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Dark Stores

What is a dark store?

Dark stores are local retail outlets without a storefront for customers. In the dark store business model, Orders can be placed online and home-delivered to customers or they collect those from a designated location.

Dark Store Business Model not be compared with the other models of retailing – brick and mortar, eCommerce, or omnichannel / multichannel. It has its own distinctive features that may share similarities with the other forms of retailing in varying degrees.

Some of the key features of the Dark Store Business Model are:

  1. A physical place
  2. Purchase/procurement, storage and order fulfilment for local retail customers
  3. No storefront, Not open to customers
  4. Only online shopping
  5. Orders are delivered or customers collect it by themselves

With dark stores, retailers can focus better on other important areas of work like achieving operational efficiency, better marketing, strengthening of the logistics and distribution network, technology and automation, and of all, business growth and expansion. Dark Store Online Consulting services assists in marketing strategy, business strategy, and layout planning.

The need for hiring/owning real estate in a prominent location gets eliminated in the case of dark stores. The saved investments can be utilized for acquiring larger workspace in less expensive areas within the city. More inventory-holding capacity means a wider range of products for a wider range of needs and market segments. This offers dark stores the opportunity to cater to a wider market.

Coming to Africa, given the region’s overall growing business and economic performance, its retail industry is also pacing up. Africa has at least 20 countries growing at 5% GDP. Increased economic activities are leading to increased income levels, changes in people’s lifestyles, and more spending power. These factors carry a positive impact on retail markets including eCommerce and dark stores.

Another plus point is growing urbanization in Africa. Countries like South Africa, Nigeria, Angola, Ghana, Cameroon, Botswana, Côte d’Ivoire, and a few others have an urban population of over 50%.  People with busy and urban lifestyles are more likely to embrace dark store online shopping.

However, it is also important for entrepreneurs and businessmen to be aware of the ups and downs in setting up and managing the operations of a dark store.

Challenges in starting and running a dark store

Achieving operational efficiency

Operational efficiency is a universal requirement but when you open a dark store, you are already telling the world that you are going to be efficient. Why would customers buy from your dark store if you do not have all the order sizes offered by a brand, your deliveries are delayed, orders fulfilled contain incorrect items, or billing is faulty? Your ability to achieve high standards of performance and execution in service delivery is dependent on the operational efficiency and effectiveness of your dark store.

Competing with big brands and the mom & pop stores

For the big retail chain brands, it makes sense for them to intensify their presence to cater to the local markets via dark stores. It saves time, money, and efforts to have a dark store presence than having a full-blown retail outlet. This speeds up their expansion goals.

Then there are the customers’ favourite mom & pop stores and the local departmental stores. Customers who are already buying from these places may need a strong reason to switch to a dark store brand. They may try it for once or twice but to tilt their loyalty and habits will be tough.

Store Layout

In terms of physical dimensions, a dark store is hardly like a store. They are no less than the sizes of warehouses or distribution centres. Then there are humongous levels of inventory that needs to be stored and processed every day for stock replenishment and fulfilling customer orders. An efficient layout plan is required to ensure space optimization, proper storage for different types of inventory, smooth movement of staff and goods within the store, smooth flow of operations, due adherence to safety and security considerations, etc.

Purchase and inventory decisions

Accuracy of demand forecasting plays a vital role in the purchase and inventory management decisions. The same holds for dark stores. These decisions affect the ability of a dark store to fulfil orders, manage its logistics, ensure smooth flow of incoming and outgoing inventory for space optimization, maintain the desired inventory cycle, maintain a healthy working capital ratio, prevent inventory wastage, etc. Fallacies here can lead to the creation of deadstock, overburdening of available space, over or under purchasing, stress on logistics, delayed/cancelled orders, unexpected burden on working capital, etc.

How Your Retail Coach (YRC) can help: A glimpse

YRC offers a comprehensive range of  Dark Store Online Consulting services in establishing and managing dark stores. From planning to implementation assistance in developing a robust business model, formulating the financial assessments, carving out the business strategies, defining the operations, etc., our Dark Store Online Consultants are intended to deliver the best. Highlighted below is a preview of our services in dark store consulting for Africa.

A strong value proposition is critical for a dark store business model to effectively compete with other local offline retail outlets. In dark store business model development, we focus on identifying and bringing forth a strong and sustainable UVP for your business. This is followed by the formulation of the strategic framework of the value chain and internal capabilities required to deliver the intended offering.

In Dark Store Online Consulting, we study the financial or commercial viability of the business project. This will cover estimation of the capital/initial expenditures and cost of operations, projection of sales turnover, determination of average margin, purchase planning and inventory calculations, preparation of estimated profit and loss statements, etc.

In business strategy for dark stores, we delve into defining the functional workarounds for the key business processes. This includes formulating strategies for technology, HR, infrastructure, supply chain and logistics, and operations towards ensuring that the planned dark store business model works as intended.

A good layout is identified with proper entry and exit spacing for inventory, organized storage for quick and easy withdrawal and placement of inventory, smooth and safe movement of staff and inventory, due addressing of store safety and security considerations, and space optimization. Our dark store layout planning experts will work to ensure that these objectives are accomplished in your dark store warehouse/distribution centre. Our dark store online consulting helps in store layout planning as well.

With operational efficiency, dark stores could not only control their operational costs but also gain on time to process orders at competitive levels. And in this pursuit, the first requirement is to define and map the operations. Our Dark Store Online Consultant will get SOP covered for your dark store striving to make your enterprise process-driven and growth-ready.

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We are a boutique retail consulting firm. To know more about our dark store consulting services for Africa or if you have any query, drop us a message and we shall get back to you.

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