Dark store: have you already thought about this?

I strongly believe that after the end of the quarantine, imposed in many countries due to the pandemic, the dark store format will develop much faster than experts predicted earlier.

Let’s find out why this is happening?

Maksym Prokhorov Founder and IT manager of PM Partners.

From theory to practice: dark store and its needs

Online orders are the basis of this technology. The dark store is the situation when the buyer in the online store forms his consumer basket. Then the basket is collected by warehouse workers. Afterwards, the retailer sends assembled and paid goods to the address specified by the buyer.

Another type of dark store is the following, the customer collects the necessary goods in a “basket”, pays for them, and then simply physically picks them up in the store. In other words, the customer uses the “click-and-collect” function.

Sainsbury’s supermarket was the first to try to introduce the idea of ​​a “shop without customers” in the UK in the early 2000s, but then the number of orders was quite small and the retailer had to close this format.

However, in the past few years, supermarkets around the world are facing a new problem: the marketplaces of the “live” store are not able to provide both real and online customers with orders, especially when online orders are becoming more and more spread.

Nuances: details about the dark store format

The store, which works in this version, resembles a warehouse of a typical supermarket. There are only employees on its territory — they collect online orders.

In 2009 near London another attempt was made to launch a dark store. Tesco tried not only to implement this principle of trade, but also to establish the name of the format.

Dark stores are now developing large chains in the European Union, the United States and other countries.

We have carefully studied the basis of work of British colleagues, and if you compare our dark stores, they will be very similar. Essentially, we like the Tesco business model, because we have taken a lot from it. And the path of evolution that it has gone through in 10 years, we are going faster

The director of e-commerce of the retail chain “Crossroads” Denis Vasilye

Such stores can be attributed to the FMCG segment, where we can find food products and goods included in the list of basic necessities.

The interior space of the dark store is organized so that workers collect the order as quickly as possible. Moreover they maintain the temperature necessary for goods and abide by all nuances of storage.

Other niches for shops without buyers:

• Fashion retailers with help of this format may reduce costs and set more competitive retail prices;
• For furniture stores the possibility to manage small points for registration of the order and delivery of purchases as a part of large dark stores is very suitable.

This approach to the sale of goods to the end-customer is quite effective for online trade in everyday goods. This is confirmed by the experience of at least two countries: France and the UK. More than 2,000 dark stores already operate in France, and online sales in the FMCG market account for 5.7%. In the UK online sales of everyday goods account for 7.5% of the market.

In Eastern Europe recently about 0.3–1.7% of consumers bought food and daily goods online. However, taking into account the latest events, it is very likely to observe large jumps in these indicators, of course it is an upward trend.

Is digitalization the future of trade?

Walmart, Albertsons, Stop & Shop, Meijer, Hy-Vee and many others have in recent years begun to invest more in automated mini-warehouses inside their stores and have started to open dark stores.

Keeping up with the markets and grocery stores. According to Bill Bishop, co-founder of the retail and product consulting company Brick Meets Click,workers who collect, package and deliver goods by hand are expensive for such stores. Therefore, grocers turn to technologies that reduce costs and prevent congestion of commercial areas where buyers are present.

Walmart in Salem, New Hampshire, USA, has launched a pilot project with stand-alone carts that collect customer orders and deliver them to supermarket employees, who prepare the contents for shipment.

The retailer also recently opened a 3,700-square-foot Walmart Pickup Points in one of the grocery stores, outside Chicago. Customers drive up there and stop in the parking lot, and Walmart employees load their order into the trunk. In addition, Walmart makes address delivery from here. The location inside looks like a typical supermarket, but shoppers can’t go there.

Some experts say that such models have an advantage over large centralized warehouses because they are closer to consumers than classic warehouses.

“The microformat helps retailers solve the problem of labor costs and last mile costs”

Jefferies analyst Christopher Mandeville

According to his estimates, the cost of delivery of products from central warehouses is usually about twice as high as when using a dark store as part of a large store.

“Dark stores in the grocery store — is a new trend,” said Michael Demko, founder of consulting firm Locai Solutions.

For example, in 2019, only about 5% of buyers bought products online, in the United States. Even then analysts predicted that in the coming years this number will increase. However, they could not even imagine how the situation in the world would change in just a few months.

e-Commerce in numbers

Susan Meyer, corporate content marketing manager at BigCommerce, says that by the end of 2019 (according to Statista), the global e-commerce market has reached $ 3.5 billion and amounted to 14% of total retail sales worldwide.

In early 2020, analysts forecast that by the end of the year, global e-commerce sales will increase to $ 4.2 billion, or 16% of total retail sales. And the numbers, according to their forecasts, will continue to grow. Now, I think a few people doubt it.

At the same time, Susan Meyer points out that the competition on the Internet is tougher, advertising rates are high, and the amount of information is very large. Accordingly, consumers change their principles when choosing a retailer from which to actually make a purchase. And that’s why digitalization plays an increasingly important role in increasing the competitiveness of the store in e-Commerce, in fact, as we see in the example of dark stores.

15 years ago we asked each other: “What is e-Commerce? What are its benefits for small businesses?” I hope that 15 years from now, people will not think about e-Commerce at all, just as we do not think about electricity today,

Jack Ma, founder of Alibaba, one of the richest businessmen in the world.