Online businesses often need to utilize warehousing in order to maintain a healthy inventory. For most eCommerce businesses, a warehouse gives you a physical location to store and stock products that are sold online. This ensures that when sales are made your business has the products necessary to fulfill each and every order.

Of course, smart warehousing is more than just finding a place to keep your products. When done correctly, warehousing allows your business to flourish by providing your business with a safe and reliable place to store its goods, as well as a complete system for tracking and shipping items.

Without proper warehousing, most online businesses couldn’t safely grow and scale.

Knowing which kind of warehousing your business needs can help you understand what you should look for when choosing a warehouse. Generally speaking, there are five major types of warehouses available to retailers.

5 Types of Warehousing

1. Private Warehouses.

Owned by a private entity, like a wholesaler or distributor, private warehouses typically rent available space to smaller sellers, making them a good choice for start-ups and businesses with less physical inventory. Because larger businesses operate from these warehouses, they provide smaller businesses access to expensive management systems, which can help prevent major inventory issues down the road. However, private warehouses can be expensive depending on the services they offer and where they’re located.

2. Public Warehouses.

Offering services similar if not identical to private warehouses, public warehouses are typically owned by government agencies. Small businesses can rent available space at an affordable cost, but typically they won’t have the same advanced management services offered by private warehouse spaces.

3. Government Warehouses.

More secure than public warehouses and more affordable than private warehouses, government warehouses are a great choice when they’re available. Businesses should know, however, that if you default on rent the government can sell any goods located at the warehouse in order to recover their costs.

4. Distribution Centers.

Incredibly efficient, distribution centers are a great warehousing option for businesses wanting to ensure products get sent out quickly and can be tracked easily. Often used by businesses that have perishable products, distribution centers can be costly if your products don’t move off the shelves as quickly as expected.

5. Smart Warehouses.

By using AI to make order fulfillment as simple and streamlined as possible, smart warehouses automate almost every step needed to receive orders and get them sent out to customers. Because of their efficiency, more and more warehouses are shifting to smart warehousing models, which means in the near future all warehouses will be equipped with smart software and drones.

Of course, there are ways around warehousing as an online business, which means you don’t necessarily have to rent warehousing space if you want to keep your startup business costs low. Many successful online businesses opt for affiliate online models, which means you earn commissions when products sell (you’re never responsible for product fulfillment) or dropshipping models, which allow you to sell unique products online without ever needing to keep an inventory (your wholesale supplier will do that for you).