5 Things to consider before opening Dark Stores like Grofers
When the going got tough, the retailers got creative. With the digital transformation continuing to influence customer behavior and preferences, dark stores have emerged as a saving grace for many retailers. Traditional retailers who quickly turned to online channels for meeting the increasing demand; now faced the challenge of faster delivery of fresh products. As consumer expectations for quick delivery and convenience continued to rise, retailers were on the lookout for ways to disrupt the supply chain efficiency while achieving profitability. Retailers then began using the network of dark stores across densely populated areas to serve the online demand.
Physical retail outlets or supermarkets that are shut down were converted into eCommerce warehouses or online fulfillment distribution channels called Dark stores. Not open to customers, the warehouses are fully utilized to store inventory and to fulfill orders quickly and accurately. Dark stores enable the online platform to provide customers with in-store pickup, curbside pickup, same-day delivery, etc. Whole Foods, Walmart, Target, Bed Bath & Beyond, and a large variety of fashion retailers have already been experimenting with the concept of Dark stores for a long time.
Benefits of the dark store concept
Quick and contact-free shipping
Dark stores merge the convenience and comfort of online shopping with the instant gratification of traditional shopping by getting your products as soon as they are purchased without waiting for shipping.
Improved Distribution and Quicker Delivery
Converting existing physical stores into dark stores can immensely expedite order fulfilments quicker and more efficiently by including a variety of distribution options and inching the products closer to a specific part of the market.
Larger Audience and Broader Reach
Dark stores enable your products to be available online 24/7, hence it gives a smarter way to access a larger potential audience.
Improved SKU management
Dark stores improve SKU management in retailers by focusing on storage and click-and-collect capabilities.
5 Things to consider before opening Dark Stores
As more and more retailers continue to explore the idea, there are a few factors that they need to consider ensuring they get their dark store strategy right:
Assess Demand
Retailers considering opening a dark store should first ensure that they have adequate demand that necessitates the opening of a dark store. As per the study, retailers should access existing demand and ensure that at least 80% of their orders are online to break even. Leveraging 3rd party marketplace or loyalty program data can help you map out the gaps in retailers' networks in the surrounding areas. Deciding on the right product categories based on the prevalent local demand patterns is crucial before opening a dark store. The dark stores in India are mainly concentrated on grocery, apparel, footwear, consumer durables, and home goods retailers.
Location Quality
Unlike the traditional brick-and-mortar store locations, dark stores are not open to the public and hence need not be in high flying crowded areas. Dark store retail strategy should focus on less crowded, industrial areas that are accessible via road. Dark stores also need a proper planogram with the aim of shelving maximum products and addressing customer demands with maximum efficiency. The most critical aspect of dark stores is inventory replenishment, as retailers need to ensure they can handle the increased online demand, within the short window span. Inventory and space planning teams must work together to maximize the utilization of the highest possible availability and greatest possible speed. Dark stores that offer home delivery options need to have adequate space to accommodate delivery vans in the fleet along with loading positions. It would also be a great idea to reserve a specific space for items that are most in-demand to facilitate quick pick up and delivery.
Start Simple
Ecommerce teams might be too fast to deploy the bells and whistles of automation as soon as they see this opportunity, going too soon on automating your dark store can hinder your long-term success. Retailers need to take at least a year or two to study the operation model of the dark store before assessing ways to automate the store to ensure maximum productivity.
While there are many benefits to adopting a dark store strategy, there are many logistics planning and support that you will need to ensure before opening it.
Create a clear communication plan
When a new fulfillment option opens, especially in a locale where the customers are not yet introduced to the concept, they need to be clearly communicated to, marketed, and reminded often of all the available options. Retailers must give ample information about how the new options work across websites, social media, or mobile to ensure customers are comfortable and aware of all the nooks and niches of the plan.
For example, in the case of curbside pickup you need to provide pick-up directions so that shoppers are clear about where to navigate and park for delivery. This opportunity could be used to leverage your knowledge of each customer and store inventory to deliver personalized and relevant cross-sell offers for BOPIS or curb-side pickups.
Determine the Best use of Dark stores
In most strategies, dark stores are used as mini distribution centers for fulfilling online orders, improving delivery times, or reducing strain on larger warehouses. Dark stores can also simultaneously operate as fulfillment locations for curb-side pickups, delivery, and other contactless options that are allowed in those regions.
Dark stores have the potential to immensely accelerate the online fulfillment capability of a retailer. However, it is important to carefully consider the above points to ensure you execute in a flexible, agile way that ensures the sustainability of the store. Dark store strategy can be used to help supplement the fulfillment options for retailers by continuing to provide an outlet for consumers to safely pick up their purchased products. It will very well depend on how well retailers use the dark store strategy and communicate to customers to ensure brand loyalty. AI-driven technologies and machine learning algorithms help retailers deal with the increasing pressures and demand variations whether from planned promotions, weekday variation, seasonality, or localized demand-influencing factors such as events and weather forecasts.
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