Dark Stores With Delivery Services: Neo-Retail in the GCC
Are you exploring ways to change your business to adapt to life in a pandemic, like many retailers and other sales organizations in the GCC right now? If you are, the concept of the dark store might well have gained your attention.
It’s not that dark stores are a particularly new concept. Some supermarket chains in the UK have been operating them since around 2013.
Here in the GCC, though, the dark-store phenomenon has only recently materialized, primarily driven by COVID-19 movement restrictions and social distancing measures.
Maybe you are considering converting an existing retail outlet into a dark store or implementing the concept as part of your ecommerce expansion. If that's the case, this brief guide will help you understand the changes involved, particularly concerning your local logistics and delivery practices.
What is a Dark Store?
In case you've just come across the term, and it conjures up images of a dark supermarket with consumers shopping by torchlight, enlightenment is awaiting if you read on.
You can think of a dark store as a retail store without the shoppers. Like a conventional retail store, a dark store has aisles with shelving and racks for merchandise.
It has an area to receive and store inbound inventory. However, at the other end, in place of customer checkouts, it has a dispatch zone. That's the area in which orders can be packed and prepared for collection by customers or last-mile delivery to shoppers' homes or other remote locations.
Rather than shoppers milling in the aisles, logistics staff roam them instead, picking items from the shelves to fulfill online shopping orders. In some cases, the human workforce may be augmented by robotic picking equipment to enable faster, more efficient, round-the-clock fulfillment.
In effect, then, the dark store is similar to what you might previously have known as a distribution or fulfillment center, with a few minor differences.
Whereas distribution centers are often located in industrial parks away from urban centers, a dark store is more likely to be found in a town or city center. A primary advantage of this type of logistics hub is its proximity to the customer base.
Central locations make it easier to minimize delivery times, often enabling lead times of hours, or even less, from purchase to delivery.
However, dark store locations are not always based on decisive strategy. In many cases, their central situation is because they were once conventional retail stores that their operators have since converted into micro-fulfillment centers.
Most purpose-built distribution centers are vast in their footprint, built to house sufficient inventory to meet regional logistics needs. On the other hand, dark stores are typically much smaller, serving as hubs for localized delivery services or as pickup points supporting click-and-collect ecommerce sales.
Their urban locations are advantageous for placing inventory close to local customer communities. Meanwhile, their small scale facilitates the management of fast-paced ecommerce product flows.
The internal setup of a dark store is different from that of a conventional fulfillment center. The layout is likely to be very similar to a traditional store, suited more to pedestrians than the wide-aisled, industrial configuration of a warehouse, optimized for mechanical handling equipment.
Most dark stores have narrow aisles, such as those you would expect to see in a supermarket. However, they are absent of the cosmetic niceties designed to capture shoppers' attention and induce compulsive purchases. Instead, their operators focus their marketing and merchandising efforts on their website design and functionality while maximizing the dark store's capacity as a supply chain logistics component.
How Do Dark Stores Work?
A dark store's purpose is to support a fast and efficient digital shopping service for consumers. It enables online purchases to be converted into physical orders rapidly, either for collection by customers or for home delivery.
Their operation is similar to a regular retail store, differing primarily in that order pickers, rather than consumers, select purchased items from the shelves. The order pickers receive picking lists generated from online purchase orders and select the purchased items accordingly. They then pack those items up for collection or delivery.
There are no cashiers or checkouts in a dark store. The customers complete the checkout and payment process online or pay upon collection or delivery if the store's operator offers such facilities.
As the dark-store concept gains traction and processes become more established, it's expected that automation will play a more significant part in their operation.
Indeed, that’s already happening in countries where dark stores have operated for a while. British supermarket chain Tesco has several sites where mechanized equipment brings inventory to pickers’ fixed locations, instead of having the pickers walk the aisles.
Once assembled, customers’ shopping orders are moved to a dispatch zone. This area might include a physical collection point for customers who wish to come to the store. In many dark stores, though, the dispatch zone serves only to provide space for staff to sort orders and present them to delivery personnel.
It’s All in the Delivery
The one big difference between a conventional and dark store is that it’s not a primary customer touchpoint. Dark store operators don’t benefit from providing a personal customer experience on-site, using the traditional retail merchandising and customer service strategies possible with an in-store presence of consumers and sales professionals.
Instead, the delivery operatives are the new ambassadors of retail in these dark store days. That fact cannot be emphasized enough if your business has historically engaged in traditional retail and is transitioning to dark-store operations. It’s something we’ll discuss further a little later in this post, but first, let’s look at the primary catalyst for the strengthening GCC dark-store trend—the Coronavirus pandemic.
Adversity Drives Retail Innovation
Without the retail turmoil wrought by COVID-19, dark stores might not have seen much attention in the GCC for some years to come. However, in times of adversity, technology and innovation tend to shift into overdrive—and that’s what we see right now in a world gripped by a viral pandemic.
It all began when governments began to place their nations under lockdown, implementing movement restrictions and social distancing rules to stem the pandemic’s spread. Suddenly, traditional in-store shopping lost much of its appeal. Nevertheless, consumers still need to meet their needs, and hence came a boom in ecommerce.
The Great Accelerator
The Great Accelerator is an appellation sometimes assigned to COVID-19 in deference to its impact on digital-technology adoption. In the GCC, as elsewhere, remote working, shopping, and socializing have elevated to new heights of importance, regarded as essentials rather than convenient alternatives to the physical versions of these activities.
Safety became the watchword for retailers everywhere. Those with little or no online presence quickly sought to remedy that limitation. Meanwhile, consumers, including those not formerly tending towards digital purchases, rapidly increased their tech-awareness and began flocking to online shopping sites.
As a result, in the first half of 2020, ecommerce demand soared among consumers in the UAE, rising by a whopping 300%.
From the Darkness, Enlightenment Will Evolve
As conventional retail transitioned to the online environment, operators faced the need to adjust their approach to facilities’ use and operation. Several have seen that the ideal way to utilize their premises is to go dark, converting their stores into micro-fulfillment centers.
Going dark is a reasonably quick way to shift from in-store to online retail. Even if a hastily rearranged shop floor is not the most efficient logistics solution, it’s a start.
Moreover, the current adversity will possibly continue to drive automation apace. If so, affordable robotics solutions will gradually enable slicker order processing to streamline ecommerce operations in former retail stores exponentially.
During any step-change in technology and business strategy, knowledge grows with adoption. More GCC companies will probably follow the example of Carrefour and Talabat, both of which are enterprises already engaged in dark-store operations.
As more stores go dark, practices and methodologies for running them will doubtless become less experimental and more tactically optimized.
Meanwhile, the dark store trend is not solely about converting conventional outlets. For instance, supermarket giant Carrefour built a purpose-designed dark store from scratch last year. Incredibly, it completed its project to commission the 5,000 square-meter facility in a mere five weeks.
Dark Stores and Last Mile Logistics: A Marriage of Convenience?
So what do you need to know about dark store operations and your contact with customers? Whether you have an established ecommerce business or convert from conventional to online sales, customer deliveries will almost certainly feature in your sales and service offering.
Dark stores offer some compelling benefits in terms of local logistics especially. For instance, unlike an outsourced logistics operation, which will probably house your inventory in a regional distribution center, a dark store can operate right amid your customer base.
Does your business own and run the store already as a conventional retail facility? If so, a dark-store conversion gives you the possibility to retain in-house inventory management while outsourcing only the delivery activity.
A well-planned dark-store setup will allow you to dispatch online purchases quickly and, due to the short distance from the store to your customers, complete deliveries within hours.
It might even be possible to deliver within an hour of purchase. Right now, consumers want an experience as close as possible to shopping in-store—but without the health risks. Therefore, the ability to offer rapid home delivery is a huge advantage for retailers.
How to Exploit the Dark Store’s Delivery Advantage
A dark store is an ideal way to capitalize on the advantages of neo-logistics providers and crowdsourced delivery platforms.
Optimized for rapid urban and local deliveries of anything from takeaway food to home appliances, these digitally powered service providers are tailor-made replacements for the in-store checkout.
Some of the benefits of partnership with these rapid-response delivery companies are as follows:
They can get purchases quickly into your customers’ hands and handle payment at the point of delivery.
They are invested in the kind of customer-service ethos that consumers expect.
They are supported by digital solutions that make it easy for your business to manage and track deliveries in real-time.
They use contactless delivery processes to reduce the risk of customer exposure to the COVID-19 virus.
They employ delivery staff not merely as bike, car, and truck drivers but as ambassadors for the brands they serve.
Several such companies, including Shipa Delivery, have been present in the GCC for the last few years. Lately, their operational scope and scale have increased in response to the COVID-19 situation and ballooning demand for consumer deliveries.
These developments are also seeding a crop of new players in the ecommerce logistics sector. That means plenty of competition and the opportunity to find a delivery-service provider that closely matches your needs at an affordable rate.
Delivery as a Dark Store Enabler
Indeed, it’s fair to say that online delivery platforms are an enabler for dark-store operations. Their responsiveness, ability to handle deliveries on-demand, integration capabilities, and contactless-delivery options underpin a customer experience almost as personal as your shoppers receive in-store.
At the same time, they have the appropriate delivery assets to support quick delivery dispatches from small facilities. Their bikes and small vans are ideal for urban facilities that might not benefit from marshaling areas, yards, and loading docks or bays.
A dark store necessitates a retail business model that keeps your shoppers’ contact with sales staff on a remote footing. Therefore, your only face-to-face touchpoint with customers will be through your delivery partner. For that reason, it makes sense to engage one that was born with stellar customer-experience goals at front and center.
Dark Store Benefits: A Summary
Perhaps it’s not sufficient to know that a dark store setup can help your business overcome pandemic challenges and keep you connected to your shoppers. In that case, you might want to assess all the benefits—not just those related to last-mile delivery.
In summary, aside from being ideally located for fast delivery operations in high order-density zones of your market’s geography, dark stores offer several other potential business advantages.
There’s every possibility that the following benefits will continue to exist even when consumers regain the freedom and confidence to return to in-store shopping.
Can carry many SKUs in low quantities with fast stock turns, placing your entire inventory range close to your customers.
Make it easier to sell products with a short life, such as fresh food and produce, which would be challenging to retail via ecommerce without a dark store in the customers’ locality.
When converted from traditional outlets or supermarkets, can carry a lot more inventory, as you can narrow the aisles, and space no longer has to be optimized for shopper activity. Hence you can use a lot more of the building’s capacity for storage and order processing.
Can offer in-store or curbside collection options for those customers who would prefer to pick up their purchases than have them delivered.
Pandemic Band-Aid or Ecommerce Breakthrough?
Let’s conclude with one remaining question to which the answer lies in the future. Are dark stores here to stay, or will their appeal diminish once the GCC, and the rest of the world, are free from the risks of Coronavirus transmission? Companies like Carrefour indeed believe in their long-term utility, as indicated by the scale of their investment in dark stores.
Nevertheless, after the pandemic abates, many shoppers will likely hanker after a nostalgic return to the in-store shopping experience. Where will that leave enterprises that make extensive, and perhaps costly, alterations to turn their existing stores dark?
One possible scenario is the evolution into a hybrid solution that combines aisles open to shoppers with sectioned-off areas reserved solely for online order picking and processing.
Dark Stores for Now—With a Bright Future Ahead
The continuing advances and reducing costs in robotics and automation could facilitate a future shift towards dark/light store hybridization. They might even add some novelty value if transparent screens allow shoppers to see the automated picking taking place.
Further options to enhance the shopping experience could include comfortable lounge areas. There, after (or instead of) browsing the aisles, customers could enjoy some refreshments in restful surroundings while placing online orders for immediate collection.
In any event, as with many adversity-driven innovations, the likelihood of the dark-store concept disappearing is unlikely. It will probably, at the very least, become a stepping stone for a new generation of combined in-store and online retail models.
Dark Store Delivery Services in the GCC
Are you planning to open a dark store in the GCC? If so, don’t forget about the need for a harmonious relationship with a suitably oriented delivery provider.
Shipa Delivery’s fleet of bikes, vans, and trucks is at your disposal. We’ll integrate your systems with ours for a seamless customer experience—from order capture to the point of delivery.
To find out more, why not stop by at our Help Center? From there, you can easily drop us a message with any questions you may have, or chat online with one of our delivery experts