“Dark Store” has a rather sinister and almost dystopian ring to it. In reality, it represents one of the many bright ideas and concepts that helped numerous retail businesses stay afloat during the pandemic.
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Dark Stores: A Post-Pandemic Retail Model Here to Stay
When the going gets tough, merchants get creative. During the pandemic, we witnessed hotels turn empty rooms into co-working spaces for the WFH crowd and restaurants offering takeaway menus and home delivery. Along the same lines, many retailers converted their physical stores into “dark stores” to cater to shoppers confined indoors.
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 struggled during the pandemic. So what separated the leaders from the laggards?
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.”
One of the ways retail stores successfully adapted their business models to the pandemic was the pivot to the “dark store.”
Related Reading: Digital is Better, Says Covid-19
What is a Dark Store?
A dark store is 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, which allows more space for store inventory and the opportunity 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 used variations of this process include Whole Foods, Walmart, Target, Bed Bath & Beyond, and most large fashion retailers. But as brick-and-mortar stores struggled during lockdowns, the number of dark stores grew significantly.
Related Reading: Digital Ecommerce Business Models – The Current Landscape
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
Curbside pickup usually consists of a dedicated parking space where an employee will bring out the order so that the customer doesn’t have to leave their car. From a pandemic perspective, this provided the highest level of safety for customers. But it’s also a very convenient way of shopping that many consumers have come to appreciate.
In-Store Pickup
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 store to pick up their products. This option is convenient for customers and means no delivery expenses.
Home Delivery
The demand for home delivery increased dramatically during the pandemic and works very well for dark stores. Home delivery means fast and convenient contactless delivery and is perfect for groceries and other essentials.
Benefits of the Dark Store Concept
Quick and Contact-Free Shopping
The need for social distancing and safety measures created a need and demand for contact-free shopping. Dark stores allow consumers to purchase from a brick-and-mortar retail store without entering it.
They can place their order online and pick it up or have it shipped. This way, dark stores combine online shopping safety with the (almost) instant gratification similar to in-store shopping.
Improved Distribution and Quicker Delivery
Converting physical stores into dark stores is a smart way to expedite order fulfillment and more efficiently by including various 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 especially benefited from the dark store concept, and its popularity resulted in the term “dark supermarket.” One of the reasons is that dark stores can improve SKU (stock keeping unit) 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.
Related Reading: Selver, the First Grocery Store on Magento
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.
Have Dark Stores Remained Relevant After the Pandemic?
Since long before the pandemic, converting physical stores into dark stores has been a way to reduce costs, optimize the supply chain, and leverage online shopping. Many retail chains have benefited from the concept, and sometimes, retailers 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 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.
Does the Dark Store Model Work for All Businesses?
Now that the lockdowns are in the rearview mirror, consider your need for physical stores. Do you receive frequent visitors to all locations, or does it make more sense to keep one flagship location in a major city?
Depending on the location of your dark store(s), you may not be able to offer same-day or same-hour delivery for shoppers. However, it all depends on your customers’ expectations, as not all products need to be delivered within an hour.
Certain stores can operate as MFCs (micro-fulfillment centers) for last-mile fulfillment and as pickup centers as well. This adds a new dynamic and purpose to physical stores that otherwise depend solely on foot traffic to stay open. This only works with up-to-date inventory management and the ability to handle orders online, returns in-store, etc.
The dark store model pushes businesses into omnichannel and elevated digital capabilities.
Key Takeaways
The pandemic 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 must 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.
The 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.
