The surge of e-commerce in recent years has many players in the grocery industry re-inventing the ways they use physical stores. In Europe alone, the top 15 players opened more than 800 dark stores by the end of 2021.
Technology is at the heart of successful dark store operations, which enable speed, cost savings, operational control, and efficiency. In fact, an urban dark store operation can reduce the average picking time per item from 90 to just 20 seconds. Additionally, checkout time per order reduces to zero.
With this in mind, will dark stores become the future of any e-commerce operation? Very likely! According to Interact Analysts, there are currently more than 6,000 dark stores worldwide with a projected forecast of 45,000 globally by 2030.
Let’s take a look at the ins and outs of dark stores and why so many companies are betting on this operational model.
In the Land of Dark Stores: Hyper-localized Fulfillment Centers Set Up Exclusively for Online Orders
Over the past two years, retailers have been reimagining how to use traditional and non-traditional commercial spaces for e-grocery fulfillment and delivery. Supply chain challenges brought on by the pandemic coupled with more shoppers now comfortable ordering their groceries online, meeting consumer demand has become a challenge and opportunity for retailers around the world.
Retailers from supermarkets to convenience stores and large-format department stores have turned to the dark store concept to maintain their operations running with arguably fewer logistical challenges. To respond to increasing online orders, reduce contact, maintain or increase sales, and meet delivery promises of as little as 10 minutes, dark stores are proving to be a smart way to meet the evolution of consumer behavior and expectations.
Dark stores are warehouses and distribution centers used to fulfill online orders only. Many retailers globally have already converted a part of their retail space into a dark store and automation is at the heart of the entire orchestration. Tech-savvy retailers are adopting the dark store concept to make online order fulfillment simple, effective, and fast. With a dark store, retailers can store as much stock as needed or forecasted to effectively respond to online orders.
The Many Benefits of Dark Stores
Just in the first nine months of 2021, nearly $5.8 billion was invested globally in “dark convenience stores”, according to McKinsey’s latest report ‘The State of Grocery Retail 2022-Europe.’ While setting up a dark store can mean a costly investment upfront, there are many benefits to this type of operation compared to traditional grocery outlets. These include:
- Increased Inventory Capacity and Accuracy: Since dark stores operate as fulfillment centers, inventory can be stocked and configured in more efficient ways than in traditional retail spaces allowing for more product availability. Additionally, scanned inventory is automatically accounted for as soon as it’s picked off the shelf, allowing for greater stock accuracy in real time. These benefits can also positively impact customer satisfaction.
- Order accuracy: More often than not, Dark stores operate through technology only, meaning there’s less room for error within the ordering process. This means orders placed contain items that are in fact in stock and available, mitigating delivered orders with missing SKUs of the wrong product altogether. t.
- Speed: Hyper-localized dark stores or mini-warehouses are enabling market players to deliver online orders within record times. What would typically take days or hours for a traditional retailer can now be done within minutes. Today, there are approximately 200 dark stores in operation by Q-commerce players such as Getir, Gorillas, Gopuff, Zapp, and Jiffy, which all have a 10-minute delivery promise.
- Improved efficiency and product quality: With a laser focus on online-only fulfillment, dark stores increase the efficiency in which items can be picked and loaded for delivery per minute and hour. This also means that product quality increases as stock is rotated on a faster basis than at traditional retailer operations, and zones within dark stores remain at the right temperature levels to keep stock fresh.
Why Traditional Retailers Should Consider Opening a Dark Store
The world of groceries changed dramatically over the last two years, and new business models have already taken a large portion of the market share from supermarkets. So, while traditional grocers have embraced and optimized their digital channels—some faster than others—, quick commerce players have sprouted with hefty investments and innovative solutions to cater to new consumer behavior and trends.
It seems that while the traditional approach to any new company venture should be prioritized based on a clear need and demand, supermarkets simply cannot ignore what’s happening in the market and should move quickly to set up operations to effectively compete. Dark stores can be the next logical step to expanding their operations in a scalable fashion, enabled by robust and reliable technology.
While retailers in more developed countries and with deep pockets are investing in robots to maintain labor costs low and increase speed and accuracy, this type of automation is not necessary to get started. In fact, just having a separate fulfillment center from the traditional operation will save costs across the operation in the long term, especially around human headcount. Think more space to effectively expand product lines, offer a quicker delivery promise, and better utilize in-house resources and fleets.
When considering opening a dark store, retailers should keep in mind the location. Dark stores should be located within close proximity to the central retail location near their customers. Typically, dark stores are set up around densely populated areas in order to cater to the most customers around a radius to enable convenience, speed, and cost savings in last-mile deliveries.
Technology is at the heart of any dark store operation. If developing or enhancing your own logistics platform is too costly, there are technology partners that have the knowledge and expert teams to help you manage fulfillment and delivery with ongoing feature and functionality development for continuously evolving operations. That enables you to focus on other sides of the business, with external support whenever needed.