E-commerce companies often hear that using multiple warehouses will automatically slash costs and turbocharge efficiency. The prevailing narrative is that more warehouses equal faster delivery and cheaper shipping, a strategy popularized by giants like Amazon. However, the real cost of splitting inventory is more complex. Distributing products across multiple fulfillment centers can introduce hidden expenses and operational challenges that many industry pitches gloss over. This guide critically analyzes the single vs. multiple warehouse strategy for U.S. eCommerce businesses, debunking the myth that multiple warehouses are a guaranteed path to lower costs and higher efficiency. We will examine detailed cost breakdowns, fulfillment speed realities, regulatory/tax implications, and real-world examples to reveal what “they” aren’t telling you about multi-warehouse operations.

Jump right in: The Real Cost of Splitting Inventory

• Detailed Cost Analysis: Single vs. Multiple Warehouses
• Fulfillment Speed: Perception vs. Reality
• Data-Driven Visual Insights
• Regulatory and Tax Considerations
• Real-World Case Studies & Modeled Scenarios
• Competitor Claims and Industry Misconceptions
• Summary

Detailed Cost Analysis: Single vs. Multiple Warehouses

Splitting inventory between warehouses changes the cost structure of fulfillment in significant ways. Below we break down key cost factors and compare a centralized (single warehouse) approach with a distributed (multi-warehouse) approach.

Shipping Expenses – Savings vs. Added Complexity

At first glance, placing warehouses closer to customers should reduce shipping distances and costs. Indeed, adding a second fulfillment center can yield roughly 10% savings in parcel shipping by minimizing high-zone (long-distance) shipments, and a third can increase savings to around 25–30% ​digitalcommerce360.com. Geographically, a single warehouse will inevitably ship many orders to distant zones (e.g. West Coast to East Coast), incurring higher carrier zone charges. Multiple strategically placed warehouses can eliminate the most expensive zones and lower the average zone per shipment​.

Shipping zone coverage with one vs. three U.S. fulfillment centers. Left: a single California warehouse sees large portions of the country in far shipping zones (green/blue/purple areas indicating Zone 6–8). Right: three warehouses (CA, TX, PA) shift most of the U.S. into closer zones (red/orange/yellow), eliminating Zone 7–8 shipments and significantly reducing average shipping distance.​

While multiple warehouses do cut average outbound shipping costs, these savings aren’t “free.” Inbound freight and transfer costs often rise with distributed inventory. Instead of one bulk shipment from your supplier to a central location, you may pay to send goods to multiple facilities (for example, importing containers to both East and West Coast ports). As one logistics provider notes, “distributing inventory will increase your inbound shipping costs”​dclcorp.com. If inventory must be redistributed between warehouses to balance stock, those internal transfers incur transportation and handling costs as well. In short, multi-node networks shift some costs from last-mile shipping to upstream freight and complexity.

Storage Fees and Inventory Holding Costs

Housing products in more than one warehouse can drive up storage and inventory costs. Each facility needs to maintain safety stock, buffer inventory kept on hand to prevent stockouts. In a single warehouse, a slow-moving item might require only 1 pallet in storage; in three warehouses, that could mean 3 pallets (one at each location)​digitalcommerce360.com. As a result, “you just tripled your inventory and carrying charges for that one item”​digitalcommerce360.com. This inefficiency multiplies across many SKUs, forcing companies to tie up more capital in inventory. More units sitting in warehouses also means higher inventory carrying costs (insurance, depreciation, cost of capital) and potentially greater risk of obsolescence or spoilage.

Scenario: (750 cubic feet minimum storage for each warehouse)

Single Warehouse:

1000 cubic feet @ $0.75 per cubic foot = $750/month

Two Warehouses: Split stock

750 cubic feet @ $0.85 = $637.50
50 cubic feet @ $0.85 = $637.50

New monthly cost = $1,275/month

You’re now paying 70% more and you’re carrying more inventory to avoid stockouts. 

Furthermore, warehouse storage fees may increase with a distributed approach. A business might get volume discounts by keeping 10,000 units in one facility, but split into two locations (5,000 each), it could lose economies of scale. Some 3PLs also charge minimum monthly fees per warehouse. Until inventory levels and throughput justify each additional node, you could be paying for underutilized space. As DCL Logistics cautions, “one of the biggest costs of splitting inventory is additional storage costs” and you may end up paying extra for storage anomalies while learning to optimize new locations​.

Stockouts, Stock Allocation, and Service Levels

A multi-warehouse strategy can paradoxically increase the risk of stockouts in some situations. With inventory divided, each location has a smaller pool of stock to draw from for local orders. If demand surges unexpectedly in one region, that warehouse can run out even if another warehouse has plenty. Proper forecasting and allocation become critical – you’ll need “good data and a strong forecasting process to balance inventory effectively among several facilities”​digitalcommerce360.com. Many eCommerce companies find that maintaining high service levels across multiple nodes requires holding extra buffer stock at each location. This means more total inventory on hand than a single central stock would require, adding to holding costs as noted above.

Stockouts at one warehouse also create expensive operational workarounds. You might expedite shipping from a farther warehouse to fill the order (incurring express shipping fees that wipe out the normal cost savings of having a closer location). Or, you might initiate an inventory transfer from one warehouse to another to rebalance – incurring labor and freight costs with no revenue attached. These are the hidden costs of trying to avoid a lost sale. While a distributed network can shorten delivery times when stock is in the right place, it introduces a new failure point: the chance that the “nearest” warehouse doesn’t have the item. In contrast, a single large warehouse pools all inventory, which can actually lower the overall probability of stockout (thanks to risk pooling) for the same total stock level. Many firms offset this by carrying excess stock in each warehouse, but that drives up costs as discussed.

Hidden Operational and Technology Costs

Beyond shipping and storage, multiple warehouses come with a host of operational overhead and hidden expenses:

Technology and Systems Integration:

Managing inventory across locations requires more advanced software. Order management must decide which warehouse will fulfill each order based on inventory availability and customer location. Inventory tracking systems need to sync stock levels in real time across the network to prevent overselling. Upgrading to a multi-warehouse capable warehouse management system (WMS) or order management system can be a significant upfront cost. DCL Logistics notes you’ll likely need to “upgrade your technology systems” for multi-site inventory tracking​
dclcorp.com. Integration between systems (e.g. your shopping cart, each warehouse’s WMS, and possibly a centralized inventory control) adds complexity and IT expense.

Labor and Management:

When your 3PL provider operates multiple warehouses, indirect labor costs can increase and affect your fulfillment fees. Each additional facility requires its own management structure, potentially duplicating roles such as warehouse supervision and inventory management. This duplication might lead to reduced efficiency compared to a single, larger warehouse operation—particularly if smaller warehouses operate below optimal capacity. These inefficiencies may result in higher service fees from your 3PL, as their operational costs rise.

As one analysis put it, multiple sites can lead to “reduced efficiency unless you’re shipping over 5 million in GMV or 50–100 orders daily”​redstagfulfillment.com – Below this threshold, sellers could indirectly bear the expense of underutilized labor through increased fulfillment charges.

Administrative Overhead:

There are many one-time and ongoing tasks required to launch and run an extra fulfillment center. Setting up a new facility involves site selection, lease negotiations, outfitting racking and equipment, and onboarding staff​
digitalcommerce360.com. These startup costs can easily reach hundreds of thousands of dollars. Even using a 3PL (third-party logistics provider) doesn’t eliminate all overhead – you’ll need to manage the relationship, possibly replicate training/documentation for a new team, and coordinate operations across providers. Multi-warehouse operations also demand more planning overhead (e.g. coordinating inbound freight deliveries to multiple locations, running inventory audits at multiple sites, etc.). All of this is “management bandwidth” that carries a cost, either in added staff or in time diverted from other business priorities​ dclcorp.com.

Bottom Line: The sum of these hidden costs can erode or even outweigh the shipping savings from multiple fulfillment centers. It’s not uncommon for smaller eCommerce businesses to find that splitting inventory increases their overall fulfillment cost structure once everything is accounted for.

In fact, industry research warns that while strategic warehouse placement can reduce outbound costs, running multiple warehouses “often create[s] higher inventory costs, increased inbound shipping expenses, and reduced efficiency” for businesses without sufficient volume​.

Consider a smaller eCommerce retailer comparing fulfillment scenarios between operating one, two, or three warehouses. While adding warehouses typically reduces outbound shipping costs due to shorter delivery distances, other expenses such as inbound freight, storage fees, inventory carrying costs, and indirect labor (increased 3PL service fees from operational inefficiencies) rise significantly:

Fulfillment Speed: Perception vs. Reality

One of the biggest drivers of the multi-warehouse trend is the promise of faster delivery times. It’s true that placing inventory closer to customers can reduce transit time – and today’s consumers do expect quick shipping. However, the relationship between warehouse count and fulfillment speed is not as straightforward as it appears. Let’s examine the perceived versus actual impact on delivery speed, and how modern logistics tactics can bridge the gap even with a single warehouse.

Perception: Multi-Warehouse = Fastest Delivery.

Industry narratives often assert that you must disperse inventory geographically to achieve acceptable delivery times. For example, it’s said that “if your warehouse is closer to the customer, your product can get there faster”​symbia.com – a seemingly obvious truth that leads many to assume multiple warehouses are necessary to meet 2-day or next-day delivery expectations. The multi-warehouse model indeed enables ground shipping to cover more regions within 1–2 days, avoiding the need for air express in far-reaching zones. Companies with decentralized inventory tout their ability to offer same-day or overnight delivery in multiple metropolitan areas simultaneously.

Reality: Smart Logistics Can Achieve Speed with Fewer Nodes.

It’s important to recognize that carriers and fulfillment networks today are highly optimized, and transit times even from a single, central warehouse may be quite reasonable for broad regions. A business shipping nationwide from one location can often reach most customers in 2–5 days via ground service. In one real-world example, a specialized sports apparel eCommerce vendor fulfills all U.S. orders from a single Southeast U.S. warehouse, reaching customers in 2–6 business days – and the company is “still growing strong” without ultra-aggressive delivery promises.

Because their product is unique (only authentic licensed items of its kind), customers tolerate a few days of shipping. This highlights a crucial point: if your product has a unique value or if your customer base is willing to wait 3–5 days, a single well-located fulfillment center can be sufficient for speed. Not every business is shipping “commoditized” goods where fastest delivery wins; many can compete on other values (exclusive products, custom items, brand loyalty) and avoid the cost of multi-node fulfillment.

Even for businesses that do compete on speed, there are techniques to improve delivery times without maintaining dozens of warehouses. Zone skipping is one such method: orders heading to a distant region are consolidated and transported together (often via freight or direct truckload) to a sorting hub nearer the destination zone, where they enter the local parcel network for final delivery​warehousingandfulfillment.com.

This effectively “skips” over several intermediate transit zones. The result is faster (and cheaper) delivery to far-away customers, despite shipping from one origin. In practice, a centrally located warehouse can use zone skipping to serve even coast-to-coast orders in just a few days, by injecting packages into the destination region’s parcel hub. Carriers’ optimized routes and hub-and-spoke networks also contribute to surprisingly quick cross-country ground shipping.

For example, UPS Ground from a central state like Kansas or Kentucky can reach a majority of the continental U.S. within 2–3 days. If your current single warehouse isn’t centrally located, sometimes moving it (e.g. from a coast to a Midwest hub) or using a bi-coastal two warehouse setup can yield most of the speed benefits without needing a larger network.

Additionally, if occasional long-distance orders do need ultra-fast delivery, the cost of upgrading those few shipments to air express might be far less than the fixed cost of operating an additional warehouse year-round. Many mid-sized eCommerce retailers find it cheaper to pay for expedited shipping to outlier zones during peak needs than to continuously run another facility. In other words, you can “rent” speed on demand from carriers instead of building an entire infrastructure for it. This flexible approach can be more cost-effective until your order volumes make multi-warehousing truly efficient.

Multi-Warehouse Speed Pitfalls:

It’s worth noting that a poorly managed multi-warehouse setup can undermine speed advantages. If inventory isn’t distributed correctly, an order might still ship from a warehouse 1,500 miles away because the closer facility was out of stock. In that case, the customer sees no speed improvement for that order, despite the company bearing higher costs for multiple locations.

Likewise, splitting an order across two warehouses (because each had only part of the items) means the customer might receive two packages at different times – a potentially confusing experience, not to mention doubled shipping costs for the seller. These scenarios illustrate that more warehouses don’t automatically equal faster or better delivery for every order. Effective order routing algorithms and robust inventory planning are needed to actually realize the speed gains; without them, a multi-warehouse strategy can falter.

Finally, keep in mind that diminishing returns apply. Going from one to two warehouses might cut a day or two off transit to some regions. Going from five to ten warehouses, however, might only improve average transit time marginally, while complexity increases significantly. Each additional node has a smaller incremental speed benefit, especially once you cover the major population centers. Businesses should balance the marketing value of offering “1-day shipping everywhere” against the substantial operational effort it takes to make that a reality.

Data-Driven Visual Insights

To clearly illustrate the dynamics discussed, this section presents visual comparisons of single vs. multiple warehouse operations.

Operational complexity increases with multiple fulfillment centers. The flowchart below contrasts a multi-warehouse process (left) with a  single-warehouse fulfillment process (right). In a single model, every order follows a simple path: it is processed at one central warehouse, handed to a carrier, and delivered to the customer. In a multi-warehouse model, each order triggers a decision: the system must check the nearest warehouse for stock. If available locally, the order ships as normal; if not, it is re-routed to an alternate warehouse, often farther away. This added decision layer (and potential inter-warehouse coordination) makes the fulfillment workflow more complicated. It also introduces scenarios like split shipments or cross-country fulfillment if the nearest location is out of stock.

Figure: Process flow comparison. The diagram shows that multi-warehouse operations require more complex logic and coordination. By contrast, a single warehouse provides a streamlined, one-stop fulfillment pipeline. These complexities translate into needs for more sophisticated software and planning, as discussed earlier.

Another useful visualization is the geographical impact on shipping costs. The earlier U.S. map graphic showed how multiple distribution centers shrink shipping distance zones. Companies often use such heat maps of customer locations and transit times to decide on warehouse placement. If most of your customers are clustered on one coast, a single warehouse nearby might serve them with 1-2 day delivery, negating the need for multiple sites.

On the other hand, if you have two big customer clusters on opposite coasts, a bi-coastal strategy (two warehouses) could make sense to minimize cross-country shipments. The key is to use your order data to drive these decisions, rather than assuming multi-node is always superior. Modern analytics can plot customer density, simulate shipping costs from various warehouse configurations, and even optimize for minimal total cost.

Data visuals like bar charts and cost breakdowns (such as the one shown earlier) can help quantify the trade-offs in dollars and cents, rather than just transit days.

Regulatory and Tax Considerations

When choosing between a 3PL with a single warehouse or one with a multi-warehouse network, most sellers focus on shipping costs and speed. However, there are important regulatory and tax implications to consider. Where your inventory is stored—whether in one or several locations—can create additional tax obligations for your business. These compliance issues can add complexity and unexpected costs to your fulfillment strategy.

Sales Tax Nexus

In the United States, having inventory in a state generally establishes sales tax nexus there.

Nexus means you are required to register, collect, and remit sales tax in that state on all taxable sales to customers in that state, not just those shipped from the warehouse.

Here’s the catch for sellers working with multi-location 3PLs:

• Your inventory placement in multiple states—even if managed by your 3PL—can trigger nexus in each of those states.

• Some 3PLs automatically move your inventory between their warehouses to optimize fulfillment (without notifying you in real-time), inadvertently creating tax nexus in new states.

What This Means for You:

• You may be legally obligated to register and file sales tax in every state where your inventory is stored by your 3PL.

• Failure to register and remit taxes can result in back taxes, penalties, and audits, even if you weren’t aware your inventory was there.

States like California, Pennsylvania, and Washington are aggressive in tracking businesses with inventory in third-party warehouses and enforcing nexus compliance.

A single-warehouse 3PL strategy keeps sales tax obligations simpler, typically requiring you to file in one or fewer states (barring economic nexus thresholds).

Income and Franchise Taxes

In addition to sales tax, some states impose income or franchise taxes on businesses with inventory in their state, even if you have no physical office there.

• Simply storing inventory with a 3PL in a state like Texas may trigger a franchise tax filing requirement.

• Many states don’t offer exemptions just because the inventory is with a third party.

Using a single-warehouse 3PL allows you to choose a state with favorable tax laws or no income/franchise tax, reducing your compliance burden.

Property and Inventory Taxes

Several states impose business personal property taxes on inventory stored within their borders.

• Nine states, including Texas, Kentucky, and West Virginia, fully tax business inventory annually.

• Others impose partial inventory taxes.
  (Tax Foundation, 2023)

If your inventory sits in a 3PL warehouse in these states, you are responsible for annual tax filings and payments on the assessed value of that inventory, even if it’s unsold.

With a single-warehouse 3PL, you can strategically select a fulfillment center located in a no-inventory-tax state and avoid this cost entirely.

Labor Laws and Local Regulations

While your 3PL partner manages their own staff, state labor laws can influence the operational costs they pass on to you.

• For example, warehouses in California are subject to stricter labor and environmental regulations, which can increase the 3PL’s operating costs and, ultimately, their fulfillment fees.
• This can result in higher per-order fees, which aren’t always transparent on the surface.

Choosing a single-warehouse 3PL in a business-friendly state can help control costs and simplify logistics.

Environmental and Zoning Regulations

Environmental and zoning laws affect warehouse operations, especially in states with stringent regulations like California and New Jersey. 

Warehouses in these regions often face additional compliance costs that can impact the rates your 3PL charges you.

A single, strategically located warehouse often avoids higher-cost regions and provides a more stable fee structure.

International and Cross-Border Considerations:

If you’re considering international warehouses with a global 3PL:

You’ll face import/export regulations, customs duties, and VAT/GST registrations in each country where inventory is stored.

For example, storing goods in an EU warehouse makes you the importer of record, requiring VAT registration and filing obligations.

In summary, inventory stored in multiple warehouse locations—whether owned or through a 3PL—creates tax nexus and other regulatory obligations. Sales tax registration, income tax filings, and property tax exposure can all increase as you spread inventory across states. Many eCommerce sellers underestimate how quickly these responsibilities grow, moving from filing taxes in one state to five or ten.

A single-warehouse 3PL reduces complexity, minimizes your tax exposure, and makes compliance more manageable. It also limits the risk of unexpected back taxes, audits, and additional filings, freeing up your time and resources.

Real-World Case Studies & Modeled Scenarios

To ground this analysis in practical terms, let’s look at a few examples – both real and hypothetical – illustrating the cost and efficiency outcomes of single vs. multiple warehouse strategies.

Modeled Scenario: Cost Trade-off Analysis

Consider a hypothetical mid-sized eCommerce retailer based in the U.S. that ships 1,000 orders per day across the country. Today, they operate from one central warehouse in Kansas. Average ground shipping time is 3–4 days nationwide, and their cost breakdown per year might look like this:

• Single Warehouse (Central U.S.): Shipping costs $70k; Warehouse storage $30k; Inbound freight $20k; Inventory carrying cost $10k; Labor/operations $25k; Systems $5k – Total ≈ $160k/year.

   

• Two Warehouses (East + West Coast): Shipping costs $63k (10% savings); Warehouse storage $40k (duplicated facilities); Inbound freight $35k (shipping goods to two locations); Inventory carrying cost $15k (extra stock in each location); Labor/ops $40k (two teams); Systems $8k (upgraded multi-warehouse software) – Total ≈ $201k/year.

   

In this scenario, the two-warehouse setup saves about $7k in outbound shipping but adds $48k in extra costs across storage, labor, and operations leading to a higher total cost overall. For a startup, that’s a meaningful margin hit. The decision becomes: is slightly faster delivery for some customers worth nearly 25% higher annual overhead?

As the earlier chart shows, the breakeven point might come if order volume increases substantially or if faster shipping from two hubs significantly boosts conversions. But for most smaller ecommerce businesses, splitting inventory across multiple warehouses before reaching scale may increase the cost per order, not reduce it.

The key takeaway: don’t assume more warehouses = lower cost. Run the numbers based on your own order volume, shipping zones, and ops budget. That’s the only way to find the real savings or risks.

Case Study: Staying Centralized – When One Warehouse Is Enough

Not all businesses with national reach need multiple warehouses. Despite selling across the country, an apparel company thrived with a single fulfillment center because their value proposition (exclusive licensed products) allows for slightly slower delivery​ digitalcommerce360.com.

Another scenario is businesses with moderate volume and highly diverse SKU catalogs. Imagine an online retailer that sells niche hobby components with 10,000+ SKUs. Orders come from everywhere, but it’s hard to predict which SKUs will be needed in which region. Splitting that catalog into multiple warehouses could be a nightmare – either you duplicate thousands of items across locations (huge inventory investment) or split them and risk constant inter-warehouse shipments for items ordered outside their “home” region.

For such a company, a single, central stock hub often maximizes availability and minimizes stockout risk. They might promise 3-5 day delivery and invest in efficient operations at one site, rather than two-day delivery with inventory chaos in a multi-warehouse setup.

One mid-sized brand shared privately that when they tried using three fulfillment centers (through a 3PL), they encountered issues: popular SKUs would run out in one location and sit overstocked in another, causing lost sales until stock was rebalanced.

They eventually reverted to two warehouses in key regions and tightened their SKU assortments per location, finding a balance between speed and simplicity. This shows that more warehouses isn’t always better – sometimes it’s prudent to consolidate and optimize one location until growth truly demands expansion.

Competitor Claims and Industry Misconceptions

It’s important to address some of the common claims made by fulfillment providers and industry pundits, which can sometimes oversimplify the multi-warehouse decision. Multiple 3PL companies advertise distributed inventory as a panacea for eCommerce growth, citing benefits like faster shipping, lower costs, and better customer satisfaction. While these claims aren’t outright false, they often come without caveats, giving the impression that “multiple warehouses are inherently more cost-effective.” Let’s debunk a few misconceptions:

Misconception: “Faster delivery is guaranteed with multiple warehouses.”

As discussed in the speed section, this is only partially true. Yes, having stock near customers can reduce transit time, but only if that stock is effectively managed. A quote often heard: “Warehouses in key locations speed up deliveries, making customers happier.” That’s generally true​ dckap.com, but the unstated fine print is if each warehouse has the right items in stock. If not, an order might travel even further (from a different warehouse) or get split into multiple shipments. Also, beyond a certain point, shaving another day off delivery might not noticeably boost customer satisfaction, especially if you’re already at 2-day delivery. A single warehouse can often achieve 2-day delivery for a large region and 3-day for the rest, which in many cases meets consumer expectations. Surveys show a majority of shoppers expect “fast” shipping to be in the 3-4 day range for free delivery​. So, multiple warehouses aren’t the only path to acceptable delivery speed.

Misconception: “Multiple warehouses always reduce shipping costs.”

This claim overlooks the reality of cost trade-offs. Yes, you reduce the distance on average (lower postage or carrier fees per package). However, the total logistics cost must include the added overhead. Competitors might highlight a success metric like “X% cost savings by adding fulfillment centers.” For instance, one fulfillment provider noted that some brands saw 13% overall cost savings after distributing inventory​.

What isn’t often mentioned is that those savings occurred in specific cases likely involving high shipment volumes and optimized operations. For many others, the savings in postage are offset by increased inventory and handling costs, yielding no net gain (or even a net loss). The misconception is thinking of shipping cost in isolation. A multi-node network can indeed lower per-package shipping charges, but it often raises per-unit fulfillment costs when you factor everything in.

It’s worth reiterating the Red Stag Fulfillment finding: a multi-warehouse approach can backfire cost-wise for smaller merchants, “often creating higher inventory costs, increased inbound shipping expenses, and reduced efficiency” if you’re below a certain order volume threshold. In short, multiple warehouses are not inherently more cost-effective – they only become cost-effective when the volume and distribution of orders align to make it so.

Misconception: “You need multiple warehouses to avoid stockouts and expand capacity.”

Proponents claim that spreading inventory gives you a safety net – one warehouse can cover if another has an issue (weather, etc.), and that it prevents any single site from being overwhelmed during peak seasons​ dclcorp.com.

There is truth here: having a second node can provide business continuity if one warehouse goes offline, and during peaks, orders can be load-balanced across facilities. However, this comes with the inventory redundancy cost we explained (safety stock in multiple places)​ dclcorp.com. Also, if one warehouse is near capacity, a company could often expand the existing site or use temporary labor/shifts to handle peaks, rather than using a new permanent location.

The misconception is that multi-warehousing is the only solution to scale – in reality, many businesses scale in one location up to a very high volume by optimizing processes, automation, or enlarging the facility. Only when those avenues are exhausted (or when proximity to customers becomes a severe competitive disadvantage) does opening another warehouse make sense.

))Misconception: “All big eCommerce players have multiple warehouses, so you should too.”

This is more an implied industry sentiment than an outright statement. It’s true that giants like Amazon, Walmart, and Target operate dozens of distribution centers. But their scale (millions of orders, ubiquitous customer expectations of 1-2 day delivery) demands it – and they can spread the enormous fixed costs over huge volume.

They also have sophisticated systems to manage such networks. For a small or mid-size merchant, trying to copy Amazon’s playbook without Amazon’s volume can be disastrous. What’s efficient for a company shipping 100,000 orders a day may not be efficient for one shipping 500 orders a day. Right-sizing your fulfillment strategy is critical.

There’s no shame in staying centralized if that best fits your business; you can still offer excellent service. In fact, many successful D2C brands intentionally start with one warehouse and only expand to a second when service levels truly demand it. As one 3PL advises, “there’s no right or wrong answer [to how many warehouses you need].” You should carefully answer key questions about your product, customers, and capabilities before deciding​(digitalcommerce360.com).

Misconception: “If my competitor has 2 warehouses, I must have 2 or more to keep up.”

It’s easy to be swayed by industry buzz and competitor moves. But keep in mind that competitors might not be transparently sharing their cost outcomes. Some retailers have rushed into opening multiple distribution centers because it’s seen as modern or necessary, only to quietly scale back when costs ran too high. Focus on your own economics. If you can deliver a great customer experience with one well-run warehouse, that can be a competitive advantage (lower costs = ability to offer lower prices or free shipping). On the flip side, if a competitor genuinely benefits from two warehouses (perhaps they have product demand localized on each coast), analyze whether your demand profile is similar before assuming you need the same setup.

In summary, multiple fulfillment warehouses are not a silver bullet. The industry claims have to be weighed against the full picture of costs and requirements. It’s wise to approach any “automatic” cost-savings claim with healthy skepticism and demand data. Often, a gradual approach – e.g. testing a second warehouse with a 3PL on a small scale or using pop-up fulfillment centers during peak season – can validate whether the benefits materialize as advertised, before fully committing. The myth to dispel is that distributed inventory inherently fixes your cost or speed challenges; in reality, it introduces a new set of challenges that must be expertly managed to see positive results.