Diamond says in-house fulfilment can cost brands GBP £5m

Diamond Logistics has published an analysis claiming that running an in-house fulfilment operation can cost growing eCommerce brands up to GBP £5.3 million over five years. The estimate is based on a 10,000 sq ft warehouse in the UK with five full-time employees.

The figure includes setup costs, annual operating expenses and the premium businesses may pay on carrier rates when they lack large-scale buying power. Diamond argues these costs are often underestimated by brands that have outgrown home-based or self-storage setups and are deciding how to manage rising order volumes.

For online retailers in a growth phase, fulfilment can quickly shift from a back-office task to a core operational issue. As product ranges widen and customer expectations rise, businesses that once packed orders from a spare room, garage or small unit can find that model no longer works.

That leaves a choice between building warehouse and fulfilment functions in-house or handing them to a specialist logistics provider. Diamond said the review was intended to show the long-term financial weight of the first option, rather than focusing only on the initial investment needed to open a site.

The analysis examined the likely cost of operating a warehouse in 2025-26, with staffing, rent and systems among the main cost lines. It also highlighted recurring expenses such as National Insurance contributions, energy bills and warehouse management software, which can add to the burden on smaller and mid-sized brands.

Cost pressure

Kate Lester, Founder and Chief Executive Officer of Diamond Logistics, said the company had reached its view after working with online sellers for many years.

"Having been in business for over 30 years, we've partnered with thousands of eCommerce businesses, and at the point they've come to us, they all had one thing in common - none needed their own warehouse or fulfilment operation. Too often, businesses focus on the upfront setup costs and overlook the cumulative impact of ongoing operational expenditure, which is where the true financial pressure gradually builds over time.

As a result, we wanted to take a deeper look at the true reality of these costs over a sustained period, rather than just at the point of initial investment. Our findings highlight just how significant these expenses become over time - and how they can not only restrict growth, but potentially derail it altogether by tying up capital, locking brands into fixed costs, and diverting attention away from customers and products," Lester said.

In Diamond's comparison, outsourcing fulfilment came out at a much lower cost, although the company did not provide a full alternative figure in the material released. Its argument rests on turning a fixed cost base into a variable one that rises or falls with order volumes, rather than requiring a retailer to commit to a warehouse lease, systems investment and a permanent staffing structure.

That question of fixed versus variable costs is familiar to consumer brands trying to preserve cash while expanding. A dedicated site can offer direct control over stock handling and customer orders, but it can also lead to underused space, higher labour costs during quiet periods, and pressure to invest in technology that may take time to pay back.

Carrier pricing is another factor in the calculation. Larger fulfilment groups can often negotiate lower shipping rates because they aggregate parcel volumes across many customers, while an individual retailer running its own operation may not secure the same terms.

Outsourcing case

Lester said many founders overestimate the value of physical control and underestimate the complexity of logistics operations.

"In almost every case, the desire to invest in bricks-and-mortar logistics infrastructure is driven by a misalignment between perceived control and the true cost, complexity, and long-term commitment involved in running a fulfilment operation. However, once businesses begin to factor in the real costs - including staffing, NI contributions, warehouse rent, energy, and investment in WMS technology systems - the appeal of an in-house model quickly diminishes.

In many ways, that's exactly why the Diamond Logistics network was created. We wanted to give growing eCommerce brands access to the technology, infrastructure and fulfilment expertise they need to scale, without the requirement for significant capital investment. Through our nationwide fulfilment network, supported by Despatchlab, our proprietary logistics platform, we can do just that by combining warehouse management, fulfilment and multi-carrier shipping into one seamless system, giving these businesses access to enterprise-level technology, competitive carrier rates and the operational support, without having to build that infrastructure themselves," Lester said.

The figures come at a time when many eCommerce businesses are under pressure to balance customer service with tighter margins. Warehousing, labour and delivery remain high costs, and retailers have been looking more closely at whether logistics should stay in-house or be managed by specialist partners.

Diamond Logistics operates in same-day delivery and fulfilment, and the analysis is part of its case that outsourcing is the better route for scale-up brands. Lester framed the savings in stark terms.

"Through this offering, we can essentially provide eCommerce brands with a fully scalable solution that removes the burden of warehouse investment, long-term leases and building in-house fulfilment teams, while still giving them complete visibility of their operations and the flexibility to help them grow. This isn't a marginal saving we're talking about, it's potentially over £5 million over five years - and outsourcing to Diamond Logistics converts all of that into a single, variable, scalable cost - one that moves with our customer's business, not against it," Lester said.