Light at the End of the Tunnel: How Dark Stores and Micro-Fulfillment Centers are Revolutionizing the Retail Supply Chain

By Josch Chodakowsky

As the well-worn proverb says, "necessity is the mother of invention," the pandemic hit retail spaces particularly hard, pushing consumers to use e-commerce more as social and safety protocols increased. While there may be more stores open now, shoppers have found that the convenience and speed when ordering items online is invaluable even long after the protocols have gone.

To take advantage of this, retailers have turned parts or all of their spaces into "dark stores," which act much the same way a warehouse or fulfillment center would. The opportunity then arises for retailers to not only leverage a wealth of direct consumer data from these types of transactions, but also provide greater personalization and localization services. This itself sets off a bevy of offers and angles from which to engage their customers. The resources here discuss the dark store trend and how it will affect the future of retailing.

Check out the resources below.

Tomorrow's Supply Chain: Five Steps to the Future of Fulfillment. Chain Store Age, July 2021.
The challenge for retailers is that consumer expectations for omnichannel continue to evolve, and competitive differentiation is becoming harder to achieve. To truly meet customer needs and to do so profitably, brands are looking to provide omnichannel flexibility and scalability at the local level. But this, in effect, means rethinking fulfillment from start to finish. Chain Store Age describes the five steps needed to make this happen:

  • Learn from the Future: Advanced/predictive analytics, as well as internal and third-party data sources, are key to forecasting demand, the impact of changing customer behaviors, and shifting market dynamics.
  • Reconfigure the Network: This focuses on leveraging distribution centers, micro-fulfillment centers, partial dark stores, dark stores, and more. There will be no one-size-fits-all solution, with a variety of set-ups required to handle different volumes, order patterns and service requirements.
  • Update Inventory Management: Inventory powered by analytics solutions that model consumers' probable spending patterns are needed to ensure retailers have the inventory they need for rapid fulfillment.
  • Reimagining Delivery and the Last Mile: Gig economy delivery services or in-house "mini gig economy" operations will increase to meet demand. Greener transport solutions, multi-tenant fulfillment hubs, and customers themselves can even be part of the solution if given the right incentives — and if retailers can offer more convenient pick-up options.
  • Partner Up: Partnerships will span areas including on-demand warehousing and new options for transportation and last-mile delivery. Technology providers also have a key role to play, developing specialist solutions such as order management systems and carrier management tools.

Retail Supply Chains: The State of Play. LinkedIn, June 2021.
Few retailers can hope to grow, or even survive today, without the ability to sell through e-commerce channels. Supply chains are continually disrupted by container shortages, a lack of air freight capacity, and movement restrictions implemented by governments to combat the pandemic.

How have retailers fared in the online and traditional sales environments during all this turmoil? Some have hit on the right strategies and are thriving, while others struggle. This shares examples of the highs and lows of online and in-store retail that enterprises have endured between late 2019 and early 2021, and highlights some of the most notable changes in the retail supply chain arena during that period.

Shining Light On Dark Stores, and How Retailers Can Make Them Work in a Post-Pandemic World. T-Roc/Biz Journals, June 2021.
Initially, brick-and-mortar storefronts went dark due to social restrictions and less foot traffic. It was a way for retailers to boost their e-commerce sites and get their products into customers' hands. It's no secret that online shopping skyrocketed during the pandemic, with existing and new customers ordering everything from groceries to home essentials to be delivered to their homes. Dark stores were most helpful during the holiday shopping season when companies faced daunting shipping demands and long delivery times. Running a dark store enabled retailers to get items to customers in a timely matter and build loyalty.

Getting to Hyperlocal Fast. Modern Materials Handling, June 2021.
Major supermarket chains including Kroger, Walmart, and H-E-B have started micro-fulfillment center (MFC) projects, tapping automation companies that offer robotic, high-density storage and picking systems. These can be placed inside of a store, or in a so-called "dark store" that fulfills online orders for a compact geographic area. Micro-fulfillment can be thought of as putting advanced automation right into the back of stores or in dark stores to rapidly meet the need for same-day fulfillment, especially in the grocery sector.

As Shopping Patterns Continue to Evolve, Grocers are Investing in Ghost Kitchens. Modern Retail, June 2021.
Grocery sales exploded in 2020 — thanks to restaurant closure and people increasingly ordering their goods online. Now, as the world returns to normal, grocers are hoping to use ghost kitchen to convince shoppers they should buy prepared food in additional to daily necessities. Both Walmart and Kroger's ghost kitchens will let shoppers order pre-made meals and have them ready for pick-up in the stores or via their own delivery program.

Stay on top of trends with Marketing Futures Pulse issues, which explore how new technologies, current events and trends, and innovations will affect marketers and consumers alike.

Connect with our Ask the Expert team in real time for customized answers to your specific marketing challenges.

Submit a request to Ask the Expert here.

Josch Chodakowsky is a senior manager of research and innovation at ANA.

The views and opinions expressed in Marketing Futures Pulse are solely those of the contributor and do not necessarily reflect the official position of the ANA or imply endorsement from the ANA.

You must be logged in to submit a comment.