Product Research

Renting Warehouse Space vs. Using a 3PL

by Dirk Llorens Aug. 24, 2021

As your eCommerce business grows, you’ll need to establish the right way to handle logistics and shipping for the orders that are hopefully flooding in. There are multiple options for companies to use. While some prefer to rent and manage their own warehouse space, this isn’t the only choice. In the modern age, third-party services that handle distribution and order fulfillment are becoming more popular. They suit many businesses down to the ground.

In this guide, we explore the argument for renting warehouse space and the argument for using a third-party logistics companies. There is no simple answer to the rental vs. 3PL question, you need to work out what the appropriate option is for your own business.


The Argument for Renting Warehouse Space


Before we explain more about 3PL (or TPL as it is sometimes called) we should explore the benefits of renting and running your own warehouse space.

Although the modern appeal of 3PL services is clear, it doesn’t necessarily mean that it is right for absolutely every company. For many, running your own warehouse is the obvious choice.

Benefits include:


  • Keeping control. Some people don’t want to delegate this task to another company. To entrust someone with your order processing is also trusting them to keep your company reputation in good standing. If the company were to continually make mistakes or fail to provide good service, customers are going to blame you for it. If you are running your own warehouse, you at least have the option to monitor and ensure that you are meeting customer expectations.
  • Saving money (sometimes). This is not a guaranteed benefit of renting a warehouse. If the space is not suitable, or it is managed badly, there’s every chance that it will cost you more. However, if you run a warehouse well, you can get the pick and pack down to a fine art and ensure you are processing orders in the most cost-efficient way.


On the very biggest scale, companies tend to find that running their own warehouse space is good practice, but it is not essential. For many smaller businesses and budding eCommerce entrepreneurs, 3PL solutions could be ideal.


The Argument for Using 3PL Services


There must be a reason why 3PL services are growing at such a fast rate. When you start to explore the benefits, it is easy to see why plenty of small companies partner with another service to get their customer orders sent out.

Besides any other reasons for working with an external partner, you need to think about the fact that it saves you the time and effort required to set up your own warehouse. Not only can it be costly to do so, but you also have to find a suitable space, buy equipment, get it insured, and this is before you have even thought about staffing. Running a warehouse is no small operation, and you might get tied into a long contract. What if those orders should dry up? Taxes still have to be paid, employees still have to be paid.

Avoiding the difficulties of setting up a warehouse yourself may seem like the most appealing option. Fortunately, there’s a much more flexible option.

Other benefits of a 3PL service include:


  • Using the company’s expertise. The company you are working with is likely to be a well-oiled machine. These kinds of companies work with a variety of clients and will have experience of picking and packing orders, plus getting them out on time. If you choose a reliable TPL partner, your customers can enjoy this benefit.
  • Simple scaling of your business. If your orders slow down, you may be able to scale back. If they go through the roof, you can accelerate. 3PL companies often have plenty of warehouse space and employees, making it easy to cope with an increase in orders.
  • Cost-effective shipping. Done correctly, 3PL doesn’t have to be an expensive method of fulfilling orders, and there is a lot less financial risk than setting up a warehouse from scratch.
  • Fast shipping. Most reliable 3PL shipping companies ship incredibly quickly, this is likely to be what their whole business is built around, so if they don’t manage to pick, pack, and ship in good time, they lose customers.


How Does a 3PL Work?


3PLs can often handle as much of the process as you want them to. It ordinarily begins with them taking shipment of your products, either from your manufacturing partners or directly from your company.

They store items in fulfillment centers, assigning SKUs and giving each product its own warehouse space, ready to be picked, packed, and shipped.

When the order comes in, the warehouse staff will locate, pack, and send the item out to the customer. Many 3PL partners have a way to automate this process, so they can receive the orders directly from your website or eCommerce system, ready to ship.

Many 3PL companies will also handle returns, so if there are defective items they won’t be sent to you to deal with. A replacement or refund can be issued as part of the process.

Financially, there are different agreements that companies may have with the warehouse. Some will work on per-project fees, some work on account retainer fees, some require a mixture of both. For small eCommerce sellers, it might not make sense to set up a retainer until you reach a high level of sales.




There are so many ways in which it has become easier to start and grow an eCommerce business. Whereas historically, you may have had to take the plunge and rented a warehouse, you can now make the decision to work with a 3PL partner. Naturally, this has both pros and cons, but it generally makes it easier to scale your business, and can take a lot of trouble and responsibility away from you, the seller.

As a retail company grows, it is natural that it takes on its own warehouse space, but in the modern age, it doesn’t have to.