On-demand warehousing lets a business rent warehouse space by the month or by the pallet, the way people book a room. It is also called flexible warehousing. An online marketplace lists space in many warehouses that belong to other companies. The business searches by city, size and type of storage, and books only what it needs, for only as long as it needs it.
The usual way to get a warehouse is to lease a whole building. A lease often runs for three to five years. The business pays for the whole building every month, even in months when it is half empty. That suits a company whose stock stays about the same through the year. It does not suit a company whose stock rises and falls with the seasons, or a brand that wants to try selling in a new city before it commits to one.
Space is usually priced per pallet per month, or per square foot per month. A pallet is a flat wooden platform, about 1.2 metres by 1 metre, on which cartons are stacked so that a forklift can move them. The warehouse owner earns money from space that would otherwise stay empty. The marketplace earns a commission on each booking, and it owns no space itself. This is the marketplace model: the platform lists what others own, instead of buying and holding it.
Consider a sunscreen brand from Pune that wants to sell in Gujarat for the summer. From March to June, it expects to need space for about 120 pallets in Ahmedabad. On the marketplace, it compares three warehouses near the city, with photos, prices and the services each one offers. One charges ₹450 per pallet per month, and its own staff load and unload the trucks. The brand books 120 pallets for four months, which comes to ₹2.16 lakh, plus handling charges. In July, it moves the unsold stock back to Pune and stops paying.
A good booking needs more than empty space. The business checks whether the warehouse is dry, secure and insured, and whether it can store goods such as chemicals or food that need special conditions. There is also a tax step. To store goods in a warehouse, a business must add that warehouse to its GST registration as an additional place of business. Many warehouses on these marketplaces run their own warehouse management system, and give the business a login to see its stock.
On-demand warehousing differs from e-commerce fulfilment. With on-demand warehousing, the business rents the space, and often arranges its own orders and trucks. A fulfilment company stores the stock and also picks, packs and sends every order. The idea of renting by the month is close to coworking space booking, where a company rents desks in someone else's office instead of leasing a whole floor.