The rise of the Dark Store
As some of our country’s well-known brands close bricks and mortar operations to open new distribution centres the breathless reports of ‘dark stores’ have captured the country’s attention. However, rather than arriving covertly and operating in secret, these ‘stores’ are upfront in meeting changing consumer demand.
It has become obvious since the first lockdown of 2020 that many New Zealand households and businesses have changed the way they shop.
Recent figures released by NZPost highlight that there is a very real need for a new way of doing business. Their research showed that during the first week of level 3, “$1 in every $4 spent in New Zealand was online, and even people who traditionally did not shop online much became converts.”
"Research showed that during the first week of level 3, “$1 in every $4 spent in New Zealand was online.”
According to NZ Post’s new eCommerce Spotlight research, conducted with Datamine, there were 170,000 adult New Zealanders shopping online for the first time during the first six months of 2020. The 60-plus age category had a 62% increase in shopping online for just the month of May (when compared with the same period in 2019).
Chris Wong, General Manager of Business Marketing, NZ Post, states Covid-19 “has forever changed the way Kiwis shop.”
It wasn’t just a temporary change either. In 2020 online spending for the first half of the year was 30% higher when compared with the same six months in 2019.
To cope with this increased demand some big brands are pivoting their operations to ensure they can keep pace and deliver products with the necessary speed and efficiency. The resultant ‘dark stores’, ‘e-stores’ or ‘shadow warehouses’ are simply repurposed areas – moving from public-facing operations to distribution ones.
While a relatively new concept locally there are many examples of this new form of distribution centre internationally. Now, as Covid-19 continues to restrain the movement of individuals within many cities, the business model is making more and more sense.
In the United States, the largest mall owner in the country is currently in discussions with Amazon towards an arrangement whereby anchor department store space may be leased out to the eCommerce giant for use as distribution hubs.
In his article for Techspot, Shawn Knight states that such an arrangement would be ideal for Amazon, as “having more fulfilment centres closer to residential areas would allow the e-commerce giant to further speed up the crucial last mile of delivery.”
Back in New Zealand and in Dunedin, the central city location of The Warehouse has been re-purposed for online orders only. In Wellington, Countdown has 100 employees working in their new customer-free facility – an operation that provides for more than 7000 online orders each week. The supermarket brand has another two similar operations planned. Other companies are following in their footsteps too.
It’s not just the big players that are making adjustments. For many SMEs, the move to online ordering has seen increasing importance placed on their packaging and distribution systems. Those that have leaned into the accelerated rate of change are being rewarded for their efforts.
For these companies, a big focus is on ensuring the ordering and distribution process is running at peak efficiency. Investments in new websites and online ordering systems are being matched by increased distribution spaces throughout the country. Automation and semi-automation systems in picking and packing orders are no longer a ‘nice to have’ but a ‘must-have’.
It’s a necessary approach due not only to the change in the purchasing mindset but the increased expectations that have come with it. Delays in fulfilling orders or returns from product damage are no longer accepted by the general market, where the consensus is that if some companies can deliver quickly and cost-effectively then all companies should be able to.
For operations such as Pharmacies, the increased demand for vital goods available immediately, especially in times where self-isolation and social distancing is so essential, the example of the dark store is lighting the path ahead.