Nearly everything about traditional retail has been upended in the last few months with the global coronavirus pandemic. But there might be a light at the end of the tunnel in the form of dark stores.
Retailers Move To Dark Fulfillment Centers
Dark stores are traditional retail stores that have been converted to local fulfillment centers. They come in the form of grocery stores, clothing brands and home goods retailers. As stay at home orders and social distancing limit the number of customers inside physical stores, some brands are simply closing their doors to customers altogether and turning those locations into dark stores to fulfill delivery and pickup orders.
Whole Foods recently converted stores in Los Angeles and New York to dark stores. Other grocery chains like Kroger and Giant Eagle have temporarily moved some locations to dark stores, with plans that some locations could become permanent. Dark stores are most common in grocery chains, but the trend is also moving to other industries. Bed Bath & Beyond recently announced plans to transition 25% of its stores into regional fulfillment centers to make faster deliveries during the pandemic. A number of fashion brands, including jewelry company Kendra Scott, are also converting their stores to fulfillment centers to provide faster deliveries and reduce the strain on the main fulfillment hubs.
But the roots of dark stores are in pre-pandemic times. Many chains, including Walmart, have been testing the dark store concept for months. Target uses a hybrid approach and sends items from stores to fulfill some online orders. The idea is to put fulfillment centers in densely populated areas to shorten delivery times and provide a faster and more convenient shopping experience. The need and demand for that convenience has only grown in recent months. Even before the pandemic, the number of U.S. adults who had tried and liked grocery delivery was at 12%, a 50% jump from 2019. Most retailers had been planning for 30% annual growth for e-grocery, which accounts for 6% of total U.S. sales, but the pandemic quickly changed those expectations.
Permanent Dark Stores Are The Future
The rapid growth in demand for grocery stores pushed chains to find solutions for automation and fulfillment quickly. But with those systems in place, dark stores could turn into permanent fixtures to serve customers.
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Even after the coronavirus has subsided and consumers try to return to some kind of normalcy, we’ll be faced with a new normal. 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 instill social distancing measures. Dark stores help ease all of those transitions while still protecting customers and employees.
Some stores may follow the lead of Walmart and Target to turn parts of their stores to fulfillment centers. Allowing customers to enter only part of the store or pulling inventory off the shelf for deliveries expands how stores can reach out and serve customers without decreasing the experience for customers who prefer to shop in store.
For other brands, full-time dark stores will become the new way of doing business. But it won’t come without challenges and adjustments. Permanent dark stores, especially in grocery chains, could disrupt the supply chain and require more infrastructure. Simply expanding the current delivery and pick-up options isn’t enough. To truly be effective, stores need to think through their entire dark store strategy and automate wherever possible. Streamlining processes and automating order fulfillment could help lessen the strain of permanent dark stores.
The current global pandemic has turned the retail world on its head and created huge unknowns going into the future. Dark stores can help improve customer experience now and provide easier access to essential items, and the practice could pave the way for the future of retail.
