22 Feb 2023

The Inception of Dark Store – Benefits, Relevance & Challenges

A dark store is an order fulfillment center focusing on a faster shipment process with optimized logistics function & enhanced customer gratification.

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2020 was a year full of change. While we as global citizens tackled our way from covid19 (and still are), industries, as we know, shapeshifted their model to survive an unprecedented economic challenge ever known to humankind. And brick & mortar stores, commonly known as retailer shops, found themselves staring down at potential shutdown scenarios owing to the restriction imposed due to pandemic curbs, leading to a minimum to negligible footfall.

This eventually gave momentum to a new customer shopping dimension through Dark stores. As customers avoided crowded places to prevent social contact during the restrictions, dark stores became a masqueraded boon for the entire retailer shopping experience, be it offline engagement or web-based order fulfillment.

In the write-up, we will cover why exactly dark stores came into existence, why they are a bright idea for the retail sector, and, more importantly, their relevance in today’s e-commerce-driven economy.

Table of Contents

What Is a Dark Store?

Also referred to as a dark shop, dark supermarket & dotcom center, a dark store at the start became a post-pandemic strategy for large-footed retail shops to eliminate their housed inventory. With retailers embracing web-based markets to counter economic blues, these stores slowly gained traction, with customers finding it easy to get their ordered goods through self-pickup options or delivery services.

Eventually, these dark supermarkets also started operating as fulfillment centers for online orders. With ‘click & collect’ becoming the norm & most preferred way of shopping for customers, the retail supply chain found a new lease of life with dark stores, ably managing complex logistics while seeing through the delivery objectives of every stakeholder involved.

How Do Dark Stores Work?

A dark store’s inception, like any other efficiently effective decision made in a sector, was done to keep the cost of operation in check, a situation more prominent owing to severe cash flow obstruction during the pandemic. To ensure that its logistical expenses are kept in check, dark stores got their establishment on the city’s outskirts, in sub-urban areas at a strategic location, making it easy for users to pick up their orders if they opt for it.

With automated tech & data analytics forming the backbone for its day-to-day operations, dark stores have pickers stationed at aisles who align products & make them ready for shipment. Stores with slightly advanced infrastructure costs have logistics robots to assemble & prepare orders, sometimes also fulfilling same-day delivery commitments. Here are the three most common shipping methods a dark store provides that boost supply chain operation.

  • Curbside Pickup: A standard delivery procedure, which is slowly becoming the default choice for customers, curbside pickup involves delivering labeled products to a user at a dedicated open or parking space outside the store. This provides the highest level of safety for both the employee & the customers as it involves minimum interaction. As a phenomenon, curbside pickups have also gradually become the most preferred fulfillment method across sectors because of their convenient nature & hassle-free approach.
  • In-store Pickup: With a dedicated pickup area usually stationed at the store's entrance, this pickup method focuses on less turnaround time for customers at bay when they reach to collect their order.
  • Home Delivery: A self-explanatory term by now, home delivery was 'the' preferred mode of shipment chosen by the masses during the curb limitation. This eventually pushed conglomerates to develop contactless delivery to minimize unnecessary interaction with people while delivering the order.

What Are the Benefits of the Dark Stores for Businesses?

While dark warehouse existence was purely driven by a survival instinct of the retail sector facing a crisis in attracting numbers during the covid crisis, little did any supply expert knew that it just might be the blueprint for facelifting the entire e-commerce operation, which might happen to empower same-day delivery concept as well.

  • Increased capacity with a reduced delivery cost: With additional storage helping sellers house more products, it effectively increases a store's sales density, leading to better economics in keeping inventory for forecasted demand, aided further by reduced delivery cost & better distribution network.
  • Customer Gratification: Having dark stores at their disposal, organizations find themselves enabled to fulfill same-day delivery for the products ordered by the customers. It allows a company to increase its larger potential audience reach, resulting in improved brand value.
  • Better Product availability: With better SKU management in place which leads to faster response time, a dark store warehouse coupled with its large area covering allows retailers to house products with slightly less market share to be available should a demand arise. Thus, helping a company bolster a diverse portfolio for its user base.
  • Efficient Workflow: With data analytics & automation contributing towards daily processes – a dark store model pans out round-the-clock operations with almost negligible delivery errors.
  • Better Management for Stakeholders: Dark stores enable logistics to take complete control of the order fulfillment process with increased customer experience. It provides an organization’s management with an extra edge to solidify its market standing further. A good user journey always lays the foundation for a company’s growth & dark store certainly up the stakes.

What Are the Main Challenges of Dark Stores?

While dark warehouses breathed life into a struggling retail sector when it needed the most, in due time, operators found a few catches along the way in the application of a dark store model.

  • Increased Transportation: Though dark stores are located in a place that minimizes logistical costs, orders consistently involving more extensive routes start to hamper the expense sheet in the longer run. Such orders incur additional handling expenditure, leading to a higher workforce and extra capital.
  • A Potential threat to In-store sales: With the curbs on restrictions now lifted, store owners bank on people returning to the usual way of in-store shopping. But as is the case, one can never predict how customer psychology presides over the economy. With users becoming accustomed to ordering from the comfort of their homes, dark store models have slowly set a monumental challenge for retailers to get back their footfall. While one always embraces new changes benefitting convenience for buyers, one has to take cognizance that it might be at the cost of a sector grappling for sustenance.
  • Infrastructure Cost: A bit subjective opinion as it is based on what scale a dark store model works – but considering that a setup requires robust tech support, skilled labor, and a large operating area, among others, the initial infrastructure cost for setting up a dark store warehouse might pose a financial challenge.

How can 3SC help set up dark stores?

3SC shapes up your fulfillment process by enabling your organization with end-to-end logistics operation. From order picking & processing to packaging and shipping, even last-mile delivery – 3SC, with its data-analytical insights & tech prowess driven by advanced artificial intelligence & machine learning, aid organization with improved delivery timelines & better customer retention scale with its marquee dark store strategy. So, if you're looking for a dark store with state-of-the-art execution & planning, connect with us now.

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