No, these are not stores without electricity!
With the growth of the e-commerce business getting stronger and stronger with each passing day, it also creates very demanding customers who are looking for faster and more frequent deliveries without interruption. This is a critical opportunity for businesses (and a challenge too), in terms of how to overcome “Last mile delivery” obstacle.
Superior last mile delivery engages and builds customer loyalty.
Research suggests that customers are willing to pay more if they are satisfied with the delivery services.
So what are dark stores?
rearch stores, also known as dark supermarkets or dotcom centers designate a retail outlet or distribution center which is exclusively intended for for online shopping. These are typically large warehouses that can be used to facilitate a “click-and-collect” service, where a customer picks up an item they have ordered online. They can also be used as an order processing platform for online sales.
The format was first launched in the UK. Since then, its popularity has spread to France followed by the rest of the European Union. And now at the United Nations as well.
The most popular companies known to operate dark stores belong to online grocery, clothing brands and household items because these allow savings on overheads.
In addition, dark stores are inexpensive to operate not only because of the cheap rental but also because of the reduced cost of picking up.
Why are dark stores needed?
Now that we have a clear understanding of Dark Stores, let’s take a look at the events that helped bring these to fruition and growth.
Higher delivery costs:
Deliveries are eating away at the margins of e-commerce players. Most of them absorb the costs associated with last mile delivery. This can be easily resolved by setting up dark stores, where the costs associated with deliveries are known. reduce by 23%.
Yes 50% of deliveries are made through dark stores, this would improve profit margins by decent percentage points.
Customer brand loyalty:
As we know, customers now have a wide range of choices to choose from, and they are not necessarily tied to just one brand. It made customers to become loyal to brands higher efficiency and faster delivery a service.
These are also the reasons why online gamers need to take action improve their delivery time, moreover, prevent erosion of market share. And by nature, dark stores are designed in such a way that facilitates faster picking, thus improving efficiency.
Conversion rate of non-performing stores:
The rise of e-commerce and the downturn in traditional retailers also forced them to review their strategy by converting their inefficient stores into online distribution centers.
An unproductive approach:
Retail chains that operate with an omnichannel approach have been known to send “pickers” to one of their stores to process an order. It was found to be unproductive due to the number of buyers the “picker” has to scramble and negotiate with to fulfill an order. This has also resulted in the need to create exclusive distribution centers or dark stores.
Advantages of dark stores
Adopting e-commerce as an integral part of our lives also means that businesses will need to integrate dark stores as part of their business strategy. This has its own advantages, let’s take a look:
Dark stores have separate temperature zones that ensure freshness (in the case of the grocery store), and with prompt delivery, quality is preserved.
Dark store setups allow picking, packing and delivery of merchandise with the ability to accommodate high volume of online orders
- Allows a full range of items:
Dark stores vary between 100,000 to 200,000 square feet. It helps to store a full range of items. For example, all soup flavors or products from the specialized range (premium, ethnic, locally sourced).
- Improves picking accuracy and efficiency:
The scale of operations in a dark store makes it imperative to integrate automating. The technology ensures that the right products are scanned and selected and the system even offers substitutes when merchandise is out of stock, without leaving this to human discretion.
Since the function of dark stores 24 * 7, it ensures that customers receive their items at the appropriate times.
- Used to store new goods:
In dark stores there are no logistical and space constraints, therefore, newly launched goods / products can be stored easily.
- Centralized Rote Planning controls:
For deliveries, the routes to the dark stores are cplanned entrally. This guarantees maximum deliveries in the shortest possible time.
What are the challenges associated with dark stores?
- Disturbance in the supply chain
- Automating this leads to one-time additional costs
- Maintenance which requires collaboration with full-time management companies
- Selecting an ideal location is important for accommodating a large fleet of vehicles with easy access to a huge pool of local workforce
- Selecting the right technology for automation that complements manual sorting (if necessary)
- Creation of a layout that optimizes efficient picking and grouping of products
Components needed before embarking on building dark stores
Disposition: Space optimization is a key part of a dark store
Standard Operating Procedures (SOP): Understanding the product proposition is essential before designing a dark store. SOPs play an important role in their definition.
Stock replenishment planning: The inventory must be quickly replenished through an order management system that sends real-time inventory updates to the website. This prevents lost sales from out-of-stock items.
Time and motion studies: It can help reduce the number of manpower, providing efficient output This is done by optimizing internal processes such as order execution time, order accuracy, data collection along with ergonomics, etc. This further helps to assess the ideal timing associated with each internal process.
Guidelines: Store management should have a set of dos and don’ts to know execute efficiently warehousing operation.
Planograms: Planograms allow more items to be placed on shelves and better meet consumer demands. This would reduce out-of-stock events, improve income and customer satisfaction.
IT integration: The transition from a retail model to a black store model involves the transfer of legacy systems and the installation of new systems such as order management systems. (WHO) and automatic replenishment systems (ARS) for supply. It is best to engage with a retail consulting company who can oversee and provide the necessary advice on the process.
How are dark stores revolutionizing grocery e-commerce?
There are a multitude of challenges with Asians grocery store e-commerce. Consumers primarily depend on neighborhood stores because they like to touch and smell products before they buy.
The situation is generally good, given the size of the market. South Korea, China and Japan are rapidly establishing themselves in terms of market share and scale. Singapore and Taiwan are improving to have more advanced channels in 2024. Besides size and growth, different markets also vary in terms of buying habits and crops.
IGD Program Director, Zhu says they will need a strategy where to invest first. In terms of online share in the total grocery market, Asia does not seem late (7.6% by 2023), compared to the United States (10% by 2022)
With Amazon entering this market, it is difficult for food retailers to ignore e-commerce.
Looks like dark stores will become the key to the efficiency and profitability of online grocery shopping (and literally every retail business)