Dark Stores Meaning
The future of grocery retailing, dark stores are traditional retail stores or supermarkets that have been transformed into eCommerce warehouses or local fulfilment or distribution centres. Dark stores are currently in vogue in grocery, apparel, footwear, consumer durables, and home goods retailing globally. These D2C (Direct-to-Consumer) entities provide a hassle-free shopping experience to the discerning customer through a dark store online ordering process, same-day on-demand deliveries, and in-store and location pickups.
While these stores are not open to end consumers, a prospective buyer can browse through the dark store online via electronic media and mobile-friendly applications which offer a near real-time view of the product shelves. He can then make a web-based purchase through these digital shopping platforms, with the purchased products promptly home delivered or collected by the buyer from a pre-chosen location.
A dark store set up is generally near demand-centric populated neighbourhoods or areas. For retail segments like apparel, footwear, and durables, they could be even be located on the city outskirts. The dark stores concept consists of the setting up of mid-size local warehouses for storing, sorting, and managing orders, facilitating quick and cost-effective picking and easier automation.
Advantages of Dark Stores
Dark stores generally offer the following benefits vis-à-vis traditional retail stores:
● Closer to customers, easily catering to larger areas: Dark stores can cater to different locations simultaneously with high order densities, unlike traditional retail stores.
● Higher product stock variety and availability: Focused on online order fulfilment, the dark store model offers better inventory visibility and help e-tailers to plan and work smart.
● Reduced operational costs: Real-time visibility, space and time optimization, and efficient supply chain management make dark store theory a wiser choice financially, considering the volatility in the grocery market.
● Efficient customer service: Whether it is 24*7 order fulfilment, picking accuracy, or living up to the quality standards, dark stores have the requisite infrastructure to make it happen.
Big Basket: An Introduction
One of India’s leading online grocery hypermarkets, Big Basket was founded in 2011 by Hari Menon, V S Sudhakar, Vipul Parekh, V S Ramesh, and Abhinay Choudhari and is headquartered in Bangalore. Valued at $1.8 billion as of 2020, the company currently operates in 30 Indian Cities. The digital grocery platform offers a variety of products ranging from fresh fruits, vegetables, food grains, oil, masala, packaged snacks, bakery, cakes, dairy products, beverages, household care, beauty, kitchen, garden, pet care, fish, meat and poultry, baby care and healthcare products. It has more than 20,000 products and 1,000 brands in its online catalogue.
Big Basket’s Rejigged Business Model
For end consumers, Big Basket is essentially a delivery platform, while from the business perspective, the company covers everything from procurement, supply chain management, logistics, consumer services through subscription-based delivery, and even the food-tech sector with some local stores selling speciality items.
Big Basket Dark Stores thus essentially follows a hybrid model combining an inventory led wholesale approach and a hyper-local procurement strategy. The inventory led wholesale approach has been adopted for the high order fill rates and products with a higher shelf life. The hyper-local strategy comes in handy to procure perishable products in a just in time model to keep quality at the top and cost at the bottom. Big Basket has an easy-to-use mobile app and a website, which generate about 70% of its revenues. The remaining revenue comes from other businesses like hotels, restaurants as well as offline retail brands.
Big Basket’s Dark Stores Concept
The dark store model was initially conceptualized by Big Basket back in 2015 when it decided to go ahead with the dark store set up in several small warehouses or dark stores countrywide to facilitate faster order shipping for customers under its express delivery service. These warehouses would also help them to make a foray into the smaller towns. Big Basket’s strategy was to establish 10 such warehouses in each metro city in its network, and one each in 50 smaller towns. Through these dark stores, Big Basket has looked to expand its reach into the smaller towns and cities.
The Alibaba-backed E-commerce giant has till date depended on an asset-light model, under which it does not own physical retail outlets and uses dark stores/fulfilment centres or warehouses. Thus, it partners with third-party vendors, wholesalers, and resellers, and also sells private label products in important categories. These private labels are cheaper than established brands and are key inventory differentiators.
Big Basket’s Dark Stores India Delivery Framework
The online fulfilment centre or dark stores business model has allowed Big Basket to deliver in three formats, i.e. Express’ delivery in 90 minutes, normal (same day or next day) delivery, and a third format, where all items, irrespective of number or size is delivered in a maximum time of three hours after placing the order. The Express delivery model makes use of smaller dark stores, with the orders catering to items like milk, fresh fruits, and vegetables. In the normal order delivery model, all the stock-keeping units (SKUs) are available, and this constitutes the majority of Big Basket’s total online sales.
Big Basket has redefined the dark stores meaning. According to co-founder and CEO Hari Menon, under the new delivery model, Big Basket dark stores can deliver around 90% of items within two hours of placing the order, and 100% in three hours, all sourced from larger dark stores. Therefore, Big Basket’s dark store journey has evolved from an earlier size of 3,000 to 4,000 square feet to the current 25,000 square feet. These large dark stores need delivery personnel with both vans and bikes, while in the smaller dark stores, the delivery people use vehicles, i.e. bikes. A greater number of delivery slots imply lesser delivery travel time, thereby lowering costs, and speeding up the operational break-even levels. Initially launched as a pilot program in 2018, Big Basket now consistently delivers according to this supply chain model in Tier-1 cities.
BB Daily, BB Instant & BB Beauty Store
Since the middle of 2018 or so, Big Basket has also launched three new businesses, i.e. BB Daily, BB Instant, and BB Beauty Store. In BB Daily, buyers can subscribe for essential groceries like milk, fruits, and vegetables, bread, dairy, eggs, breakfast cereals, etc. BB Instant uses Big Basket’s unmanned vending machines to target corporate offices, tech parks, and apartment buildings in Tier I cities. Both Daily and BB Instant are available in separate mobile apps for convenience. Beauty Store is available on the Big Basket main app and consists of exclusive personal, skincare, and beauty products.
The future looks promising
With more than 10 million customers, Big Basket turned profitable during the nationwide COVID-19 lockdown in 2020, expecting to nearly double its revenues to $1 billion in the financial year ending March 2021. Despite cut-throat competition from arch-rivals Amazon, Grofers, and Flipkart (all of whom have adopted the dark store route in recent times), along with countless other local digital supermarkets, Big Basket continues to maintain its leadership position in the dark stores India landscape, being a part of the exclusive unicorn club. During the pandemic outbreak, Big Basket had seen its daily orders double to 400,000 with a 45% retention rate for first-time customers. The company had around 2,000 SKUs for in-house brands in 2020, which it expects to increase to 2,500 by the end of FY21, as it builds robust storage, cleaning, and packaging capacities for its private label products.
Your Retail Coach – Dark Store Consultants India
Headquartered in, India, YRC (Your Retail Coach) is one of India’s premier retail eCommerce consultants in Asia, specializing in customized retail solutions like dark store retail consulting services. The company has proven credentials in online supermarket consulting, order fulfilment, supply chain management, franchise business models, and SOPs across all critical business functions. Spearheaded by experienced retail industry consultants and market strategists, YRC has partnered with successful retail start-ups from a strategic and transformational perspective.
If you are looking for customized dark store consulting services to help convert your existing retail business into a profitable dark store, please connect with YRC experts and watch your business scale up and grow exponentially.
