Cropping up across the country are stores that turn away customers because the locations aren’t meant for shoppers in the conventional sense.
Macy’s, Nordstrom, and Walmart are leading retailers that have converted stores around the country into “dark stores,” meaning the locations exclusively cater to fulfilling online orders, curbside pickup, returns, and bill pay, and not traditional shoppers.
The observed shift isn’t endemic to retail; grocery heavy-hitters like Kroger, H-E-B, Stop & Shop, and Giant Eagle, to name a few, have all converted store locations into dark stores in recent years. Most notably, Amazon opened a brand-new dark store facility — rather than retrofitting an existing Whole Foods store—in Brooklyn, N.Y. last year to support growing demand for online delivery during the pandemic.
Online shopping proved its ease and convenience at the onset of COVID-19 when shoppers felt like visiting a crowded store was tantamount to tempting fate. Industry experts say the shift isn’t surprising and there’s more to come particularly as online grocery shopping has found its footing in the pandemic-era.
Todd Hassenfelt, senior director of e-commerce at Simple Mills, estimated that this growth has accelerated by about five years.
“Think about all the bells and whistles you don't need to have in a dark store, things like a food buffet or maybe the customer service center, you don't have to have all the checkouts,” Hassenfelt said. “Now all of that space that may have been allocated for traditional customers can be more optimized to make it more like a fulfillment center and more like a warehouse so it's quicker picking.”
Deborah Weinswig, CEO and founder of Coresight Research, has a similar outlook. “The intersection of e-commerce and grocery is thriving — this continued growth in e-commerce could fuel growth in grocery,” she said.
A Coresight survey found that 31% of respondents bought online groceries in the past two weeks, roughly in line with the 29% who reported doing so in mid-June, indicating that shoppers who made the switch to online grocery haven’t reverted to their old habits.
Today’s retailers and grocers are bending to the customers’ needs of facile shopping experiences with a de-emphasis on in-person browsing as the trend is taking off.
‘Macy's just isn’t giving the customer a great reason to go into their stores’
MJ Munsell, chief creative officer at architecture design, strategy & branding firm MG2, calls buy online pick-up in-store a “huge driver” contributing to the growing popularity of dark stores. The option is a happy medium for customers who want to shop online, but still want the immediacy that comes with the in-store experience and the ability to take home a purchase the same day.
As with Macy’s and many department stores, in-store environments and eye-catching displays are lost on people and the interest has faded.
“Unless it's a very enticing environment where there's a great reason to go, either it's a great visual, entertainment, or there's great customer service, or hopefully combination of both,” she said, “but Macy's just isn’t giving the customer a great reason to go into their stores, even though they tried really hard to Band-Aid it with some of their investments.”
“It's a natural balancing act that Macy's was intending to do anyway — to close some of those stores because of their shift to digital and also declining interest in going into a large-scale department store environment,” she said. “Stores are becoming delivery centers.”
Dark stores are faster for order fulfillment
Instead of brick-and-mortar stores trying to appeal to stakeholders with conflicting needs, a dark store is one way to separate the two to give traditional shoppers the space to leisurely browse, while providing personal shoppers an unrestricted environment for speed and efficiency.
“I'd rather go into Whole Foods and experience it as a complete experience, versus this half-distribution center half-environment for me,” Munsell said. “If anyone's gone into a grocery store recently and had to interface with many Instacart shoppers at the same time, you really just want to run out and go the other direction.”
The division also creates optimization for personal shoppers.
Fulfilling an average 50-item personal order in a traditional store setting can take about 50 minutes. But when accomplished in a dark store, that time is trimmed down to six minutes, Hassenfelt explained.
The future of dark stores
Dark stores are predominately staffed by human pickers, but Hassenfelt said the scales of human to robot are bound to shift in the near term.
A small, but growing crop of micro fulfillment centers are being staffed by robot technology and Hassenfelt said there’s “a lot of efficiencies to gain” compared with automated robots to human staffers.
Kroger and Britain-based online grocer Ocado continue to build large automated centers dedicated to fulfilling mass quantities of orders.
“It doesn't mean that people won't want to go to a grocery store ever and this isn't an either-or situation,” Hassenfelt said. “But people gravitate towards saving time and convenience and this just screams that. There will be more online grocery and more dark stores and micro fulfillment centers because it hits all those checkmarks.”
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