Early in 2020, at the height of the shelter-in-place orders due to the pandemic, the average number of first-time online shoppers rose by 12% worldwide. The rapid increase is unprecedented, considering 62% of consumers still prefer buying from physical retail stores for mere months before the crisis erupted. This behavior, fueled by health concerns, continued as digital sales grew by 36% in the first two weeks of December 2020. Most companies pivoted their operations in the light of the rapid shift in consumer behavior. Instead of creating a new solution, businesses thought of using a decade-old retail concept – the dark store.
What is a Dark Store?
Dark stores are traditional retail locations converted into fulfillment centers. These shopping outlets aren’t open to customers; instead, they fulfill online orders with more space to stock inventory.
While a dark store’s interior may look like a conventional supermarket, a shopper wouldn’t find a hot bar, a bakery, or other concessions in one.
The Rise of Dark Stores During the Pandemic
The concept isn’t entirely new. Dark stores are popular in the UK, France, and China. The first supermarket to try this concept is Sainsbury’s in the UK. In the early 2000s, the grocery chain opened a branch dedicated to fulfilling online orders at Park Royal in London. The store closed after a few months due to low order quantity.
The term “dark store” was coined in 2009 by another UK supermarket chain, Tesco. In the same year, Tesco opened several dark stores in Croydon, Surrey, and Aylesford, Kent. This time around, the public was quick to adapt to the new concept. Tesco received almost 500,000 orders every week.
This store concept was on its way to mainstream popularity even before the pandemic hit. But as the pandemic spread across the world, more businesses set these up. And the interest reached overseas.
In 2020, Amazon’s Whole Foods subsidiary closed down a few of their locations in Los Angeles and New York with the intent of converting them into dark stores. Likewise, Bed, Bath, & Beyond confirmed that they are transitioning 25% of their retail operations into fulfillment centers to meet online consumers’ demands.
The Benefits of Being a Dark Store
The end of the pandemic is on the horizon as pharmaceutical companies started rolling out their respective COVID-19 vaccines in the last few weeks. Pre-pandemic normalcy is within reach as retail stores and leisure centers are opening to the public.
Interestingly, consumers are likely to retain the shopping habits they have adopted throughout the crisis. Twenty-eight percent (28%) of online shoppers say that they will continue making most of their purchases online.
“Dark stores” isn’t only here to stay, but it is the next eCommerce evolution. Forbes.com calls this new concept the future of post-pandemic retail, and rightly so.
Here are the reasons why top retailers are adapting this exciting new concept:
Increase in Capacity
Exclusively fulfilling online orders gives dark stores the ability to scale and grow without the space limitations. By adopting this concept, retailers can service local patrons and accommodate orders from farther areas.
Moreover, exclusively online stores often provide multiple delivery options. Between the possibilities for curbside pick-up, in-store pick-up, and home delivery, transitioning to a dark store operation allows eCommerce businesses to target audiences with specific delivery option preferences.
Better Product Availability
One of the main goals of dark stores is to optimize their location layout to accommodate the maximum inventory number. Simply put, a dark store has more space to handle a more extensive inventory of products.
As eCommerce business owners know, the balance between understocking and overstocking can be tricky. Transitioning to a dark store operation will provide retailers better inventory visibility. They can manage their stocks better and make the right inventory decisions.
Wider Range of Items
As dark stores utilize their square footage for storage and not customers, retailers can create layouts that enhance storage for more variety. With this capability, eCommerce stores can stock more types of products without the risk of human error within the order fulfillment process. More combination can mean more potential customers.
Despite the necessity for automation, dark stores still need “pickers” to select retail customer orders when running efficient operations. A human workforce and technology work best to provide swift customer deliveries.
Online order fulfillment is at the heart of a dark store’s layout design. Without foot traffic, pickers can do their jobs with minimal errors and utmost efficiency. Furthermore, dark stores have a better turnaround for order placement and shipment.
Transitioning to a dark store operation also provides the option to operate round the clock. Dark stores, after all, aren’t bound by peak shopping hours. By running 24/7, dark stores can fulfill more orders in less amount of time.
Overall, it is more affordable to manage dark stores than a regular retail shop. Because these locations do not cater to the general public, it doesn’t have to have all the design and branding elements that go into building a brick and mortar store, while also requiring fewer employees.
The Future of Dark Stores
The question on everyone’s mind is when will life return to normal. Experts say that getting the vaccine out to people could take the whole of 2021. It won’t mean people can start holding parties — far from it. For less developed countries, getting inoculated might take longer.
Global economies will still take a beating but eventually recover. And dark stores will be permanent additions to consumers’ retail options in the new normal.
Whole Food and Bed, Bath, & Beyond already placed their stakes on the new concept. Like Target and Walmart, other multinational companies are easing their way into transitioning their retail outlets, allowing customers in select locations.
Yet, the organizational shift isn’t without challenges. Dark stores require infrastructure and automation to be efficient. Streamlining the order fulfillment process through automation solutions prevents human error and delivery delays.
ZhenHub offers fulfillment services that can ease your eCommerce operation in transitioning to a dark store operation. We provide a one-stop, hassle-free solution for calculating rates and getting your products wherever they need to be. Sign up today to learn more about your ZhenHub options.