DARK STORE NETWORK

By

Rashi and Rahul

DARK STORES

• Dark stores are a direct-to-customer (D2C) business model that can exist in any market, be it grocery, clothing, footwear, or other goods.
• A Dark Store is a micro-fulfillment center dedicated to rapid online order fulfillment. It is a kind of small, local store but without customers. It has aisles with shelves and racks for groceries and other products.
• When a customer makes an order, dark store staff picks and packs the items immediately available in the stock. Then they ship the order directly to the customer’s address or to a convenient collection point specified by the customer.

How it started in India?

• The onset of COVID-19 in early 2020 was a catalyst for the faster adoption of dark stores in India. With the customers forced to stay indoors during the lockdown period, online retail purchases increased manifold.
• The digital payment landscape has also been evolving, with more than 33% of the population using one or more of the 50-plus Indian e-wallets.
• All these factors, along with a paradigm shift in Indian consumer shopping behavior during the lockdown have given rise to a dark stores business model that could fulfill customer needs for online shopping and also promised fast delivery and cost-effectiveness.

DIFFERENCE BETWEEN TRADITIONAL E-COMMERCE AND Q-COMMERCE

Creating Dark stores:

1)Observe what people want to buy and what the buying frequency of people followed by the total spending power of the locality.
2)Location engineering-Whenever a company wants to enter a new area then they analyze the traffic routes followed by checking the real estate prices of that area. This helps them to estimate their average lead time even before they start delivering in that area.
3)Creating Darkstore-After doing these two things, the third thing is a dark store, which is opened in a centralized location whose capacity is to serve all the customers within a radius of 3-10 km.

Working of a Darkstore

International Industry Standards for Dark Stores

1)Right Layout– Dark stores need quite a lot of space to accommodate products in bulk quantities. A retailer should look for a valuable location to set up a dark store. When it comes to choosing the right location, look for a densely populated area to have more customers and a quick home delivery process.
2)Well-Defined SOPs-SOPs or standard operating procedures are crucial when it comes to designing the product proposition. For instance, if your store uses expensive equipment such as weighing scales and ovens, SOPs can guide the staff about it. Thus, SOPs can be created to manage every operation associated with the dark store.
3)Effective Inventory Planning– Retailers need to ensure the best inventory management and order fulfillment system. Retailers should be able to monitor inventory in real-time to avoid any loss in sales that may occur due to out-of-stock products
4) Data Analytics-Structured data analysis is required to handle dynamic product mix, stock level, service level, process, and product alignment. Dark supermarkets need data analytics to ensure that popular products are always in stock and easily accessible to customers.
5) Robust Software– Dark stores are a complex model, and to ensure better efficiency in terms of cost and operations, dark stores need a multitude of software. For effective overall store operations, oversight and management, dark stores require order management systems (OMS) and Auto-Replenishment Systems (ARS).
6) ISO Standards-ISO stands for International Organization for Standardization. When a dark store is ISO certified, it suggests that they have High-quality management systems, Data security, Risk aversion strategies, and Standardized business practices.

ADVANTAGES

• Dark stores enable fast and contact-free shopping.
  
• Distribution and delivery are more efficient with dark stores.
  
• Dark stores have more products and a larger audience.
  
• Dark stores improve SKU management.
  
• Inventory control is enhanced with dark stores.

INVENTORY MODELS

1: Internal connected inventory
A company connects the inventory in its central warehouse together with its local distribution centers and stores. When a customer orders a product online, the most efficient dispatch point measured by time and cost is selected or a store is suggested for personal pickup by the customer. Sales clerks in stores can also check at a click if a sold-out product is available elsewhere.
2: Out-of-stock partnership
Manufacturers and retailers reciprocally disclose their respective stocks of products that the retailer regularly sources from the manufacturer. If the product is out of stock at the retailer, the customer can still complete the purchase because the manufacturer can send the article directly.
3: Endless-aisle partnership
In the endless aisle model, the manufacturer provides the retailer virtual access to its entire inventory,  including products that the retailer does not have in its product range. The retailer can thus over an extended product range in its online shop that is then directly handled by the manufacturer.
4: Bilateral partnership
Manufacturers and retailers reciprocally make their inventory transparent so that they can take care of each other’s fulfilled as needed. When a customer places an order in a partner’s online shop, the product is sent from the best possible distribution point.
5: Virtual inventory pool
Several retailers and manufacturers connect their inventories. The pooled inventory is held by a neutral entity (eg, a joint venture) to which every partner has access. A customer order is always fulfilled from the best possible distribution point.

Read the Full Case study: Here

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