A Mumbai-based startup named Zepto founded by two teenagers recently raised $100 million in Series C funding, taking the overall valuation of the firm to $570 million from $225 million. Zepto promises to deliver groceries in under 10 minutes. It was one of the first companies to jump in on this model in India which recently has seen established players like Swiggy and BlinkIt (formerly known as Grofers) entering as well. Zepto’s success lies in the use of ‘Dark Stores’ across the country.
What are Dark Stores?
For a layman, ‘Dark Store’ may have negative or dystopic connotations, akin to that of the Dark Web. However, the term is simply used to refer to a brick-and-mortar location that has been shut down and turned into a centre for fulfilment operations.
Imagine your nearby ‘Kirana’ store that was closed during the pandemic. The shopkeeper has now shut down the shutters and converted his shop and the warehouse behind it, entirely into a shop catering to the online platform.
A dark store may appear like those that are found in a conventional market set out with aisles of shelves that contain groceries and other items for sale.
However, they are not located in shopping malls or High Streets, albeit near the junction where road connection is good. After all, most e-players are battling it out to deliver the goods in under 10 minutes.
Operations of a Dark Store
A typical dark store, however, covers around 10,000 to 20,000 sq. ft space with around 15 to 20 employees operating during a typical shift. Dark stores can also cater to multiple online retailers simultaneously, enabling retailers to save real estate expenses.
Companies having a dark stores business model suggest that the adoption of dark stores adds 3 to 4 percent to their bottom line, due to higher customer orders and lower overall costs. You need to have the right business structure in order to attract funding. This may involve seeking out the best LLC services to have your business registered.
Dark stores need data analytics systems to gain insights into consumer behaviour and adjust internal processes to suit customer preferences. There are set SOPs, security, and warehouse handling manuals that need to be followed while planning to open such a store.
Pandemic expedited the Dark Store business model
Dark Store as a concept existed well before but its vernacular emergence has been expedited due to the pandemic. When the world came to a halt, the shops were closed, and people were confined to their homes. However, they still needed the daily essentials like food, grocery, toiletries, but the fear of contracting the virus stopped them from venturing out.
That is where the Dark Stores came into the picture and became more important than ever. It helped the retailers sustain themselves and now it is becoming a full-fledged market.
Huge potential in the sector as India goes digital
The number of Internet users in India has crossed the 825.30 million mark at the end of March 2021, making online shopping platforms within reach of nearly 50 percent of the population. As a result, during the pandemic, online retail purchases increased manifold.
According to a Business Standard report, Retail sales in India in November grew by 9 per cent over the pre-pandemic levels of the same month in November 2019.
The big players who are still not able to reach the corners of big cities or tier-2, tier-3 cities are now using the said business model to scale their operations further. Dark Stores can effectively help them expand their business and bring the population which remains in the grey zone.
These so called Dark Stores or Food services or similar concept is called Ghost Stores, Ghost Kitchens, Ghost malls etc, in the west and while these business models seems like revolutionary at the beginning but in the long run they create islands of these places similar to current real world stores, shops, food centers, warehouses or they can’t sustain and they will end up either pumping more money to keep surviving or go out of business and new concepts, models will come into picture at later times.
What these companies are trying to do is nothing but the small business shops, food joints etc, that already exists in our neighborhoods but in their case these Dark stores owned by single company who are trying to kill local small business players in the dense populations like cities and they won’t survive in smaller towns, villages.
Look at the Amazon warehouses that were serving from their central warehouse few years ago but as orders volume increased, they couldn’t serve well and ended up setting up their warehouses in every city in America similar to local grocery shops in the cities and at the end what’s difference between Amazon warehouses compared to local shops? except these new Dark or Ghost warehouses owned by single entity like Amazon instead of many local players.
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