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COVID-19 has changed the consumer landscape. The slow transition from crisis management to economic rebound proves that months of lockdown and quarantine measures have altered how people go about shopping.
A new survey shows that 49% of people are mostly focused on product availability—well ahead of price (36%) and quality (34%), which were the top 2 concerns before the pandemic.
Brick and mortar shops turned digital to keep their businesses afloat. In fact, global e-commerce has become a 26.7 trillion industry because of Covid-19.
An omnichannel commerce trend, Buy Online, Pick up in Store (BOPIS) paved the way for 195% year-on-year growth, with 60% of US retailers quickly adopting this strategy.
This data only emphasizes the necessity of implementing dark stores into retail businesses.
But hold on a second, what's a dark store?
Dark Store definition
Dark stores got their name for being hidden away from shoppers. Also known as micro-fulfillment centers, they're not really the type of shops that take in customers. Instead, they're mini-warehouses where orders can be picked up or delivered to customers.
To paint a clearer picture, imagine the aisles of your favorite grocery store filled with shelves full of the products you love. The only difference? You can't enter because only the operators preparing your online orders have access.
This concept isn't new. In fact, it has been around for more than ten years. The original Dark stores were launched in the United Kingdom. Tesco opened its first dark stores in 2009 to provide online shoppers with the convenience of click-and-collect delivery.
Dark Store benefits
Forbes dubbed dark stores the future of post-pandemic retail. Does this mean consumers won't be going back to their pre-pandemic shopping behavior any time soon?
It seems unlikely. As we're slowly inching our way to economic recovery, things are still looking up for eCommerce. Just look at these numbers:
The exciting concept of dark stores seems right for these situations. Aside from this, it attracts retailers for the following reasons:
Dark stores serve as micro-fulfillment centers that support scalability and expansion. Customers in near and even faraway areas can rely on retailers to service their needs. Retail and e-commerce business owners can target audiences with specific delivery option preferences, such as:
In general, dark stores are more affordable to manage than your retail outlets. It doesn't pay to spend money on aesthetics. You don't need to worry about the shop design and layout to wow your customers—they won't be seeing your interiors in the first place! All you need is to create a practical design to ensure everything is accessible for your staff.
As a retailer or an e-commerce merchant, you know that inventory is a pretty hard case to crack. Dark store operations give retailers a better view of stock levels, allowing them to make better inventory decisions.
Additional available items
Rather than focusing on customers and sales, retailers can design dark stores to enhance storage and provide a wider variety of merchandise. And in case you want some good news—more products also drive new customers.
With your staff having the floor to themselves, the process will flow much smoother. They can perform their job with minimal errors and maximum efficiency. It's not surprising that dark stores process and ship orders faster.
Is opening a dark store the right move for retailers and eCommerce business owners?
As we've mentioned earlier, supermarket giant TESCO was first on the scene. It makes so much sense for grocery stores since dark stores solve a wide range of problems for them, including product perishability.
To the same extent, it also works for start-ups like Fridge No More (USA), Weezy (UK), and Gorillas (Germany)--all of which have drawn a great deal of attention over the past few months. These hyperlocal delivery-only grocery stores operate similarly to each other: carrying a limited selection of products/units of products, and delivering to a specific area only.
True enough, dark stores are most common in grocery chains such as Tesco, Whole Foods, and Walmart, but they are also becoming more prevalent in other industries—namely fashion and home furniture.
In a Retail Wire discussion, Jeff Sward, Merchandising Metrics founding partner, shares that this micro-fulfillment center model doesn’t only answer grocery stores’ issue with perishables. According to him, “Of course time is a factor in fresh food, but distance is a factor in all deliveries.”
This is essentially true. Jewelry retailer Kendra Scott was forced to close their retail location during the height of the pandemic. As a response to their customers’ needs and the situation at hand, they promptly converted 108 of their closed stores into micro-fulfillment centers.
This only proves that dark stores are effective for retailers of any kind, not just supermarkets. And pretty soon, other verticals will realize it and follow suit.
Dark Stores, Covid-19, and the future of retail post-pandemic
The advantage of dark stores is that you can select products on the website or mobile app and wait for the courier to arrive and hand them to you. You can imagine how handy this is during the pandemic.
Here are some of the benefits:
Retailers do not operate in areas with heavy foot traffic, such as malls or high streets.
Customers can get their hands on products within 24 hours (sometimes even less than an hour), expediting the order fulfillment process.
Aside from home delivery, new dark stores give the customers the option to pick up their goods without the hassle and having to pay for shipping fees.
It's a great way for supermarkets to assure food quality, especially produce, because the products can be delivered without delay.
Several retail experts believe this trend is only just beginning. However, expect some challenges along the way. You might not have to concern yourself with branding, design, and in-store processes, but it doesn’t mean things will be as straightforward.
Joe Skorupa, a consultant and strategic advisor for retailers, says that "The keys to success will be execution with a lot of automation and customer analytics to predict buying patterns, specifically at the hyper-local level."
True enough, managing dark stores isn't just all peaches and creams. You'll need to exert extra effort to make sure your dark stores will run smoothly. To find out how—check out part two of this post and learn about the dark side of dark stores and how you can tame it down.