Dark Stores: The Importance of Developing the Dark Side of Retail

From the barcode to artificial intelligence (AI), retail has proven to be a sector in a state of constant innovation that allows us to measure consumption and the pulse of the Mexican economy. Manufacturers and retailers are experiencing the convergence between physical points of sale and digital platforms, which has caused major disruptions, leading them to transform their logistics processes, make payment methods more efficient and gain consumer preference.

Faced with a challenging economic outlook and great business opportunities, brands and retailers seek to connect with the future and deliver an attractive value proposition to capture more customers, who are immersed in an omnichannel environment and seek a satisfying shopping experience regardless if they  purchased their products via the internet, app or at the point of sale.

The evolution of the traditional business model has traced new routes in the integration of online and offline services offered by the retail sector, in addition to redefining the shopping experience of increasingly demanding consumers.

As the German physicist Albert Einstein would say, in times of crisis, “imagination is more important than knowledge.” The health crisis caused by COVID-19 has tested the innovative capacity of various industries to respond efficiently, quickly and with agility to the challenges of the new normal.

After two disruptive years, 2022 has been a decisive year to define what the shopping experience of the future will be like and in which topics such as omnichannel, the metaverse, wallets, robots, social e-commerce, live shopping, immersive experiences, the collaborative economy and digital transformation, to name a few, will mark the new trends. At GS1 Mexico, we believe that collaboration is the way to transcend, create better businesses and improve people's quality of life.

In addition, logistics and supply chains will continue to occupy a key place in corporate business strategies, where elements like the last mile, Industry 5.0, 3D printing, dark stores, drones, cobots – collaborative robots – smart lockers, autonomous vehicles, circular economy and sustainability will play an important role in its efficient management.

The Role of Dark Stores

In this context, a case of innovation we should highlight is that of the restaurant industry, which faced the dilemma of temporarily or even permanently closing their businesses during the contingency. As a result, in the dark kitchen or ghost kitchen model they found the opportunity to reduce costs in their customer-service activities, concentrating only on food preparation and relying on delivery apps for food delivery. 

According to a Euromonitor report, there are already more than 7,500 dark kitchens in China, more than 3,500 in India, 1,500 in the US, and 750 in the UK. In Mexico, during April and May, Alsea implemented this concept in 34 Vips and El Portón units to offer dishes from the brands Chili’s, El Portón, Italianni’s, The Cheesecake Factory, La Casa del Comal and Corazón de Barro.

At the same time, with the boom in e-commerce and online sales, the retail sector has undergone a reconfiguration of its business strategies to respond effectively to the challenges of the omnichannel environment in which they operate and meet the needs of their customers. It was in this scenario that dark stores emerged. 

Dark stores are operating warehouses or distribution centers (CEDIS) set up exclusively for the preparation and shipment of orders arriving from the retailer’s marketplace. They are usually located in cities with a high population density, and the distribution of merchandise is the same as in a physical store or point of sale. However, the main difference is that they do not serve customers, there are no cash registers and they lack advertising or promotional material. There is also another dark store format, designed for consumers to pick up their online purchases – click and collect.

According to the consulting firm A.T. Kearney, the effectiveness of dark stores is three times that of traditional supermarkets, due to the fact that they are open 365 days a year and allow for a wider product range and availability, as well as expanding order picking, delivery and pick-up capacity in areas with high purchase order density or traffic restrictions. These benefits make e-commerce a more viable option for retail.

On the other hand, dark stores vary according to their automation level, as they can be similar to a supermarket, where employees walk down the aisles with a cart and pick up items from the e-commerce order, while others implement Warehouse Management Software (WMS), drones, cobots and automated transports to place the goods on conveyor belts with trays that move them to a picking location to prepare the orders online and ship them out.  

In the near future, large retailers will undoubtedly implement dark stores to strengthen their e-commerce strategy at a local, regional and global level, as well as meeting the 24-hour delivery standard, satisfying new consumer trends, and bringing products closer to the consumer with a click of a button. And you, are you ready to take advantage of the benefits of the dark side of retail?