With the ongoing pandemic crisis and nation-wide lock-downs across the globe, things like going out to buy groceries, medicines and other essential items have become difficult if not impossible. Getting essentials delivered online is becoming the most convenient and safest way to buy essential items – especially for those heavily affected by the pandemic. Online delivery businesses and retailers are gearing up themselves for this fast-paced growth in the online grocery market. Retailers need to get creative to give their customers the experience and levels of service they expect. One of the main focus areas has been in the supply chain domain with last mile delivery options. Supply chain models like Dark Stores are offering a much more advanced version of fulfilling online grocery orders. The rise of hyper-local fulfillment channels has consequently enabled the proliferation of dark stores and the rapid growth of the online grocery market. This has in turn led to the growth of cross border commerce with retailers now expanding their operations to new regions and markets.
As in the name, Dark stores are meant to exist in the dark for customers. It is not the kind of store you would see on a high street or on a shopping mall with an impressive customer facing shopfront or lighting. Dark stores were first started in the UK to serve a sole purpose – for click-and-collect fulfillment of orders. These stores are treated as mini warehouses that are closer to customer locations – across densely populated urban areas. In some of these stores pick-ups are automated making the inventory even more efficient amidst the surging demands and hence speeding up the execution of picking up orders.
By creating store spaces specifically focused on grocery delivery, retailers can now eliminate their biggest customer concern: crowded aisles. Clogged aisles filled with customers and delivery app workers had become a burgeoning concern during the pandemic.
How does it work?
Once an order is placed online, the order is sent to the store floor. Store employees, also known as “personal shoppers” or “pickers”, pick and process the order. Since dark stores are optimized for order fulfilment services, pickers can gather and process more than one order at a time, thus sufficiently reducing the delivery turn-around time. Some of these facilities are fully automated with robotic carts doing the picking and gathering around the store.
Let’s take a look at what dark stores mean for retail :
1. Micro-fulfillment is the backbone for local fulfillment
The ability to get an order delivered to your customer’s door more quickly than your competitors has been the ultimate leg-up. So micro-fulfillment has not been just a hot trend but a strategy enabling retailers to scale up their customer experience by redefining the retail landscape. Micro fulfillment is the strategy retailers use to make the order processing more efficient – from receiving an order to packing it and in some cases offering last mile delivery. It aims to combine the speed of localized, in-store pick-up and combine it with the efficiency of large automated warehouses. Compared to supermarkets, a typical grocery dark store can achieve 200 percent productivity improvement with manual picking and a 300 percent improvement with automation.
2. Extended hours with low operating costs
Ever considered placing an online order at midnight so that you get the items delivered just in time for breakfast next morning? This would have been practically impossible with a traditional brick-and-mortar grocery store or supermarket / hypermarket but with dark stores in existence this would be no showstopper. Since dark stores are not restricted by opening hour regulations, they can operate all day round most part of the year with reduced operating costs associated with staff, electricity, etc. Again, this results in exponential increase in efficiency. Moreover, dark stores dissolve space constraint issues and open up opportunities to sell products that take up space in a typical store.
3. Instant, Contact-less yet Experience -full
As social distancing becomes the new norm, scuttling around packed grocery aisles are no longer welcome. Dark stores thin the crowd by restricting entry only for store personnel hence reducing employee and customer risk of exposure. Moreover, dark stores encourage contact-less order pick up options. Customers can receive their order at their safety and convenience, without entering a crowded store or meeting an associate in person.
Let’s now zoom into the e-grocery sector, specifically in the Middle East market.
The ME region has been relatively slow to adopt e-commerce, but the COVID-19 pandemic has brought a step change in behaviors. Consumers in the Middle East especially the aged population and working women invariably demand convenience. Simultaneously, the wavering political and economic climate has made the consumers price conscious. Consequently, channels like online retailers that align with convenience and reduced costs have gained momentum in the post-pandemic scenario. These changes in consumer preferences, with consumers increasingly appreciating the large product variety, promotions and discounts offered by online retailing is leading the shift in the Middle East retail markets. The development of online retailing presents huge growth potential in the region, and it is set to become the fastest-growing region globally, outpacing the maturing Asia Pacific.
Most countries in the ME were under lockdown since May 2020. For many consumers this marked their first interaction with online channels – enabling a high degree of familiarity even amongst infrequent users. As a result, demand for e-groceries shot up overnight, leaving retailers scrambling to manage massive order volumes in a timely manner. Multiple new players – like Noon Daily, Dubai Store, Sharaf DG, and Areem – entered the online grocery retail segment while existing players such as Spinneys, Mrsool and Nana invested in rapid digital expansion. The country witnessed a 70% increase in app downloads, a 50% increase in daily orders and a 60% increase in basket value, around mid-March, as per reports from a number-one grocery app in the UAE. The online grocery market in the UAE has witnessed a whopping growth of 300 per cent in the UAE in the third quarter of this year and is now worth $1.1 billion while Saudi Arabia’s market continues its rapid growth spree by 500 per cent to $530 million. Overall in ME, the e-grocery market is currently worth $2 billion and accounts for 12 percent of e-commerce.
The exponential growth of the online retail sector has led to more hyper-local offerings and the emergence of dark stores – primarily from Carrefour and Talabat.
Carrefour, which is operated by Majid Al Futtaim in the region, recently opened its biggest dark store in Garhoud. Spanning 5,000 square meters, it was built in five weeks and can handle up to 3,000 daily orders. As it became crucial to adapt to the surging demands, they also expanded their last mile delivery capacity with new transport partnerships to meet increased online orders.
“We have witnessed a 400 percent growth in the number of orders placed (in the retail sector) and a 300 percent growth in online sales between March-May 2020 versus (the same period in) 2019,” said Weiss, chief executive officer of Majid Al-Futtaim Retail.
Talabat, a pioneer in the online food ordering business that transformed the region’s consumer habit’s, is now all set to disrupt the online grocery market with the launch of the first dark store in the Middle East region. Talabat, initially launched in Kuwait as a meal delivery app connecting hungry customers to restaurants, later on acquired by Rocket Internet’s food group (which was eventually acquired by Delivery Hero) has been delivering food across GCC & Jordan for years.
Talabat’s new online initiative, “Daily”, is all set to deliver groceries at customer’s doorsteps in as little as 15 minutes. Talabat’s dark stores are optimized for an efficient picking process that enables it to achieve deliveries in less than 15 minutes. With all the convenience of grocery shopping in the comfort of your home, Talabat stands out for its lowest delivery time and affordable price points. Daily brings together the convenience of a local shop with the affordability and variety of a hypermarket. With no costly storefront or hefty maintenance bills, customers get what they want, delivered exactly when they need it.
For now, “Daily” will only be available for Kuwaiti and UAE customers, although the company plans on expanding to the rest of the GCC in the foreseeable future.
Speaking on the occasion, Tomaso Rodriguez, Chief Executive Officer of Talabat, said: “We couldn’t think of a better place to launch the region’s first dark store than Kuwait, our birthplace and one of the most dynamic markets in the region. This is why we want our Kuwaiti customers to be the first to experience Daily. We are looking to roll out Daily across all markets in the next several months”.
“Daily” by Talabat has now been re-branded as ‘Talabat mart’. Talabat mart has 10 stores operating across select locations in Dubai so far, and plans to open many more in the future to keep up with increasing demand.
The brand keeps safety as its top priority, in congruence with all the pandemic-related guidelines announced by the Dubai government. The staff who pick up groceries at the warehouse, as well as the riders delivering the groceries wear masks, gloves and use sanitizers, as well as have their temperature checked. The stores are disinfected and sanitized regularly. Talabat mart also encourages customers to opt for online payment and contact-less delivery to minimize contact. Talabat has now collaborated with other grocery partners in Dubai and across other emirates, such as 7 Eleven, ADNOC, ZOOM, Aswaaq Supermarkets, Fatima Supermarket and many more.
In conclusion, COVID-19 has prompted a gear shift in online retailing and hence, the supply chains that support it. From bulk pick-ups at supermarkets to individual pick-ups delivered directly to the customer or collection point, experts claim that Covid -19 had bolstered an already fast growing sector. All stakeholders should take note and revisit their strategies, operating models, and policies to make the best of this technology-driven #newnormal. Those who have already made the investment have weathered the storm and are well positioned to steer past through the post-covid retail revival. More than ever, those who fail to make the necessary changes and investments will be sidelined and their very survival put in question.
Your Retail Coach (YRC) is a retail consulting and eCommerce outsourcing company in Dubai and Saudi Arabia offering a wide range of services in retail offline, retail eCommerce and retail omnichannel catering to a multitude of industries.
Your Retail Coach (YRC) helps retail businesses with their web store and online marketplace sales management strategies and practices with a focus on developing brand awareness.
YRC assists retail businesses in managing their supply chain via services and support in warehouse management, procurement, inventory management, dispatch and team management riding on proven models of logistics and use of technology.