Rising online orders are leading to the propagation of something called “dark stores.” These are grocery stores that are designed specifically for the warehousing and distribution of products for online orders. These stores are “dark” because they aren’t open to customers. They’re only designed to support the growing need for online delivery.
Are these “dark stores” taking over the brick-and-mortar shopping experience? Let’s take a closer look and find out.
Online Delivery is on the Rise
Shipt, Instacart, and Amazon Now — premium grocery delivery services are on the rise. Only about 5% of shoppers are currently using online shopping, but this is expected to grow with time. But because this leads to more work for existing grocery stores, it’s become necessary to offload that work into more streamlined delivery services.
In some already established grocery stores, micro stores are popping up in the back. These stores can used automated services to deliver products to people who then bring them to the customers. Micro-fulfillment stores are designed to be smaller than the mega-warehouses of yesterday, bringing groceries the last mile to customers rather than fulfilling in larger service ranges.
Reduced Delivery Costs Mean Slimmer Profit Margins
Shipt’s delivery service was purchased by Target, which now delivers (for a fee) goods at their regular prices. Amazon Now is now offered for free with Amazon Prime. These delivery services don’t make up the products the way that prior services, such as Instacart, did. The profit margins are lower, and they need to be able to pay for the packaging and the delivery.
Walmart, Stop & Shop, Hyvee, and a number of other stores are all experimenting with this type of delivery model. And these dark stores are currently as large as 40,000 square feet each.
The Consequences of Delivery on the Grocery Industry
What does delivery mean for grocery services? If all customers switch to delivery, it could actually help grocery stores more than hurt them. But the transitional period is difficult, with grocery stores needing to maintain both their current locations and new warehousing locations.
For grocery stores, an increase in delivery means that fewer employees will be needed and less space will be needed. In the place of large, sprawling grocery stores, will instead be automated service centers. Automated machines will pick goods, and then those goods will be delivered directly by drivers.
Since the space will be reduced, the costs of overhead will be reduced. Fewer employees will be needed to service customers as they come in, and shoppers will be able to take advantage of an entirely online experience.
For shoppers, the entire process of shopping will be far more convenient. Groceries will be delivered to their door, and they won’t have to hunt for their groceries, either. But this does introduce some issues for grocery stores — namely, the reduction in traditional impulse purchases.
How Jobs Are Being Automated Out of the Grocery Industry
Of course, this also highlights how jobs are being automated out. With grocery delivery, the entire process is automated until the groceries are actually delivered. Often, the people who are delivering the groceries also aren’t employees, but rather contractors. Consequently, there’s potential for a “zero employment” model at work.
Automation is always a plus for any industry, because automation reduces costs dramatically. But this may be some cause for concern when a company such as Walmart is considered. Walmart is one of the largest employers in the country, with a total of 2.2 million employees. Consequently, any major changes it makes to its business or employment model actually impacts the economy as a whole.
For individuals, it may lead to reduced grocery prices. But for smaller towns that rely upon Walmart for jobs, there may be some consequences during the transition. And, of course, it isn’t just Walmart. Both Target and Whole Foods may also be expanding their delivery services and consequently reducing their browsing locations.
Currently, these dark stores are still in development and prototyping, and it may be that companies decide to move in a different direction altogether with their grocery delivery. Apart from grocery delivery, there are also curbside pickup models, which let people select their items online but pick the items up themselves.