This blog is in continuation of the initial blog series covering the rise of digital warehousing in India. The series will explore the recent trends in India’s warehousing and logistics sector, such as the emergence of dark stores, multi-modal logistics parks, and technological advancements. In this edition, we try and understand the concept of dark stores.
With the retail landscape changing drastically, dark stores have emerged as a game-changer in the business. Dark stores, also referred to as ghost stores, are fulfilment centers created exclusively for online purchases. Customers can buy products such as groceries, household goods, etc. online and have them delivered to their homes. Dark stores do not have a physical location in contrast to conventional brick-and-mortar retailers. Instead, they fulfill internet orders while operating behind closed doors. Dark stores have become quite popular as a result of the growth of e-commerce and the COVID-19 pandemic, with businesses like Dunzo and Zepto taking the lead.
Advantages of Dark Stores for customers
From a customer standpoint, Dark Stores and quick commerce platforms has many benefits. Convenience is one of the main advantages. Orders can be placed online by consumers from the convenience of their homes or places of employment, and orders can then be picked up or delivered at a convenient time. With user-friendly mobile apps and websites that make it simple for customers to browse and select products, make payments, and track their purchases in real-time, dark stores use technology to ease the ordering process. Dark stores are becoming more and more well-liked among time- and convenience-conscious urban inhabitants thanks to their seamless and convenient shopping experience.
Dark Stores have also used technology to optimise their business processes and inventory control. Without the requirement for eye-catching retail displays or high foot traffic, they can stock a variety of products, including perishable commodities. In turn, fresher goods can be delivered and less waste are produced due to effective inventory management. Additionally, because they do not have to pay the significant expenses related to operating a physical store, such as rent, utilities, and staff, dark retailers can offer cheaper prices. For customers who are searching for value for their money and are on a tight budget, this makes dark stores an appealing option.
Reason for the shift
Several reasons have contributed to the trend towards Dark stores. Retailers wanted to pivot and react to shifting consumer tastes, which hastened the adoption of dark stores. This is especially true during the COVID-19 pandemic. Retailers have found that dark stores are an effective way to quickly fill online orders while reducing the dangers of doing in-store shopping during the pandemic.
The management of dark stores depends heavily on technology. To streamline operations and boost productivity, these fulfilment centres use cutting-edge inventory management systems, automated picking and packaging processes, and data analytics. For instance, machine learning algorithms are used by Dunzo, a well-known quick commerce brand in India, to forecast demand and optimize delivery routes, assuring prompt and effective deliveries. Robotics and automation are used by Zepto, to improve order fulfilment efficiency. Quick Commerce brands can now work quickly, precisely, and flexibly thanks to technology, which is essential for satisfying the needs of online shoppers.
Real Estate and Location Considerations for Dark Stores
Finding sufficient real estate and locations is one of the biggest obstacles to the establishment of Dark Stores. For inventory storage, packing, and fulfilment tasks, dark stores need a lot of room. To effectively serve the desired client base, they must be placed strategically. Companies like Dunzo and Swiggy Insta market had to find accessible real estate for building dark stores rapidly after COVID due to the rise in demand for dark stores. This required renovating already-existing premises, such as vacant warehouses, offices, or retail storefronts, as well as the construction of brand-new facilities. Dark stores must be strategically positioned within the delivery radius to reduce travel time and costs, which makes their location essential for timely deliveries and pickups.
According to real estate consultancy JLL, demand for urban logistics spaces will increase by 7 million square feet by 2022, especially for dark stores. The main drivers of demand are retail, multi-channel and e-commerce companies. It’s also clear why given that JLL’s analysis shows that dark stores can reduce logistics costs by 10% to 30%. Therefore, big players are jumping on the bandwagon and using the dark store operational strategy to scale their operations as they are still unable to reach the outskirts of large cities or tier 2 or 3 cities. These players stand to gain significantly from using Dark Stores to penetrate deeper in the Indian market.
As Dark Stores continue to gain popularity in the retail sector as a result of shifting customer behaviour and technological improvements, their future appears promising. Dark stores are well- positioned to satisfy the rising demand for online shopping thanks to their capacity to provide ease, streamline processes, and make use of data analytics. We may anticipate more advancements in the dark store concept as technology progresses, including the application of robotics, AI, and automation to boost productivity and speed. The supply chain model for dark stores is also probably going to change, with a stronger emphasis now being placed on maximizing last-mile delivery and minimizing environmental effects. Dark stores are positioned to play a big part in the future of retail, offering seamless online shopping experiences to customers while improving operational efficiencies for businesses, as retailers and consumers continue to adjust to the shifting retail landscape.
In the coming series, we will discuss further a few other trends that have evolved in digital warehousing and their impact on the industry. And how Acuver has a team enables businesses to examine the potential opportunities these trends present.
Author: Krishna Raj Kodoth
