The concept of "Dark Stores" and why retailers need to be aware of them

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:

78% of consumers value convenience more than they did prior to the pandemic	45% of shoppers choose convenience over price when making a purchase	Across the Atlantic, 90% of UK Shoppers who have used 'Click and Collect' more often since the outbreak will continue to do so once all restrictions are lifted

The exciting concept of dark stores seems right for these situations. Aside from this, it attracts retailers for the following reasons: 

Flexibility

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:

• Curbside pick-up

• In-store pick-up

• Home delivery

Reduced costs

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.

Improved inventory

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. 

Increased efficiency

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.

QVALON: A Dark Store Solution

There’s a need to stay on top of things with dark stores—and that just can’t be done manually. There’s a lot of moving parts that will need your constant attention, such as monitoring each stage’s efficiency and communicating any identified shortcomings to staff promptly. 

As the development of dark stores is moving so quickly, it is imperative to have a digital assistant that can collect information about operations as soon as new dark stores are opened and provide transparent communication and collaboration between your staff.

QVALON has already been a helping hand to more than 80 companies, and we’ve recently helped stabilize growth for different delivery services and dark stores, such as Jiffy, Tiggy, Yandex Lavka, and Samokat to name a few. Our system is capable of supporting dark stores in the following ways:

Process simplification

QVALON monitors the quality of dark stores’ operational activities, identifies outlier processes, and understands their development areas. With smart analytics, you can have a closer look at corporate regulations to see if they are relevant and understandable to the staff.

Personnel training

Maintaining transparency in your organization reduces the chance of human error. You can educate your dark store employees on company standards and processes that relate to their job duties with the help of QVALON.

Performance monitoring

QVALON evaluates the effectiveness of personnel, management, and even dark store directors based on a rating system. This encourages everyone to work more efficiently and increases your business’ ROI.

Standardized checklists

A checklist eliminates non-compliance with standards, but you need to make sure your pre-existing checklist fits the bill. QVALON generates clearly defined checklists to guarantee high-quality operational standards.

System audits 

Auditing is made simpler with QVALON due to digitized checklists. But that’s not all — you can regularly analyze audit results, as well, so you can make prompt management data decisions and strategic improvements based on generated data.

Task delegation 

Proper task delegation can boost productivity and eliminate inefficiency. QVALON’s task management feature helps ensure your dark store teams and headquarters work in sync.

Remote monitoring

With QVALON’s photo reports, monitoring store layouts and shelves has never been easier. This also means you can step in to implement corrective measures straight away. 

As you can see, QVALON’s current set of features is proof that it’s not just a software program with electronic checklists. Instead, it’s a full-fledged assistant manager with a comprehensive set of tools for managing processes and personnel.

Through the system, it is now possible to break away from a disparate principle of management and streamline communication between managers and staff through various messengers and programs. 

The best part? These tools are all at your fingertips in one mobile device.

With QVALON, you can quickly learn about operational risks at your company and eliminate them on time. This removes the obstacles the fast nature of dark stores poses and gives you an edge over your competitors. Improve customer satisfaction by simplifying all activities related to dark stores. Talk to us today.