you can get merchandise to your customers.

Choosing the right kind of warehousing, and the right way to manage it, can be the difference between a business that scales smoothly and one that outgrows its own operations. According to a March 2025 Radial retailer survey, 60% of brands with less than $50 million in revenue are still fulfilling orders in-house from a single distribution center. This approach can cap how quickly a business can grow once order volume outpaces one facility’s capacity.

This guide covers what warehousing is, the main types of warehouses ecommerce businesses use, and how warehousing fits into the order fulfillment process.

What is warehousing?

Warehousing is the storage of raw materials, components, or finished goods in a dedicated facility before they’re distributed, sold, or used in manufacturing. It sits in the middle of the supply chain; goods arrive from production or procurement, are held in a warehouse, and then move out again toward production or distribution and, eventually, the customer.

Businesses can use dedicated warehouses they manage themselves, or lease warehouses and outsource some or all of the warehousing process to external providers. Some businesses also develop a hybrid system. For example, this could mean keeping fast-moving inventory in a self-managed facility while using a third-party logistics (3PL) provider to reach customers in another region. 

Jason Wong, CEO of Doe Beauty, uses this kind of location strategy for efficiently managing inventory to meet customer demand. “We look at where our customers are placing their orders from,” he says. “We respond by placing our inventory near those cities to reduce the overall miles traveled by those packages.”

How warehousing works for ecommerce businesses

Warehousing is just one stage of a company’s overall supply chain management or inventory management. Yet within that stage, many things are happening. Warehousing involves a series of steps as inventory enters a warehouse facility and is then catalogued, stored, and eventually shipped away.

Here’s how that warehousing inventory movement might look:

1. Receiving inventory. Products arrive from a manufacturer or supplier and are checked for inventory accuracy and quality.

2. Storage. Items are organized on shelves, racks, or bins so they can be located quickly later. 

3. Inventory tracking. Stock levels are recorded and updated as inventory moves in and out of the warehouse.

4. Order picking. When a customer places an order, the correct items are located and pulled from warehouse storage.

5. Packing. Items are packaged securely, and a shipping label (plus a return form, if applicable) is attached.

6. Shipping. The order is handed off to a carrier for delivery.

For some warehouse operations, there’s a seventh step: returns management. 

The National Retail Federation (NRF) and Happy Returns estimate that 19.3% of US online sales were returned in 2025. If a warehouse is equipped to accept customer returns, it will intake those items and inspect them. Those returned items can then be restocked, resold, or disposed of. 

Additionally, warehouses are responsible for guarding inventory against damage, spoilage, and theft through security, climate control, and proper handling.

Bernie Schott, CEO of the yoga mat brand Reech, describes what his company’s warehouse management system looks like day to day. “We check unfulfilled orders around 7 a.m., print shipping labels, and write on the back each product that needs to be picked for the order,” Bernie says. “This way, we know what products to pick from the warehouse. [Then], before sealing packages, we double-check the order against what was packed.”

Types of warehousing

• Private warehousing
• Public warehousing
• Distribution centers
• Fulfillment centers and 3PLs
• Cold storage warehousing
• Bonded warehousing
• Automated and smart warehousing

The right type of warehousing depends on your business’s size, product type, and how much control you want over day-to-day operations. Here’s a look at options for your own warehouse needs:

Private warehousing

A private warehouse is owned or leased long-term by a single business for its exclusive use. These self-managed warehouses give merchants full control over layout, staffing, and processes, but it also means covering the full cost of the space, equipment, and labor. Larger or fast-growing businesses with consistent volume and the resources to manage their own facility benefit from private warehouses. 

Flamingo Estate, a home and body care brand, handles fulfillment this way. “We don’t have a 3PL. We pick and pack our own orders in a warehouse,” Aaron Harvey, the brand’s creative director, says on an episode of the Shopify Masters podcast. “We have tens of thousands of square feet of warehouse space, and there are employees that are handwriting notes and tying ribbons. But this is what we do. This is our business.”

Public warehousing

Public warehouses are owned by a third party and rented out to multiple businesses, typically on a short-term or month-to-month basis. Businesses pay for the space and services they use without the overhead of owning a facility.

This type of warehouse space can be a good fit for businesses with seasonal or fluctuating storage needs, or those who need extra space without a long-term commitment.

Distribution centers

Distribution centers combine storage with active inventory movement. They’re constantly receiving bulk shipments and redistributing them to stores, other warehouses, or wholesale customers. This type of warehouse space is ideal for retailers with multiple store locations or wholesale accounts that need one hub to coordinate inventory across a network. 

International distribution centers reduce shipping costs, delivery times, and your carbon footprint, as the umbrella maker Original Duckhead learned. “We were doing all of our fulfillment ourselves from the UK, and then Brexit and all those things came, making it a bit more difficult for us to ship to Europe,” Founder Morgan Cros says on Shopify Masters. “So we decided to partner up with distribution centers. We have one in the UK, one in Europe, and one in the US.”

Fulfillment centers and 3PLs

Fulfillment centers specialize in getting individual orders to individual customers quickly. Many are run by 3PL providers that manage fulfillment for several brands out of the same facility. The US 3PL market reached $323.4 billion in gross revenue in 2025, up 5% year over year, according to Armstrong & Associates.

Adam Besheer, cofounder of the plant delivery brand Greenery Unlimited, outsources this using a 3PL. “We had little to no experience in fulfilling our DTC [direct to consumer] orders successfully,” Adam says in a case study, “but Shopify Fulfillment Network made getting started easier than ever. We can trust that our inventory will ship on time, be where it said it would be at any stage of the shipping process, and arrive to our customers in under three days.”

Such storage solutions are great for direct-to-consumer brands that want fast, reliable shipping without building in-house fulfillment infrastructure. Shopify’s custom fulfillment services feature is built to connect a store to a third-party warehouse or fulfillment center.

Cold storage warehousing

Cold storage facilities use refrigeration or freezing to store temperature-sensitive goods, like food, beverages, and pharmaceuticals, at a controlled temperature throughout the storage period.

Cold storage warehouses are best for businesses selling perishable products. This includes food and beverage brands as well as health and beauty brands with temperature-sensitive formulations that require climate-controlled warehousing.

Bonded warehousing

A bonded warehouse (also called a customs warehouse) is a secure, customs-authorized facility where imported goods can be stored without immediately paying import duties or taxes. Duty is only owed once goods leave the warehouse for domestic sale; if they’re re-exported instead, the business may avoid the duty altogether. In the US, goods can typically remain in a bonded warehouse for up to five years, per 19 CFR § 144.5.

Bonded or customs storage warehouses are designed for importers dealing with high duty costs, long sales cycles, or goods that are likely to be re-exported. 

Automated and smart warehousing

This is a category of modern warehouses that use robotics, conveyor systems, and warehouse management software to handle tasks like picking, sorting, moving, and managing inventory with limited manual labor. The push toward automation has accelerated. In the 2026 MHI Annual Industry Report, produced with Deloitte from a survey of more than 500 supply chain leaders, 39% of respondents said robotics and automation are already having a significant impact on their operations, up 16 percentage points from the year before.

The automated approach can be a good warehouse management system for high-volume operations facing labor shortages or looking to speed up order processing. Startups with relatively simple logistics operations and low inventory storage needs may opt for traditional warehousing, where you pay for secure storage and little else.

Ways to use Shopify to manage warehousing

Shopify includes several tools built for businesses managing inventory across one or more storage facilities. 

Jenni-Lyn Williams, founder of Snarky Tea, uses Shopify to track goods from raw materials through fulfillment of finished goods: “We use Shopify’s native inventory management capabilities to track our production as it moves from our manufacturing facility to the fulfillment center,” Jenni-Lyn says. “We also use it to manage all components on our kitted items and sampler sets. It’s a game changer and keeps us from spending $250+ a month on an outside system.”

Here’s a look at how Shopify tools can simplify your warehouse logistics processes, helping you keep goods flowing in order to meet customer expectations.

• Inventory management. Shopify’s built-in inventory management lets warehouse managers track stock levels, adjustments, and inventory history across locations. You get complete control of your physical assets, using the same software that powers your other business operations.

• Location management. Shopify users can represent warehouses, retail stores, pop-ups, and fulfillment apps as “locations,” allowing you to store goods and fulfill orders from a warehouse alongside other parts of the business, such as physical stores. Most plans support up to six locations.

• Hybrid management. If your business uses a hybrid model, Shopify’s advanced technology lets you stock the same product in your own warehouse and a 3PL or fulfillment app at the same time, with independent counts tracked per location.

• Bin location mapping. Businesses can map products to specific shelves, racks, or compartments within a warehouse. This bin location feature speeds up picking accuracy, and it works whether you stock all goods in a centralized location or across multiple warehouses.

• Inventory transfers and shipments. Shopify’s inventory transfer feature helps businesses move products between warehouses and retail stores, tracking quantities in transit and confirming what arrives. This keeps operations running smoothly as you adjust to customer demand in different regions.

• Order routing. To cut shipping costs and delivery times, businesses can set order routing rules to prioritize which warehouse fulfills an order. For example, you could set the rule to always ship from the closest location, including physical retail locations.

Warehousing FAQ

What are the three types of warehousing?

The three basic types of warehousing are private, public, and third-party logistics (3PL). Private warehouses are owned or leased by a single business for its own exclusive use. Public warehouses are owned by a third party and rented out to multiple clients. 3PL warehouses are run by outside providers that handle storage and order fulfillment on a business’s behalf.

What are the two most common warehouse activities?

The two most common warehouse activities are storage (holding inventory until it’s needed) and order fulfillment (picking, packing, and preparing goods to ship). Some warehouses focus on just storage, while distribution centers and fulfillment centers actively handle both storage and the order fulfillment process.

What are the two most common warehouse activities?

The four main functions of a warehouse are receiving inventory, storing it, picking and packing orders, and shipping goods out. Many warehouses also handle a fifth related function—returns processing—though it’s not always considered core to the original four.

What are some common problems that arise in a warehouse?

Common warehouse problems include inventory inaccuracies, space constraints, and labor shortages. In the 2026 MHI Annual Industry Report, 58% of supply chain leaders surveyed cited workforce and talent acquisition challenges, and 48% cited rate forecasting and inventory management. Rising returns volume has also led to higher costs in the warehousing industry. Per the National Retail Federation, roughly 1 in 5 US online orders were returned in 2025.