In recent years, most of the impressive growth in online shopping has been driven by purchases of consumer durables. However, with the increasing popularity of home delivery services and of click and collect, online shopping for food and other perishable goods is becoming more and more popular. To meet consumer demand and to maintain healthy margins, supermarkets are deploying “dark stores”.
At present, most click and collect and online grocery shopping services rely on supermarket employees to gather goods selected online and prepare them for collection. Dark stores use machines in huge automated stores to do the same with groceries. Software determines the demand so that customers can get the freshest ingredients possible. Dark stores are intended to make online shopping easier for customers, and cheaper for businesses.
Speaking to Business Reporter, distributed with the Daily Telegraph, Chris Webster, Vice President of Consumer Products and Retail, said, “Non-food stores have been driving a large amount of the growth going back 15 years. But what we have seen more recently is strong adoption of food shopping online. Last year it was about 5% of all food sales. We expect online food shopping will double over the next three to four years.”
Commenting on the emergence of dark stores, Chris said, “We expect the efficiency of the dark stores to increase and they should become just about profitable [as the scale of them improves]. A number of different competing economic models are being trialled. They include using the existing store base to pick. But clearly, as the volumes grow, putting products on the shelf in a customer-friendly presentation only to take them off again and give them to an online customer… one would argue that is quite an expensive way of doing it.
“The highly-automated ones have the ability in the longer run to bring marginal costs down to make it profitable,” says Chris. “The advantage is if you are organised you can get supply directly from the suppliers rather than going through a distribution network. You can get products in and out of the warehouse more quickly. Therefore you can increase the date life to customers – one of the things that really upsets people when they get a grocery home delivery is short coded, out of date products.”
Chris doesn’t expect dark stores to replace the in-store shopping experience entirely or everywhere. He believes they only work in highly populated areas. “In areas of high population density you need to build high automated dark stores,” he says. “But if you want to capture online sales in areas of low population density it probably does not make sense to put a dark store there, you just will not get the volume.
“What I expect to happen is a mixed economy: high population density with a high take-up of online shopping serviced by dark stores, and lower population density with lower take up of online shopping – either a very simple dark store or pick-up from an ordinary store.”
The full article can be read via the link.