Dark Stores Meaning
With retailing witnessing a digital transformation, dark stores have caught the imagination of grocery shoppers worldwide. These stores are generally large eCommerce warehouses that cater to an online order fulfillment platform or distribution center, or a ‘click-and-collect’ service, where the customer picks up items they have ordered online. Currently, prevalent in grocery, apparel, footwear, consumer durables, and home goods retail businesses globally, a dark stores business model is D2C(Direct-to-Consumer) in nature. It provides a quick and efficient shopping experience for consumers through a digital ordering process, same-day on-demand delivery, and an in-store location pickup.
Though open to end consumers, a potential buyer can browse through the dark store online and via mobile-friendly applications, providing a virtual, real-time view of the product shelves. He/she can then make a web-based purchase seamlessly through the digital shopping platform, pre-choosing the home delivery or the buyer pickup option according to his convenience. The dark store setup is normally done in or near high demand densely populated areas, dark stores can also be located on the city outskirts. The dark stores concept thus facilitates large, spacious storage and distribution centers where automation-friendly processes like storing, sorting, and managing orders can be carried out unhindered.
Advantages of the Dark Stores Business Model:
• Customer-centric, servicing densely populated areas and neighbourhoods: Dark stores can cater to high order densities in multiple locations at the same time, unlike traditional retail stores.
• Greater product variety and availability: The dark store online order fulfilment system ensures bigger and better inventory visibility and management.
• Reduced operational costs: Real-time live visibility, space and time optimization, and efficient supply chain management reduce operational costs and make the dark stores concept more viable financially.
• Round-the-clock customer service: Whether it is 24*7 order fulfillment, picking accuracy, or consistently maintaining quality standards, the dark store model has the necessary infrastructure to support these services.
Grofers: One of the Pioneers of Dark Stores India
A popular Indian online grocery delivery business, Grofers was founded in December 2013 and is based out of Gurugram, with estimated revenues of around Rs. 177 crores in FY2020, and more than 5,000 employees overall. The name Grofers is essentially an amalgamation of the phrase ‘Grocery Gophers’. Grofers currently operates in 38 cities in India supported by hyperlocal dark stores, including prominent ones like Delhi, Gurugram, Mumbai, Bangalore, Pune, Jaipur, Chennai, Hyderabad, and Kolkata. The company aims to increase this number to 50 cities by March 2021. Its prominent competitors in the online grocery segment include the current market leader Big Basket, Amazon Pantry, Flipkart Supermart, JioMart, Dunzo, and others. After the onset of the Covid-19 pandemic in 2020, Grofers along with Amazon India and Big Basket were among the select few online grocery platforms that continued to operate and thrive in India.
In November 2020, Grofers was in the final stages of negotiation for raising $55 to $60 million from Softbank – its largest investor with a 46% stake in it – and other existing investors. In 2019, Softbank led the $220 million Series F funding round, while in 2018, it led the $53 million Series E round for Grofers. In FY20, Grocer’s revenues grew by a huge 111% YoY to over Rs.176 Cr, from its earlier Rs. 83.62 Cr in FY2019. However, its total expenses (comprising mainly of advertising and promotional costs) also increased in the same period (see diagram below).
Grofers Business Model Explained
Grofers leverages on an online marketplace model which brings merchants and their inventories online for the prospective buyer, who doesn’t have to visit in-person to physical stores. Product categories sold digitally through the Grofers website or the mobile application include Grocery & Staples, Kitchen & Dining, Household Care, Personal Care, Fruits & Vegetables, Beverages, Breakfast & Dairy, Baby Care, Packaged Food, Fresh & Frozen Food, Pet Care, and Home Furnishings. After the order is placed successfully, delivery is made within 90 minutes for orders within a 4 km radius. The Grofers business model is thus online and hyperlocal in nature, characterized by on-demand logistics and faster delivery times, with tie-ups with local stores and merchants, who are charged a commission for all orders that they receive. The commission range for Grofers starts at 8% on orders below Rs. 700 and 12% to 15% for orders below Rs. 1,000.
Promising future ahead for Grofers and its Dark Store Model
It is expected that Grofers will continue its revenue growth in FY21 as well, given that online grocery stores witnessed an upsurge with new users during the Covid-19 lockdown in India last year, when delivery of essentials through eCommerce start-ups was allowed. Grofers path to profitability speeded up during this lockdown, as new consumer households were added to its buyer mix. In this context, Saurabh Kumar, the Grofers founder claims that his business has acquired 18 lakh new customers and successfully retained more than 70% of buyers who used his platform in the first month of the pandemic.
In 2021 and beyond, Grofers is eyeing overall profitability, fuelled by its dark stores/online order fulfillment centers, as a major chunk of India’s 150 million online buyers nowadays spend on e-groceries. Grofers has also started preparations for its IPO to be launched in the latter half of 2021. Other plans for the company include the strengthening of its private-label offerings through a reported allocation of $15 million on the category.
Your Retail Coach – Dark Store Consultants India
Headquartered in India, YRC (Your Retail Coach) ranks amongst Asia’a top grocery dark store consultants, also offering other varied customized retail solutions for its prestigious clients. The company has proven expertise in online retail grocery consulting, supermarket consulting, online order fulfilment, supply chain management, franchise business models, and SOPs across all key business functions. Spearheaded by retail experts with years of successful industry experience behind them, YRC has successfully incubated and forged winning partnerships with several prominent retail start-ups to date.
If you are an aspiring dark store entrepreneur/ looking for a successful dark store setup, get in touch with YRC retail consultants to understand about setting up a dark store. YRC retail experts have helped many darks store takes shape, scale, and achieve operational excellence to stay ahead of the curve.