Dark Stores

Toys"R"Us has been offering omni-channel (I'm so sick of that term) journeys such as buy-online-pick-up-in-store for several years.  Additionally they can use the store to fulfill online orders, which is an important part of their business, especially during the holidays.  Both cases require a store employee to pick product from the floor and move it to the backroom.  I was speaking with someone from Toys that told me a funny story about this.  You can imagine the chaos on the floor during the holidays, so when employees were picking items they were constantly being interrupted to answer questions or retrieve items from high shelves.  To combat the issue, employees assigned picking duty did so without an official uniform.  Yep, they had to wear street clothes to get the job done.

Although online grocery shopping hasn't yet taken off in the US, its quite popular in the UK.  Customers place their order online which is fulfilled at a nearby store and delivered by truck.  Pickers are given a large cart with separate bins for separate orders, and they use a tablet to efficiently navigate the store.  With enough orders, you can imagine those customers slowing down the pickers.  The grocery store layout isn't really conducive to both types of foot-traffic.  Thus the dark store was born.

Just as you might expect, the dark store has no customers and is used strictly for picking and fulfillment.  Its location and layout are similar to traditional stores, but there's no price tags, no endcap advertising, and no checkout lines.  Its a neighborhood warehouse, complete with fresh, frozen, and dry goods.

Sainsbury, Tesco, and Waitrose continue to open dark stores in the UK, filling 4,000 online orders a day per store in some cases. I suppose this makes perfect sense in areas where order volume is high, like in big cities.  Then in the suburbs, it might be acceptable to leverage the existing store, perhaps with an express lane for crowd-sourced deliveries like Instacart.

Although I don't know of any dark stores in the US, it wouldn't surprise me to hear that Amazon Fresh and Fresh Direct are using them.

Image from The Guardian: Waitrose, Aldi and Lidl eat further into major supermarkets' market share.


You could also class Ocado in the UK as having a dark store, although, as a pure play online grocery company, they don't have any non-dark stores. Ocado's picking processes are similar to other dark stores, though, and Ocado have some great videos of their picking process on Youtube.

The distinguishing factor for dark store efficiency is the amount of automation in the process: in the UK I would say that Tesco and Ocado are leading the pack, with conveyors and storage robots for picked trays at least (delivering by conveyor the trays needed to load a van in drop sequence just before departure), and partial picking mechanisation (e.g. zone picking in ambient grocery--conveyor moves tote to pickerwho picks from a small range of product, or product to picker/pick by light where the picker doesn't have to move much during picking--product totes and customer totes arrive together for processing). Some products still need to be picked using a moving cart (e.g. frozen), though.

Posted by Miles Thomas on May 16, 2014 at 02:15 PM CDT #

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David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.

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