Dark Stores meaning
The future of the post-pandemic retail ecosystem, dark stores are essentially traditional retail stores or supermarkets converted into eCommerce warehouses or local fulfillment or distribution centers. Dark stores can exist in the form of grocery, apparel, footwear, consumer durables, and home goods retailers. These D2C (Direct-to-Consumer) businesses offer convenience to the customer in terms of a dark store online order and purchase system, same-day delivery, and in-store pickups. With a combination of retail and eCommerce, dark stores are not open to end customers. However, buyers can make digital purchases through dark store online shopping platforms (which could be web stores or mobile apps), with the goods home delivered or collected by the buyer from a pre-chosen location.
Dark stores are generally established near high-demand neighborhoods or areas. For retail segments like apparel and durables, they could be even be set up on the city outskirts. The dark stores concept advocates the setting up of mid-size local warehouses for storing, sorting, and managing orders, facilitating quick and cost-effective picking and easier automation. As retailers strive for customer acquisition and retention in real-time across multiple touchpoints, most stores are incorporating dark stores nowadays to reduce cart abandonment rates and increase their profit margins.
Dark Stores India – How it all began, and what the future holds
Even before the pandemic set in, global retailers had begun experimenting with dark stores, on account of shrinking retail margins, competitive pressure, and increased customer expectations. The onset of COVID-19 in early 2020 acted as a catalyst for the faster adoption of dark stores in India. With the customers forced to stay indoors during the lockdown period, online retail purchases increased manifold. The number of Internet users in India also crossed 550 million in 2020, making online shopping platforms within reach of around 41% of the population.
The digital payment landscape has also been evolving, with more than 33% of the population having used one or more of the 50-plus Indian e-wallets. All these factors, along with a paradigm shift in Indian consumer shopping behavior during the lockdown has given rise to a dark stores business model that could fulfill customer needs for online shopping and also promised fast delivery and cost-effectiveness. In August 2020, the dark stores India scene witnessed eCommerce giant Flipkart setting up dark stores to expand its presence across food and groceries, and take on Reliance JioMart. Big Basket had also initially experimented with the dark store model in India in 2018.
As retailers increasingly adopt dark stores across a variety of sectors, the trend had initially started in the U.K. with big supermarket chains being the early adopters. The dark stores concept soon caught on with the leading U.S global retail chains, subsequently spreading across Europe, East Asia, and Australia. Today, a plethora of big supermarket chains are running dark stores, with a substantial chunk spread over more than 100,000 sq. ft with in-house specialized capabilities like food processing, cold press systems, etc. A typical dark store, however, covers around 10,000 to 20,000 sq. ft space with around 15 to 20 employees operating during a typical shift. Companies having a dark stores business model suggest that the adoption of dark stores adds 3 to 4% to their bottom line, due to higher customer orders and lower overall costs.
How YRC can help set up your dark store
In the dark store consultants India landscape, YRC (Your Retail Coach) is a premier retail management consulting firm specializing in dark store set up. YRC helps prospective online retailers successfully kickstart their dark stores or online fulfillment centers to provide a seamless, hassle-free, and real-time shopping experience. The following are the various steps involved in setting up a dark store model:
1. Store Layout Planning
The dark store model requires considerable space to stock products in bulk. Retailer store networks and previously under-performing stores could be converted into dark stores, but its location in a customer stronghold and densely populated area is key. According to YRC experts, a dark store layout should drive efficiency based on time and motion studies. Pallet pick locations, rear fill shelving, and fast, slow, medium, or bulky product groupings, will lead to a significant rise in picking efficiency. Ensuring the right pick face capabilities based on sales velocity ensures minimal replenishment. Home delivery dark stores require adequate dark warehouse space and capabilities, to accommodate delivery van fleets and facilitate large scale loading activities. YRC consultants can help you design the store layout best-fit as per the categories catered for dark stores, with alignment of planogram i.e. strategic placement of products within the dark store.
2. SOPs (Process Manuals)
Standard operating procedures (SOPs) or instruction manuals are key to managing a dark store set up. SOPs defining the type and size of product assortments influence the store’s site design. They also drive storage and picking space requirements, shelf types and racking, and determining the temperature control regions for the store. Also, these process manuals help to drive product launches, plan the store type, guide employees through job training, ensure system integration and also help in product assortments like fresh goods to minimize wastage. SOPs help define the service proposition and ensure effective implementation of end-to-end retail solutions. YRC will help you chalk out effective SOPs which would govern daily operational processes and document customer lead times, from the initial order to the final delivery collection.
3. Inventory Replenishment Planning
Inventory replenishment planning is critical to the functioning of a dark store. Order fulfillment systems need to be effectively managed, since the fulfillment window for online orders and delivery is short. The order management system has to send accurate real-time inventory updates to websites, also replenishing it quickly to reduce sales losses arising from out-of-stock items.
YRC’s team of expert consultants can help in monitoring and regulating inventory for your dark store, setting up inventory and order management systems to modify picking slots, and decide when orders are to be picked up. Order scheduling and releases for dark store pickups based on order creation and other business priorities are crucial. Order modification issues like the addition of new products, cancellation, etc. can be managed through inventory monitoring systems, even if the order is ready for picking. YRC’s team of retail experts can help your dark store to handle order fulfillment, allowing customers to return products with ease in return process flow, and also ensure quality product maintenance, especially for perishable and chilled/frozen items.
4. Time & Motion Analysis (to ensure low manpower and high output)
Dark stores need data analytics systems to gain insights into consumer behavior and adjust internal processes to suit customer preferences. YRC consultants incorporate advanced analytics to study variables like order fulfillment time, order accuracy, and inventory and picking data like motion studies to create more efficient processes. YRC’s time and motion studies and analysis help in optimizing manpower count and increasing output. It also helps to develop an ideal time for each internal process, creating an effective base for incentive schemes, and boosting productivity, providing a reliable performance standard for measuring labor efficiency. This helps to effectively supervise costs through efficient production management. When standard time benchmarks are set, management can also single out ineffective performances or idle time cases.
5. Security measures to avoid theft
YRC experts enforce security measures by implementing systems and procedures to prevent pilferage and waste management, i.e. unwanted intrusions, theft, and siphoning of goods from dark warehouses. From setting up security guidelines to implementing them, YRC can help your dark store business protect its resources and products from theft and embezzlement with loss prevention strategies.
6. Store set up guidelines – listing the Do’s and Don’ts
YRC’s consultants help in formulating store set up guidelines with a list of things to do and avoid. This consists of preparing the dark store’s unique warehousing model, with demand forecasting and operational management strategies, techniques, and methods built-in to minimize loss and maximize profits.
Planogram help to optimize dark store performance, shelf product layouts, space allocation, and customer needs. YRC’s specially designed planograms reduce out-of-stock situations, triggering reduction of opportunity losses, and generating greater revenue, ROI, and higher customer satisfaction.
8. IT Integration
Dark stores need a fully functional Order Management System (OMS) and Auto-Replenishment System (ARS) for effective procurement management. YRC helps you to choose and invest in the right technology, software, and infrastructure, and also help in the dark store’s IT integration and automation process. The automation levels are suggested as per the stage of business life-cycle and available resources.
9. Manpower Recruitment Assistance
Since online grocery lead times are tight, manpower planning for order fulfillment is essential. YRC can help ensure the implementation of flexible employment contracts, and proper selection, recruitment,
onboarding, and training programs.
10. Customer Orders to Last-mile delivery: Mobile/ Web Application Wireframe Strategy
YRC’s dark store-focused consultancy services help improve the website and application features and functionalities, ensuring last-mile deliveries and click and collect points, all of which impact warehousing and logistics. Dark store warehousing space allocation influences transportation patterns, with items arranged in them for picking convenience. Applications and websites ensuring optimal delivery and logistics processes require careful planning and implementation. YRC experts help to frame a successful Wireframes & AI strategy that helps your dark store to function optimally and increase its reach.
Dark Store Consultants India – YRC
Your Retail Coach (YRC) is one of India’s leading retail eCommerce consultants specializing in a wide range of custom-fit retail services, including dark store consulting services. The company has years of proven expertise in online supermarket consulting, order fulfillment, and supply chain management and has successfully established franchise business models, and SOPs across critical business functions. Led by experienced retail industry experts and market strategists, YRC has also been a strategic and transformational partner for numerous retail start-ups.
YRC can help transform your existing warehouse into a fully functional dark store and unlock the true potential of your business. If you want to know more about dark stores and dream of creating your online delivery business, contact YRC today and craft your very own success story!