After a cross-border seller’s business has reached a certain stage and has comprehensively considered various factors, it may be appropriate to establish an overseas warehouse.
In this article, Weefreight will share some suitable times to establish an overseas warehouse, as well as an analysis of the cost and benefits.
When to Establish an Overseas Warehouse
Stable and Large Order Volume: When a seller’s product’s order volume in the target market continues to grow steadily, reaching a certain level of monthly orders, such as several hundred or more, establishing an overseas warehouse can reduce logistics costs and improve delivery efficiency, making it economically viable.
Suitable Product Type: If a seller sells small, lightweight, high-value, and fast-moving goods, such as 3C electronics and jewelry, overseas warehouses offer relatively low storage and transportation costs, can quickly meet customer demand, and improve customer satisfaction. Furthermore, for products with strong seasonality, such as holiday gifts and summer clothing, pre-stocking goods in overseas warehouses allows for faster delivery during peak sales season, helping to capture market share.
Brand Development Needs: When sellers seek to enhance their brand image and customer experience, overseas warehouses can provide faster delivery and more efficient after-sales services, such as local returns. This helps strengthen customer trust and loyalty, and promotes brand growth in overseas markets.
High Supply Chain Control Requirements: If sellers require high control over their supply chain and want to independently manage inventory, shipping, and delivery, avoiding the inconsistent service quality that can arise from third-party overseas warehouses, then building their own warehouses can better meet this need.
Input Cost Calculation
Rental Costs: Rents vary significantly across countries and regions. For example, in the United States, a 10,000 square foot warehouse costs between $10,000 and $20,000 per month, or between $120,000 and $240,000 per year. In regions like Asia and Europe, rents also fluctuate significantly, influenced by factors such as local economic development.
Labor Costs: Labor costs vary significantly across countries due to differences in economic levels and labor market conditions. For example, hourly wages for warehouse workers in the United States are higher, and additional expenses such as employee benefits and insurance must be considered.
Hardware and System Investment: Hardware requires racking, forklifts, and packaging equipment. Equipment purchase or rental costs vary depending on scale and demand. System investment primarily involves a warehouse management system (WMS). A mature WMS system costs from a few thousand to several hundred thousand RMB.
Maintenance and Operational Expenses: These include daily maintenance, insurance, taxes, network communications, office supplies, and other miscellaneous expenses. As business expands, investments in warehouse upgrades may also be necessary.
Other Costs: These include initial transportation costs, the cost of shipping goods from China to the overseas warehouse, and potential costs for destroying unsaleable inventory.
Benefit Calculation
Reduced Logistics Costs: Overseas warehouses can reduce initial transportation costs through bulk shipping, while also offering relatively low local delivery costs. For example, compared to direct mail costs of $8-12 per order, using an overseas warehouse might only cost $2-5 per order, reducing costs by approximately 40% for a 100g item.
Improved Sales Efficiency: Fast delivery services increase customer satisfaction and purchase intent, thereby increasing sales. For example, reducing traditional cross-border logistics delivery times from 15-30 days to 1-7 days can attract more customers and improve your store’s competitiveness.
After-sales Service Optimization: Overseas warehouses can conveniently handle returns and exchanges, reducing customer dissatisfaction and return rates, while also reducing cross-border return costs.
Brand Value Enhancement: Efficient logistics and high-quality service help enhance brand image and visibility. In the long term, this can contribute to expanding your brand in overseas markets and increasing your market share, ultimately generating greater revenue.
(Note: All fees listed above are for reference only. Please refer to your actual invoice for details. Thank you!)
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