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    There is no escaping the reality now. As preventive actions continue to be enforced by governments across the globe, commuting has been abandoned for work from home facilities. This drastic change due to the pandemic has been imbibed into all of our lives last year and to say, one of the many biggest knock-outs, as a consequence, has been that people are now shopping differently. Amidst market disruptions and unprecedented economic slowdown, the role that grocery retailer’s play in our daily lives has been re-clarified. In order to understand the shift in consumer behavior, spending and expectation Mckinsey conducted a survey with more than 5,000 consumers in Asia, across seven countries: Australia, China, India, Indonesia, Japan, South Korea, and Thailand. There’s no doubt that the pandemic has opened new opportunities – let’s take a look:

    • There has a 30 to 70 percent drop in the preference to dine-out spending and a sharp increase in grocery shopping purchase of ready-made food from grocery stores, as compared to food delivery from restaurants in most countries
    • Online spending on food has increased between 16 and 70 percent across countries and this may not change in the near future.
    • In all countries, consumer preferences lean towards self-check-out over assistance from cashiers

    In short, retail trends such as contactless transactions and in-store automation has accelerated without doubt post Covid-19. The retail industry is set to battle against these unexpected changes in consumer demand and behavior. And the stage is now well and truly set for what needs to be a sweeping response from the retail industry to reinvent them and reimagine the next normal.  With consumers increasingly placing value on convenience, proximity and efficiency and the ability to buy online in the comfort of their homes, retailers need to change from their traditional ways of working. This has led to the rise of dark stores which essentially serve as enablers for online businesses that offer convenience and curated product offerings. Dark stores are non-customer facing mini warehouses full of groceries where ‘pickers’ pick the goods that have been ordered online by customers. These goods are then shipped directly to the customer’s door. The store aisles are laid out almost like a mock supermarket and pickers roll baskets around these aisles almost like how the public goes shopping. What they are enacting essentially, is the manual part of the routine grocery shopping, on behalf of the customer who simply receives the delivery. Most retailers are now turning physical stores into temporary or permanent fulfillment nodes to enable faster delivery. Consequently, dark stores are located at places not optimal for conventional supermarkets yet are accessible for delivery vehicles- ensuring same day or next-day fulfillment of orders.

    As retailers continue to figure out strategies to maintain business continuity while safeguarding the health and safety of both consumers and employees and also align the supply chain capacity  in-order to manage the overwhelming demand- we can now take a look at how APAC retail industry has been affected and their outlook on swimming through the #newnormal.

    Asian grocery e-commerce faces a lot of challenges. Asian consumers particularly like to shop at their local neighbourhood stores mainly due to trust and emotional reasons. Additionally, they like to touch and feel products before purchase, and they think of shopping mostly when the next meal is due.

    With customers locked inside their homes, visits to shopping websites and customer registrations have increased manifold. This has made India conducive to an e-commerce growth.   According to an industry report, the Indian e-commerce industry is set to pivotal growth and appears not far behind the US. In fact, it is expected to surpass the US and become the second-largest e-commerce industry by 2034. The Indian grocery market is expected to present stiff competition with a spam of deep-pocketed new entrants venturing into the field. With consumer preferences for door-step delivering hastening with ongoing state and nation-wide lockdowns, existing players including Amazon, Big Basket and Dunzo have also heightened focus on this category.

    In the need to exercise tighter control over product selection and delivery experience, Swiggy had announced plans to partner with a chain of dark stores enabling it to offer over 2500 items and delivery grocery and household items within 45 minutes. The launch of InstaMart has come amid the entry of Reliance JioMart, expanding its operation to 200 cities across India. Another entry into the market is, Flipkart Quick. With its own independent network of dark stores aka kirana stores, Flipkart can now push to a 90-minute delivery model for an assortment of handpicked products.

    This huge bet on grocery delivery would give opportunities to monetize brands as the model offers a direct gross margin of 15-17% on products, compared to marketplace commissions that round up to 4-5%. As consumers fear stepping out, physical retailing has taken a toll; consequently, brands now prefer to partner with online players.

    Singapore, Malaysia and Indonesia are fast establishing themselves and gaining traction amid the online shopping boom.  As a scenario, Grab, a South East Asian ride-hailing, payments and delivery app, has also got down in the game and takes a nice shot at online grocery delivery. Announcing the opening of its first dark store in Malaysia’s Klang Valley area, near the capital Kuala Lumpur, the Singapore-based company offers free next-day delivery of more than 2,500 products including freshly sources produce from local farmers to its customers.

    “Our ambition is to be able to offer the widest selection of groceries at the best prices, maximum freshness, and zero delivery fees to every Malaysian household. In addition, we hope that Grab supermarket will create even more income opportunities for all our drivers,” said managing director of Grab Malaysia in a statement published. Grab soon plans to open further dark store facilities in different parts of Malaysia.

    FoodPanda, a Singapore based food delivery service, has forayed into the on-demand grocery delivery service in Malaysia featuring 3,500 daily essentials including groceries, household items and fresh produce delivered to its customers within 20 minutes. Pandmart, officially opened its first dark store in July and there are currently 25 Pandamart dark stores across Malaysia. In a statement published recently in a virtual press conference, Foodpanda Malaysia’s Dark Stores director Ashutosh Gandhi claimed that over 100 local and international brands source products to Pandmart facilities and expiry checks are done on a daily basis tracking the perishability of these items.

    Tapping out the potential of the Chinese market, the second largest e-commerce platform, Walmart launched its online operations in China with the largest hi-tech AI(Artificial Intelligence) automation and drones delivery system in the world, in collaboration with e-commerce giant JD aka JingDong. Fresh produce is considered one of the benchmarks for China’s e-commerce, yet loaded with challenges around freshness, produce and price. However, Walmart’s fresh produce system has turned around these challenges. The key success factor driving Walmart’s strategy is the dark store facilities located more than 3 miles from Walmart to respond to customer orders as soon as possible. The store admin prints out the customer orders, picks items according from the respective aisles, and bags the items which are then received by the delivery driver. The entire process including delivery time to the customer’s door is completed in around 1 hour. With the automated system, the picking agents handle customer orders in the dark stores with drones speeding up the process.

    Other mega cities like Bangkok and Jakarta also saw a proliferation of dark stores. In cities with congestion issues, such as these, ‘last-mile delivery’ has been a major roadblock.  The one way is to set up as many dark stores in the cities, as close to customers as possible, reducing the impact on the last mile and hence speeding up the product delivery.

    This unique and innovative model emerging from the Covid-19 pandemic will remain one of the key focus areas for retail industry leaders, not only to achieve operation efficiency and maintain business continuity, but also future proof the supply chain model. Understanding these insights, retail consulting firm, Your Retail Coach (YRC) is working with retail businesses to set up dark stores across the region to further optimize their supply chain and operations, as the world steps into the next normal. Your Retail Coach (YRC) helps retail businesses with their web store and online marketplace sales management strategies and practices with a focus on developing brand awareness.

    Your Retail Coach (YRC) assists retail businesses in managing their supply chain via retail management consulting services in warehouse management, procurement, inventory management, dispatch and team management riding on proven models of logistics and use of technology across every process, making it system-dependant and less person-dependant.