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The rise of Dark stores, but what are they?

Blog | The rise of Dark stores, but what are they?

Since the start of the COVID-19 pandemic in March 2020, there has been an explosion of retailers utilising dark stores to respond to online orders. Dark stores are standard high street brick and mortar stores that have been converted into fulfilment centres. They come in different forms ranging from your local grocery store, clothing shop or hardware store.

Retail across the world has been turned upside down with the pandemic. With this crisis, retailers have become imaginative in searching solutions and dark stores seem to be a viable option. Increasing social distancing measures and sporadic lockdowns have nudged individuals to shop online and physical stores to close, allowing dark stores to fulfil the normal delivery and pickup transactions.

From Europe to the US and even Australia

Multiple retailers in the US, Europe and Australia have invested their energy and resources in creating dark stores to help them deal with the high volume of online orders. The US grocery giant, Whole Foods, have started to expand their dark stores after a successful initial trial in March. Grocery Dive, a retail magazine in the US spoke with the grocery company about the impact of the transition to the growth of the business: “With stay-at-home orders in place, customers have generated unprecedented demand for grocery delivery; As we navigate the challenges associated with COVID-19, we continue to find ways to increase delivery availability while navigating safety measures and social distancing.”

Looking to the UK, a dark store success has been the sport and home retailer Halfords who have been operating their 335 stores in the past couple of months through the dark store model. Halfords is however in a unique position of turning 53 stores from dark stores to a ‘retail lite’ model, where individuals can come into stores with restrictions. Graham Stapleton, CEO of Halfords has stated that “We are pleased to be in a position to start letting our customers back. However, we are going to be reopening our stores to customers gradually and cautiously in order to be absolutely certain that our colleagues and customers have a safe environment in which to work and shop.”

Considering the challenges the social distancing measures and the ease of the lockdown still represent, the chain continues to bet in dark stores to expand their online delivery business and keep clients as the majority of Halford stores will still be dark stores.

In Australia, Athlete’s Foot, a sports gear retailer has also turned their stores dark to cope with both online demands during COVID-19 and to help to roll cash flow. CEO of Accent group - which is the umbrella company for Athlete's Foot - Daniel Agostinelli stated: “It is clear that there has been a seismic and most likely enduring shift in consumer behaviour away from traditional shopping centres to shopping online. With 18 websites and our leading digital capability, Accent Group is capitalising on this trend.”

Dark stores are not going away anytime soon

These three examples across the US, UK and Australia are clear indicators of a trend that has come to stay. However, with the growing uncertainty with how COVID-19 is going to affect retailers in the upcoming months, particularly with the easing of lockdowns across the globe, the presence of dark stores is not solidified.

Some will disagree - Blake Morgan, a contributor to Forbes magazine states that “The rapid growth in demand for grocery stores pushed chains to find solutions for automation and fulfilment quickly. But with those systems in place, dark stores could turn into permanent fixtures to serve customers.” She also warns that “Even after the coronavirus has subsided and consumers try to return to some kind of normalcy, we’ll be faced with a new normal.

Here we can see two major factors at play: dark stores can result in cost-saving options for businesses, bringing items closer to the shoppers, using less valuable real estate in the city.

One consideration that needs to be taken into account for retailers is what is needed for a successful dark store strategy. Having a fulfilment centre on its own is not enough to have a successful supply chain. What they do need to take into consideration is how they actually deliver and pick up through their dark stores. They need to understand what technology could help them allow their dark store strategy to flourish, especially when it comes to reopening of brick and mortar stores in the upcoming months.

And, customer behaviour: shoppers who have experienced delivery, curbside pickup and e-commerce will likely adopt at least some of those habits into their everyday lives. Many stores may still limit the number of customers inside at a time or instil social distancing measures. Dark stores help ease all of those transitions while still protecting customers and employees.

Do you want to talk about your business continuity plans around coronavirus and after the pandemic? Get in touch today. Based on our experience with the recent events, we can help you plan and optimise your delivery operations with a rapid setup.