Created on July 26, 2022
One day a customer is placing a 10-minute delivery order and the next day, they are exploring the various aisles in a supermarket for a “slow-store” experience. So, the retailers are currently juggling various buying behaviors.
One such strategy that took the entire last mile delivery space in its stride, is Dark Store.
What started as a micro-fulfillment center for supermarket chains, such as Tesco, Kroger, and Wendy’s has now assumed a mammoth stance with multiple on-demand business models across the globe.
As the online grocery market gets ready to hit the USD 2,158.53 billion mark by 2030, the retailers are looking for ways to operate in a delivery-centric manner. The demands for warehouse space are soaring, surpassing 100 million square feet in the US, booming the commercial retail market and creating a plethora of jobs.
So, dark stores have not only changed the operational dynamics of the traditional last mile, but they are also spurring huge waves of transformation in multiple industries.
Also, the global last mile food and grocery delivery market will be USD 72.3 BN by 2025. As 52% of shoppers now prioritize delivery speed and Gen Z consumers are willing to pay for faster deliveries, this comes as no surprise!
While the market for quick deliveries is booming with demand and disruption, dark stores offer retailers the ease of serving more customers in a more controlled manner. Brands like Gorillas, Getir, and GoPuff are some epitomes in this regard with only 13% of stores allowing customers full access to the aisles and more than 83% not accepting cash purchases.
Forbes points out that the dark stores are empowering the brands and retailers to boldly claim the unexplored avenues of operational excellence and control. Several delivery variations of dark store business models are enabling merchants to enter market segments where they don’t have physical stores via “ghosting.” Some classic examples include Wendy’s and Chick-fil-A which introduced “ghost” kitchens specifically for delivery orders.
Another impressive trend to watch out for is the emergence of technology-based partnerships between different brands, such as Kroger and Ocado, where Kroger is showcasing its range with Ocado. While Ocado is working with Kroger in the US, it is also working with Morrisons in the UK, Sobeys in Canada, Casino in France, and the ICA Group in Sweden to create automated customer fulfillment centers for processing and packing online grocery orders.
Such partnerships are also creating third-party sales streams via hybrid partnerships between brands such as Giant Direct and Instacart, where Gaint is catering to the delivery needs of Instacart by leveraging smart robotics in its dark stores.
All in all, dark stores are changing the retail, eCommerce, and last mile as we know it.
The Last Mile is the most crucial and confusing leg of the order movement that can easily spiral out of control, creating cost and time leakages in multiple ways. A recent study revealed that three-fourths of the consumers are willing to pay more for better and faster deliveries.
Further, 74% of satisfied consumers intend to increase their purchase levels with preferred retailers by 12%.
Now, this creates a market that every retailer wishes to ace, grab, and never let go of!
However, the operational puzzle is full of questions:
Which rider to choose for which area and which vehicles should be prioritized for what type of deliveries? How to allocate orders dynamically keeping the currently available riders in mind and when should a driver be marked available for delivery? When to start optimizing a delivery when the entire delivery ETA is of 10 minutes??
There are tons of other such questions that need a precise and reliable answer in the form of fulfillment models and operational processes. The stakes for chains and franchise-based businesses are even higher as the overall process management becomes increasingly complex.
Enter the dark stores, and the puzzle seems quite less daunting now!
Dark stores are transforming the Last Mile deliveries by offering three control points – fulfillment, inventory, and perishables. Also, an important and crucial service facilitator is smart logistics automation platforms that are catalyzing the transformation of the Last Mile via dark stores.
Dark stores are generally organized as warehouses where the attention to aesthetics is negligible and the focus on inventory and fulfillment is immense. These stores have an extensive range of products that is compiled keeping the market demand, purchase history, etc., in mind.
Further, the dark stores are located at strategic locations keeping the local customer clusters in mind and can vary in size, inventory, and distance from consumers. A large city or urban area can have multiple dark stores located in a strategic pattern or position such that the stock transfers or lack of stock can also be managed effortlessly.
Even the store is organized such that the order bagging and packing time is reduced to 2-3 minutes.
Dark stores serve a specific set of area codes. Hence, the process of inventory management becomes extremely specific to the incoming customer requirements. If the local customers are consistently placing orders for essentials such as fruits or soap, the inventory is planned based on the order history.
Further, most retailers are opting for smart automation and software with predictive analytics to plan and manage the inventory.
Hence, the deliveries rarely get delayed because of stock issues. If a specific item is getting consumed at a higher pace, the inventory is planned accordingly and shortages can be tackled by getting items from another nearby store, dark store, etc.
Perishables like groceries, milk, eggs, and meat need to be delivered well within their respective expiry windows. Further, in a traditional store delivery scenario, the ingredients such as herbs, greens, eggs and meat, etc can get spoiled. The freshness cannot be ensured until or unless the grocery deliveries are prioritized, which, in turn, disrupts the delivery planning.
On the other hand, the dark stores are located in close proximity to the delivery locations, and ensuring the freshness of ingredients, as well as perishables, is easier. The dark stores have different freezer units depending on the items being stored which ensures that the items delivered to the consumer are not spoilt or stale.
While the dark store transformed the last mile for grocery retail, on-demand, and quick-commerce in general, the real magic is automation!
Smart automation platforms offer granular planning and insightful trends for core business decision-making. Retailers can plan, manage, monitor, track, and control the processes, people, and operations for every delivery.
All the riders are geo-fenced to the store location and right when a driver enters the geo-fence of the store, they are marked “available for delivery”. The smart logistics management automation platforms assign the placed orders in a dynamic manner to all the available drivers keeping various allocation rules in mind.
These allocation rules can be anything – the type of vehicle, the distance of the delivery location, load, nature of the order, type of bag required, etc.
The entire process right from order creation to order pickup consumes 3 to 4 minutes, or even less, depending on various factors.
As eCommerce penetrates more locations and regional markets, the evolution of dark stores with automation and the last mile is going to unfold as an extremely promising event for investors, retailers, and of course, the consumers!