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Originally Posted On: https://www.vaimo.com/what-is-a-dark-store-a-post-pandemic-retail-model/
The term “Dark Stores” may have a rather sinister and almost dystopian ring to it. But in reality, it represents one of the many bright ideas and concepts that have helped numerous retail businesses stay afloat during the pandemic.
DARK STORES: A POST-PANDEMIC RETAIL MODEL HERE TO STAY
When the going gets tough, merchants get creative. We’ve witnessed this in all kinds of contexts the past year, as hotels have turned empty rooms into co-working spaces for the WFH-crowd and restaurants have started offering takeaway menus and home delivery. And along those same lines, many retailers have converted their physical stores into “dark stores.”
Because even though confined indoors, consumers did not stop consuming. Despite incomes going down significantly for many, global shopping volumes overall increased, with the retail sector gaining 35% in market capitalization from February 2020 to April 2021. And yet, many retail businesses have been struggling. So what separates the leaders from the laggards?
Well, McKinsey puts it like this: “In many cases, the strengths enabling some companies to surpass their industry peers—tech-forward and asset-light business models propelled by the tailwinds of growing demand—became even more important during the crisis.”
And one of the ways retail stores have successfully adapted their business models to the pandemic has been to “go dark.”
Related reading: Digital Ecommerce Business Models – The Current Landscape
WHAT IS A DARK STORE?
Let’s first define what a dark store is and how it’s different from other hybrid and ecommerce business models. A Dark Store is basically a brick-and-mortar location that has been shut down and turned into a center for fulfillment operations.
These distribution outlets are not open to visitors, allowing more space for store inventory and to quickly and accurately fulfill orders. Dark Stores provide shoppers with resources and options like purchasing products online, same-day delivery, or pickup in-store.
Of course, this concept is not new. Some companies that have long been implementing variations of this process include Whole Foods, Walmart, Target, Bed Bath & Beyond, and the majority of large fashion retailers. But as brick-and-mortar stores have struggled during lockdowns, the number of Dark Stores has grown significantly during the past year.
Related reading: Digital is Better, Says Covid-19
HOW DOES DARK STORE ORDER FULFILLMENT WORK?
Using Dark Stores for order fulfillment is a profitable option for many different kinds of retailers. The three most common delivery options for Dark Stores are curbside pickup, in-store pickup, and home delivery.
Curbside pickup usually consists of a dedicated parking space where an employee of the retailer will bring out the order so that the customer doesn’t even have to leave their car. This provides the highest level of safety for customers from a pandemic perspective. But it’s also a very convenient way of shopping that many consumers have come to appreciate this past year.
Another traditional Dark Store option is to have a dedicated pickup area inside the store, often near the front entrance. This means customers won’t have to walk through the whole store to pick up their products. This option is convenient for customers and means no delivery expenses.
The demand for home delivery has increased dramatically this past year and works very well for Dark Stores. Home delivery means fast and convenient contactless delivery and is perfect for things like groceries and other essentials.
BENEFITS OF THE DARK STORE CONCEPT
There are many benefits of Dark Stores, some of which we’ve listed below:
QUICK AND CONTACT-FREE SHOPPING
The need for social distancing and safety measures have created a need and demand for contact-free shopping. Dark Stores allow consumers to purchase from a brick-and-mortar retail store without having to enter it. They can place their order online and either pick it up or have it shipped. This way, Dark Stores combine online shopping safety with the (almost) instant gratification of getting your product immediately.
IMPROVED DISTRIBUTION AND QUICKER DELIVERY
Converting physical stores into dark stores is a smart way to expedite order fulfillments quicker and more efficiently by including a variety of distribution options and bringing the products physically closer to a specific part of the market.
LARGER AUDIENCE AND BROADER REACH
Turning a brick-and-mortar store into a dark store gives you a much larger potential audience, as your products are now accessible online to everyone, 24/7.
IMPROVED SKU MANAGEMENT
Grocery stores have especially benefited from the Dark Store concept. One of the reasons is that Dark Stores can improve SKU management by focusing on storage and click-and-collect capabilities. In groceries, there are almost as many SKUs as there are customers, so this is a big win for those retailers.
Related Reading: 10 Things to Keep in Mind for Grocery Ecommerce Success
EASIER TO MANAGE PERISHABLE PRODUCTS
Another reason grocery stores thrive with the Dark Store concept is that it addresses the challenge of perishability. Delivering fresh food requires flawless warehouse control and super-efficient order fulfillment to minimize the time between off-the-store-fridge and delivery.
MORE EXTENSIVE RANGE OF PRODUCTS
Since customers can’t come inside Dark Stores, their layout can be optimized and planned for more storage and better picking capabilities. Improved storage capacity means greater product assortment, and faster picking means orders are fulfilled quicker.
IMPROVED INVENTORY CONTROL AND MANAGEMENT
In some cases, one Dark Store can support the retail fulfillment of several other stores in the same geographic region. As these warehouses are customer-free zones, they can better control inventory and manage larger order volumes.
WILL DARK STORES REMAIN RELEVANT AFTER THE PANDEMIC?
Since long before the pandemic, converting physical stores into dark stores has been a way to reduce cost, optimize the supply chain, and leverage online shopping. Many retail chains have benefited from the concept, and sometimes retailers have teamed up with ecommerce merchants to meet customer demand. Grocery delivery and fashion retail were already big on dark stores, even before the pandemic hit.
But in the wake of the global pandemic, other sectors have followed suit. There has been massive growth in the demand for ecommerce, curbside, and instant delivery. Given this evolution, it looks pretty likely that the new Dark Stores are not only here to stay but will continue to evolve as a concept.
Retailers who recognize and adapt to the constant behavioral shifts of the market are the ones who will win the hearts of tomorrow’s customers.
The pandemic has accelerated the shift in consumer behavior that was already happening: a shift from brick-and-mortar stores to online shopping. This has permanently altered the retail landscape, and brands need to adapt to stay relevant and attractive. Closing some locations permanently and turning them into Dark Stores will be the best way forward for many brands.
Benefits of Dark Stores include:
- Quick and contact-free shopping
- Improved distribution and speedier delivery
- Larger audience and broader reach
- Improved SKU management
- Easier to manage perishable products
- Ability to stock a more extensive range of products
- Improved inventory control and management
When the going gets tough, merchants get creative. Ecommerce revenues are projected to reach $6.5 trillion by 2023—with Dark Stores helping drive this new shopping equation.
HOW VAIMO CAN HELP
At Vaimo, we’re experts in digital commerce. We’re a full-service omnichannel partner and can help you with every part of the process—from strategy, design, development, and managed services to brands, retailers, and manufacturers worldwide.
If you’re looking for a partner to guide you through the digital transformation journey and help you understand how to make the most of the new ecommerce landscape, we’re here for you. We’re happy to help you build and finetune your ecommerce strategy, implement technical changes, and improve the digital customer experience and buying journey. Get in touch to talk to one of our experts.