Dark Stores – Shining a Light on the Future of Retail

Dark stores

Dark Stores are an emerging retail concept where traditional outlets are converted to warehouses to facilitate a click & collect offering. It’s a trend that has been accelerated by COVID-19, where stores that have been unable to open during lockdown – and for some, post the restrictions easing at the beginning of July – have been reconfigured into dark stores to help them continue trading.

They can serve a variety of purposes from large warehouses down to a dedicated section of an actual store that is used just for online order fulfillment. The strategy first emerged in the grocery industry, partly as a response to the issue of shoppers having to navigate aisles crowded with pickers from assorted delivery services and compete for access to products. As a result, retailers are either building mini-warehouses in their stores or opening up dark stores in separate locations devoted to delivery. In doing so, they realise a number of advantages:

Customer contact

Dark stores combine the benefits of a store with a fulfillment centre, enabling retailers to complete orders as close to their customer as possible. Often arranged like a traditional store, they are closed to the public and give pickers access to products without competing for space with shoppers. As a result, pickers can quickly fulfill orders and deliver them to a customer pickup location, such as a drop box, or make available for same-day shipment to the customer’s home.

In the current challenging climate, underperforming stores make great candidates for conversion to the dark store format. Ideally they should be located in well populated areas where there is access to a substantial number of existing and potential customers. Fulfilling from these locations helps reduce transportation costs and provides quicker service, shortening the time to deliver from days to hours. It can also reduce environmental impact and carbon emissions in the last mile of delivery and encourage customers to click and collect instead.  

Inventory innovation

By definition, dark stores work with a clearer view of stock levels and product availability than a traditional store because every product is tracked in real time. In fact, modern order management systems that support global inventory transparency can optimise dark stores to be even more efficient and fulfill customers’ expectations more effectively. With a purpose-built distribution order management system, for example, retailers can route requests to the dark store that is best located to handle the fulfillment.

Dark stores can also improve efficiency and the quality of the customer experience, because retailers can increase the number of products that are delivered to drive a more efficient operation. For instance, while many people will recognise that ordering groceries online doesn’t always match the quality of instore shopping, with a dark store, grocers can create dedicated chilled operating zones that maintain the quality and freshness of food. Likewise, products won’t be handled and damaged by other shoppers which helps maintain quality.

Redeploying staff

As many retail outlets temporarily closed their doors at the end of March, the fate of thousands of store workers was put in doubt. Dark stores provided a much-needed – and unexpected – lifeline as they allowed retailers to retain a good number of their staff, albeit in a different role. With space reconfigured to cater for the massive spike in online transactions, many store staff were able to keep working despite stores being closed to the public. Not only has the transition to dark stores enabled retailers to better address their customers’ demands, it has also mitigated the potential devastation that large-scale job loss can cause.

Around the clock retail

Since dark stores aren’t limited to the opening hours of traditional outlets, they have the option to operate around the clock, adding to the scope to improve fulfillment efficiency. In addition, they can open up opportunities for retailers to sell new product categories that can’t be offered in a high street retail store because of space constraints.

As savvy retailers turn to dark stores, they are not only reinventing the use of retail space, but also meeting the needs of customers, who want the best of both worlds and the option to blend digital shopping with the convenience of click and collect or home delivery. In doing so, dark stores may be shining a light on an exciting new trend for retail.

Credit: Rob Shaw, MD EMEA at Fluent Commerce