Over the last year, many traditional retailers, particularly grocery stores, have been pressed to react to COVID-19 lockdowns, safety measures and an increase in ecommerce grocery demand.
As the online grocery market has surpassed $8 billion in sales and e-commerce revenues are projected to reach $6.5 trillion by 2023, many retailers have converted brick and mortar locations into dark stores, focusing exclusively on fulfilling online orders.
As online grocery business continues to grow and consumers increasingly seek fast and frequent deliveries, grocers are compelled to consider whether dark stores are the most effective solution for ecommerce order fulfillment. Clearly, this model has seen promising results during COVID-19. Now, grocers must ask themselves: Do dark stores have a place in a post–COVID world?
How Dark Stores Work
Serving as miniature fulfillment centers, dark stores have made it possible for grocers to adjust ecommerce operations to boost productivity and reduce costs as transaction volumes increase.
Some are set up with aisles and shelves, just like a regular store. At these locations, pickers collect the items to fill several online orders at once.
Others are designed more like warehouses. They can be completely automated, using robots to pick and pack online orders, or hybrid models, utilizing autonomous carts to gather items before sending them to the pickers who prepare the order for delivery or pickup.
The Benefits of the Dark Store Model
Dark stores are designed to make the shopping experience, from order to fulfillment, as smooth and efficient as possible for customers and businesses alike. With this, incorporating the dark store model as a part of an overall retail strategy comes with a variety of advantages.
To begin with, they allow grocers to repurpose stores that have been closed, so there is usually no need to invest in new space. In some cases, making a store dark allows grocers to continue paying rent on the property to prevent competitors from moving in.
At the same time, these stores allow grocers to find efficiencies in stocking, picking, inventory management and the flexibility to quickly scale the business to a larger customer base without affecting the in-store shopping experience.
For grocers specifically, dark stores provide a means to optimize in-store pickup processes by reorganizing the location of items for faster picking. Separate temperature zones ensure freshness and preserve quality of goods.
Ultimately, the dark store model provides an opportunity for grocers to stand out and rethink the way they do business to satisfy consumers’ quickly growing appetite for online shopping and fast delivery.
Logistical Challenges
While dark stores allow existing grocers to create fulfillment centers, the logistics of organizing inventory and distribution processes, creating online shopping platforms, and implementing automation systems could involve fundamental changes to a business based on an untested model that relies heavily on shopping habits.
The complexity of these challenges means that the dark store model is not a blanket solution for grocers reacting to the ecommerce shift. They need to account for location, products and customer base and be evaluated on a business-by-business basis.
The Future of Dark Stores: A Component of a Broader Strategy
Even after COVID-19 has subsided, we will face a new normal. Shoppers who have experienced the convenience of delivery and curbside pickup will have adopted some of those habits into their daily lives and stores may continue to require social distancing. Dark stores can help ease transitions while continuing to protect customers and employees.
However, dark stores are not the only solution.
Some form of micro-fulfillment will be a valuable component for many businesses despite the current challenges and complexity of transitioning a business to a new model.
Are dark stores a thing of the past? Probably not, but they aren’t taking over the future, either. Instead, they will become one component of our retail landscape and a great tool for many businesses trying to adjust to a changing marketplace.
To learn more about KPS Global’s role in helping grocers navigate the new waters of ecommerce, fulfillment and more, visit https://kpsglobal.com/products/online-grocery-pickup-ogp/.
