Dark Store

Not open to the public, the interior of an online dark store may appear like those that are found in a conventional market set out with aisles of shelves that contain groceries and other items for sale. However, they are not located in shopping malls or High Streets but in gritty and grim areas where good road connections are present.

The building themselves are frequently non-descript and utilitarian from the outside. Inside, the stores dispense with assistants who provide clients with product advice, point of sale displays and check-out counters. After the orders have been processed online, they are sent to the shop floor.

These electronically generated orders are then routed and processed according to the store’s layout for optimal picking. Unlike a traditional store where a picker moves around the aisles with a shopping trolley, they stay in a single spot. A mechanized system or goods-to-person pick station sends lower selling products such as spices and cordials from storage along a conveyor belt to the picker.

Goods that usually sell fast such as bananas and Coca Cola are placed on shelves in aisles in another portion of the dark store. More than one order can frequently be collected simultaneously. Fulfilled orders are then delivered to customers through the use of a fleet of vans that return throughout the day to be refilled.

What is a Dark Store?

A Dark Store is a micro-fulfillment center dedicated to rapid online order fulfillment. It is a kind of small, local store but without the customers. It has has aisles with shelves and racks for groceries. When a customer makes an order comes, dark store staff picks and packs the items immediately available in the stock. Then they ship the order directly to the customer’s address or to a convenient collection point specified by the customer.

Benefits of the Dark Store

Quick Shopping- Dark Stores offers the convenience of online shopping with the benefit of instant delivery of your products. It also helps maintain the safety and social distancing measures during the pandemic. This is why dark stores have created a space for quick and contact-free shopping. Dark Stores allow consumers to purchase from a brick-and-mortar without even entering it.

Fast Delivery- The dark store is the best way to provide faster order fulfillments and deliver more efficiently by including a variety of distribution options. It helps bring the products closer to a specific part of the market.

Better SKU Management- The main benefit of the Dark Store concept is that it can improve SKU management by focusing on capabilities such as storage and click-and-collect. It is good for a grocery store to have as many SKUs as there are customers.

Range of Products- The dark store layout can be planned for more storage and better picking capabilities. Improved storage capacity means better product management, more room for an extensive range of products, and faster order fulfillment.

Inventory Control- Dark Store also supports the concept of inventory control in the same geographic region. As these dark stores are kind of warehouses that are customer-free, better inventory control can be managed for larger order volumes.

Relevance of Dark Stores After the Pandemic

Converting a brick-mortar store into a dark store has been a great way to optimize the supply chain, and improve customer experience. Many retail companies have benefited from the Dark Stores during the pandemic situation. And it is likely that the concept of Dark Stores is not only here to stay but will continue to evolve in the coming years.The pandemic has not only accelerated the shift in consumer behavior but has already pushed a shift from brick-and-mortar stores to online shopping. The concept of Dark Store has changed the way grocery retail brands operate in the market space. Dark Stores will be the best way for improved storage and distribution of products for many brands.

The Challenges of Dark Stores

Potentially higher transportation costs. If not dropshipping from the closest location, these costs come from the need to provide home delivery from, and transport click-and-collect orders to, the dark store facility. Goods handling costs are sometimes higher as well — especially for retailers who deal in perishables. Taken together, these can offset some of the savings achieved through greater dark store efficiencies.
Cannibalization of in-store sales. For many retailers, an online order gained is an in-store sale lost, yet the fixed costs of operating a traditional self-service outlet remain the same. This means that over time, the profitability of a retailer’s brick-and-mortar locations will decline.
Increased competition and customer-base erosion. Once consumers become accustomed to buying certain items online, it is very easy for them to switch to an alternative source for their products. Selling points that previously allowed a retailer to hold onto its customer base and control the customer interaction — such as convenient store locations, familiar store layouts and superior customer service — are no longer relevant or play out very differently in the online world.

Dark Store Order Fulfillment: How Does It Work?

Dark stores improve order fulfillment in several ways, depending on their customers’ preferences and the type of goods or merchandise they provide. The three most common methods are:

Ship to customer delivery, which became hugely popular at the start of the pandemic, when people were homebound and online shopping surged. Since then, consumers have become accustomed to the ease and convenience of having their orders delivered to their doorstep and now prefer this way of shopping for many items. Most dark stores provide home delivery; it has become virtually synonymous with the dark store concept.
Curbside pickup is also utilized by many dark stores, especially dark supermarkets and others that sell perishable goods — this grew significantly during the pandemic. When this method of fulfillment is employed, the dark store usually provides dedicated parking spaces for customers and a store employee brings the order to the car, so that the person receiving the order doesn’t have to leave the vehicle. This approach is both convenient for consumers and makes it easy for the store to follow customers’ social distancing practices, if any. Regardless, it’s likely to stay.
In-store pickup is another order fulfillment approach used by many dark stores. In this case, the outlet typically has a dedicated pickup area inside the building, often near the front entrance. Sometimes changing rooms or other areas where customers can inspect their purchases are also provided. This approach allows the store to reduce its shipping expenses and can be convenient for shoppers, who don’t have to navigate a large store to pick up their items but can still try them on or look them over before taking delivery.

Are Dark Stores Right for Your Business?

Operating a dark store is a great option for any retailer that needs to fulfill and rapidly deliver a large volume of online orders. However, some retailers of high-end or hard-to-find merchandise (think jewelry, for example), may be immune to online shopping trends — at least for now. For them, the dark store concept is not a good fit.

Other retailers may feel compelled to provide home delivery of online orders, but the location and distribution of their customer base may mean that converting to a dark store is not the optimal solution. That’s because dark store facilities are often located on the outskirts of large cities where land is more plentiful and cheaper, but may be a considerable distance from the majority of the retailer’s customers. This raises their transportation costs, while traffic congestion impedes their ability to compete by offering same- or next-day delivery.

How to Ensure Your Dark Store Is Profitable

Make sure there is adequate demand. To be profitable, dark stores need to fulfill a large and steady stream of orders. To gauge whether a given area will support that level of demand, retailers can make use of third-party marketplace and loyalty program data. A good rule of thumb is that retailers should refrain from opening a dark store until they can account for at least 80% of the demand needed to break-even.
Choose a less expensive location on the outskirts of a densely populated area. Since dark stores are not generally open to the public, there’s no point to locating them in city centers. Instead, top priority should be given to airport, rail and highway access for rapid product replenishment and distribution. Some stores may also need to consider whether there’s sufficiently convenient customer access for curbside pickup. Outlying locations in industrial areas are often ideally situated and will be much less expensive than prime urban real estate.
Optimize the store’s layout for packing and shipping efficiencies. While shoppers don’t enter most dark stores, space planning is still vital to achieving a rapid order turnaround rate — which is key to dark store profitability. Dark store floor plans will vary from retailer to retailer, depending on the type of merchandise they sell. Some will group similar items together as in a traditional store to help employees quickly assemble orders, while others separate them to reduce the likelihood of the wrong product getting shipped. Either way, the products that are purchased most frequently should be placed at the front of the store, wherever is closest to the shipping area, to speed packing and delivery. These most-popular items may vary throughout the year based on such factors as seasonal preferences and ties to holidays like Halloween or Christmas.
Stock the widest possible selection of products. A good floor plan makes it easier to carry the widest possible range of merchandise. The broader the product selection, the larger the customer base that can be served and the easier it becomes to sustain a high volume of orders. Also, having more items in stock improves overall turnaround times and increases customer satisfaction — which, in turn, helps build and sustain the store’s customer base.
Ensure that merchandise is actually in stock and available for delivery. A potential downside to carrying a large selection of products is the customer disappointment and defections that can occur when some of those items are out of stock. To minimize this risk and maximize the upside of being known for a broad product selection, dark retailers need to maintain appropriate levels of inventory for all of the merchandise they offer.
Automate and use data analytics to govern store operations and logistics. With the aisles free of customers, dark stores can employ robots to gather merchandise and assemble orders, shortening delivery times and driving down labor costs. At the same time, inventory and order management software can be used to manage the complex supply chains and intricate logistics required to keep a steady stream of merchandise coming in and orders going out. Making use of these systems helps avoid product shortages as well as surpluses. This allows inventory to be turned over more quickly and with fewer product substitutions, leading to heightened customer satisfaction.

The Future of Dark Stores- Automation and analytics will play an outsized role in the future of dark stores, as retailers innovate to meet burgeoning consumer demand for 24-x-7, near-immediate delivery. This will lead to many variations on the dark store model. For example, some fast-food and grocery chains are already experimenting with so-called “ghosted” facilities — nearly 100% roboticized fulfillment depots — that focus exclusively on readying orders for home delivery. Others are trying out “smart supermarket” and similar concepts that integrate online and in-store shopping into a single, seamless customer experience.

FAQs

Why is it called a dark store?

When retailers began converting their brick-and-mortar outlets into fulfillment centers for online orders, they referred to them as dark stores because they were closed to the public. They operate more as warehouses and delivery depots than traditional stores. Some are also nearly entirely automated, allowing them to — literally — operate in the dark.

What are dark stores in logistics?

To fulfill orders rapidly and efficiently, dark stores employ complex logistics. They receive and track products from many different sources and prepare them for delivery. Using inventory management systems and predictive analytics, they can anticipate orders so that moments after a customer completes a purchase online the item can be shipped or readied for pickup.

What’s the benefit of dark stores for a traditional store?

The dark store idea is to create a retail distribution hub or warehouse designed to prepare and deliver goods purchased online. As consumers migrate from in-store to online shopping, the dark store model allows traditional retailers to remain viable by fulfilling orders placed on the web. These fulfillment centers also give web-based retailers a way to establish a physical presence. Dark stores are popular with consumers because they provide immediate and convenient delivery.

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