Since we've been moving forward speedily in this pandemic world, all we need is isolation and instant gratification. And this is valid in our every action, from social connections to shopping. This being the case, traditional retailers feel the need to do something more to meet customer demands in an ideal way. That's why online shopping has been the best solution for many years for those who noticed earlier. For relatively small retailers, it's been a bit complicated to keep up the pace in e-commerce. Right here, "dark store" concept appears. In this article, you will have an idea about the description, benefits, and working principles of dark stores worldwide.
What Is A Dark Store?
Think of a physical store full of goods but not open to in-store shopping. You cannot go to a dark store to take what you want in exchange for money. So, the answer to "What is a dark store?" is as follows: A Dark store is a retail store converted into a micro-fulfillment center for online orders. This dark store concept is used by every retail company operating in almost every sector such as F&B, apparel, or electronic goods to meet the fast-growing needs of customers. Dark stores are generally located in the suburbs or on the outskirts of the cities as those areas are relatively more affordable in terms of rental fees. This is an essential case as we think the size of an average dark store in the U.S (almost 40.000 square feet). Dark stores take different names in different countries. For example, in the U.K, dark supermarkets are pretty standard. Dotcom Center is the other description of those stores, and they offer click-and-collect services for their customers. The reason why the dark stores do not accept in-store shopping is that a specific space is allocated for inventory.Once the order is placed, the goods sold are picked and packed in the dark store by the customer himself. For traditional retailers, this means more online sales with fast delivery and more satisfied local customer. That's why dark stores are also known as retail distribution centers and pretty beneficial for conventional retailers of all sizes. Especially during the COVID-19 pandemic when every one of us demands fast delivery and minimum physical contact, dark stores have a chance to expand wider all across the globe.
How Do Dark Stores Work?
After explaining the dark store meaning, it is time to point out the working principle of them. Dark stores might look different physically from each other. One may include shelves and aisles without signage or display, while others may look more like a developed warehouse with robots roaming around. In the first one, customers go into the dark store and pick the items they've bought online from the shelves. A robotic system deals with your order to make it ready for you on time in the automated one. Sometimes it's delivered to you by couriers, and sometimes you come to pick it up. A more hybrid model is also used globally. In those models of dark stores, the items sold are gathered by autonomous carts. Afterward, the pickers prepare the order for delivery. When it comes to the working hours of these stores, there is not a legitimate restriction as dark stores are not customer-facing shops. Orders are generally picked at night. Deliveries are done by trucks making multiple trips to deliver the orders on time during the day. Regardless of the business model preferred, customers want one thing: fast delivery with responsiveness. Dark stores have been gaining ground in the e-commerce world because of this very demand. People want a stress-free shopping experience, after all. They prefer to collect their order from a nearby dark store.
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Why Should I Open A Dark Store?
You most probably see a sign like "Online-Only" somewhere on your way to work or back home. This is the sign of big retailers such as Walmart, Whole Foods, Kroger, and Bed Bath and Beyond trying dark stores as a part of their sales operation in response to COVID-19 conditions. However, those giants are not the only ones to enjoy dark stores. Instead small shops are also experimenting with this concept, and they won't regret it as their customer numbers increase while the cost to reach them decreases. Here below, you will see the advantages of dark stores for retailers.
As these dark stores are inventory-priority establishments, the inside area is designated according to this purpose. Its layout is generally planned to reveal better storage and picking capabilities. Only this can provide more significant product classification and accurate order fulfillment amid complicated online operating situations.
Easy Control of Stock Levels:
Despite the huge ones, dark stores are generally smaller than conventional warehouses. That's why it is much easier to control and manage them in terms of inventory tracking. Some dark store owners prefer to build inventory management systems to control the area better and handle the orders properly. Inventory management software might be pretty helpful (and, in some cases, vital) to prevent deadstock and stockouts. When you successfully rule stock control simplification, you will have optimal inventory level at all times.
Better Warehouse Efficiency:
If you have your answer to "How do dark stores work?", you most probably solve the efficiency problems, too. With the adoption of the right technology and hardware, the dark store warehouse efficiency can be maximized.
Fast Order Consumption:
Say that you are out of coffee at home, and you are expecting guests. It will be a gift from heaven if someone drops a packet of coffee at your door in 10 minutes. People who are used to your brand's fast and dependable delivery service are more likely to turn out to be your loyal customers in a short time. Dark stores give you the chance to offer more for your customers with fast delivery returns. This will be enough to increase purchases and customer lifetime gratification.
Dark Store Order Fulfillment Models
Dark stores are seen as the future of the post-pandemic retail world. They are a strategic and profitable business for all kinds of retails. To survive and struggle, should have these main delivery options in place:
- Home Delivery
- In-Store Pick up
- Curbside Pick up
The above are essential pickup options for an average dark store. The potential customers should be fed enough alternatives to feel comfortable enough about getting their orders as fast as possible. There are lots of dark store examples with only one delivery option. As you might easily guess, those kinds of dark stores couldn't avoid disappearing as they couldn't compete in the sector.
The home delivery option is generally the most common one, especially for local retailers. It ensures a fast and contactless delivery opportunity for buyers. Besides home delivery, some dark stores have a dedicated pick up area in the shop for customers who want to come and pick up their items. The designated site is mostly right near the entrance, so the customers do not have to walk through the whole store. This is called the In-Store Pickup option, and this is also one of the most common alternatives. The last one is the Curbside Pickup. It is easy for customers with vehicles to pick up their items quickly. There are generally particular parking areas for this option where a dark store staff brings out the things, so the customers don't have to get out of the car.
Why Are Dark Stores Getting Popular?
A retail business requires some logistical difficulties. Especially by diving into the online world, they have to struggle more with inventory management, increasing orders, on-time delivery, and in-store experience. Inventory tracking systems sometimes cannot keep up with the speed of online and offline demands and eventually result in product outages and unhappy customers. The other difficulty occurs when store employees, a.k.a pickers, replace ordered items with what's available in store. For example, as a customer, you order baby food for 0-6 months. However, you get baby food for 6-12 months. This complication most probably happens because the employee in the store sends you the wrong item. If you have an automated dark store system, you can stop the order accuracy problems and have more satisfied customers. In-Store Experience is also an important subject when it comes to dark stores. Crowded aisles with working pickers alongside the customers are the scenario we are used to in a regular shop. On the contrary, dark stores make it easy and comfortable for buyers to come and pick up orders effortlessly and fast.
Additional capacity, full range of items, greater availability, clearer view of stock levels, increased efficiency, improved picking accuracy, centralized route plan, and faster consumption are among the most significant benefits of dark stores. As it is projected that e-commerce revenue will reach up to $6.5 trillion in less than two years, retailers should be thinking of broadening their horizons with some efficient and new ways. Dark stores are likely to expand more and more as online grocery, apparel, and other retailing businesses take off. This is, for sure, an advantage for companies to reach out to new markets and new customers in a more contactless and hygienic world.
Written by Erhan Musaoglu
Erhan Musaoglu is the CEO and Co-Founder of Logiwa.