21 November 2021 We live in a new era of consumption. High consumer expectations are pushing retailers to interact with every customer in real-time, across all touchpoints. And not only that: you must offer a personalized and positive experience. Consumers want quick responses to their purchases, which means allowing them to access purchased products when, where, and how they want, faster and faster. However, providing this advanced service can be challenging with traditional distribution center infrastructure; you need to get closer to customers for results to happen. Traditional retail (brick-and-mortar retail) seems to have identified it during the pandemic, and a new omnichannel distribution network model is being designed, bringing new meaning to existing physical store structures. To deliver goods quickly and accurately, you need detailed logistical planning and in-depth inventory control so orders are processed as quickly as possible. Physical proximity to the customer also makes a difference. But how do you achieve this when located in an industrial area, far from major urban centers? The answer came with a new distribution network model, which gives even more strength to omnichannel: the dark store. If the term is not well-known here in Brazil, in countries like the United States and the United Kingdom, dark stores are already part of many businesses. Major market players, such as Walmart, Carrefour, and Target, are increasingly investing in this model in various regions of the world. And now that the pandemic has forced physical stores to close and migrate to e-commerce, dark stores have gained even more traction. Want to learn more about them? Check out the topics below. What is a Dark Store? A dark store, which literally translates to “dark store,” is a place exclusively for storing, picking, and shipping products sold online. However, unlike traditional distribution centers, which have large areas and are located in more distant zones, the dark store is smaller in size and located in urban centers. It’s almost like a store, but with doors closed to the public (hence the term “dark store”) and functions as a mini distribution center for products sold through e-commerce. This urban hub is usually located in areas with higher population density, where there is already some knowledge of the residents’ consumption habits. Its goal is precisely to shorten the distance between the product and the customer, allowing for same-day delivery or next-day delivery. Other names that can be given to this model are microhub, mini urban distribution center, micro-fulfillment center, or hyper-local distribution center. Despite being closed to shoppers, the dark store has a layout reminiscent of a traditional store, allowing pickers quicker access to products. This enables them to assemble an order as quickly as possible and ship it to the customer or prepare it for pickup. Benefits From the definition of a dark store, you’ve already noticed a significant advantage: being located in urban centers, it’s closer to the consumer and speeds up deliveries, offering an improved shopping experience. The customer can also choose to pick up the product at this location (BOPIS or click-and-collect), managing to have the item in hand even on the day of purchase. And this makes a difference for the buyer. According to the Global Consumer Insights 2018 survey conducted by PwC, nearly half of Brazilians (45%) are interested in purchasing basic items online, and two-thirds (64%) are willing to pay more for faster shipping, if possible, same-day delivery. With dark stores, a good logistics strategy, and the help of technology, companies can meet this expectation. In addition to the advantage of being closer to the customer, allowing for the delivery or pickup of the product on the same day the purchase is made, the dark store offers other benefits for the company, such as: – Taking advantage of physical stores with low traffic, but located in strategic points of the city, to transform them into dark stores, managing to serve potential customers. Depending on the size of these stores, they can remain open to the public, operate normally, and have a specific area dedicated to fulfilling e-commerce orders. – Reduction of transportation costs, as well as reduction of environmental impact and carbon emissions associated with delivery and incentives for customers to click and collect. – Reduction of known last-mile e-commerce issues. – Ease of serving regions with a high volume of orders: with the right strategies and the help of technology, dark stores can serve areas with many orders that a typical store might not be able to fulfill due to space and volume limitations. – Reduction of implementation and operational costs: dark stores do not require the same level of planning as a regular store. Additionally, construction and retrofit costs should also be significantly lower than those of a typical store. With real-time visibility, optimization of space and time, and efficient logistics, dark stores become a much better choice from a financial perspective. – Greater efficiency: with the adoption of technology in the stages of receiving, storage, and picking, dark stores can fulfill a large number of orders with high speed. – Unique customer experience: if executed correctly, the dark store can generate deep brand loyalty, maximizing profits and minimizing cart abandonment, thanks to short delivery times and/or facilities like online shopping and in-store pickup (BOPIS) and online purchase and return to store (BORIS). Tips for Creating a Dark Store A fundamental requirement for setting up a dark store is knowing the customer and their preferences. This greatly aids in organizing stock, the mix of products offered, and internal processes. Therefore, it is essential to have data analysis tools that provide relevant insights into consumer behavior. Even before an order is placed, the analysis helps define stock levels of each item, as well as the layout of the dark store, facilitating the sorting of the most popular products. Having warehouse management software (WMS system) capable of fulfilling in-store orders (store compliance) is also crucial for managing inventory, controlling goods movement, stock replenishment, picking, and other processes that directly or indirectly affect customer satisfaction. With a clear view of inventory, managers can direct the order to the right dark store so that the order is quickly picked and shipped. Another software that greatly helps is the OMS (Order Management System), which provides complete order management, from the moment the purchase is made to the last mile. OMS allows visibility of all network stocks and centralizes all information in one place, allowing not only managers to access order data but also customers, who can track the status of their purchase, so they know exactly where the order is and when it will be in their hands. Using an OMS also preserves investments in legacy order systems. The perfect integration between WMS, OMS, sales acquisition systems, and ERP provides the ideal foundation for a dark store to operate efficiently and offer qualified service to consumers. In addition to investing in technology, it is necessary to train employees so they can operate in our model, focused 100% on agility, accuracy, and customer satisfaction. Also, have tools to collect customer feedback and evaluate your operation’s performance so you can constantly improve it. With WMS Visual Management, you have real-time information presented in dashboards that can be shared with teams to ensure maximum productivity. The system also offers KPIs that allow you to analyze performance and make necessary changes to improve processes; in addition to event-based notifications (alerts) – making the system reach the user, for example, using mobile devices that people already use (smartphones, tablets, etc.). It may also be interesting to segment the business into dark store clusters, selecting the most popular products in each category. Consider starting a dark store with essential and best-selling goods, so you can experiment to better understand the dynamics and gradually build the structure. Why Does the Current Moment Strengthen Dark Stores? With the coronavirus pandemic, e-commerce has gained even more strength, while physical stores had to close, and many are still not planning to reopen. To readjust their business, many entrepreneurs have migrated to e-commerce, and some are already using physical stores as distribution points. According to Forbes, in the United States, Whole Foods recently converted its Los Angeles and New York stores into dark stores. Other supermarket chains like Kroger and Giant Eagle have temporarily moved some locations into dark stores, intending to make them permanent. In the United States, dark stores are more common in supermarket chains, but the trend is already moving into other sectors, such as home goods retail, clothing stores, and even jewelry stores. The fact is that many companies that had to migrate to the dark store model during the pandemic period are understanding its advantages and opportunities and are likely to maintain it permanently. As many experts say, with the coronavirus, a “new normal” has been inaugurated, and there’s no going back. Consumers who have experienced the convenience of e-commerce will likely continue to make some purchases online. And it is in this context that companies with the best conditions to make quick deliveries and offer a positive shopping experience will stand out. Therefore, we can say that dark stores will definitely be part of the future of retail. But for them to work, a strategy is necessary, and automation when possible. Streamlining processes and automating order fulfillment provide the ideal foundation for the dark store to function at its best and with the best results. What is a Dark Store and why is it gaining popularity? Deagor WMS per ecommerce può aiutarti!