Dark stores: How they are helping e-tailers save costs and offer deliveries in minutes

Some hyperlocal delivery companies are promising to fulfil orders within 10-20 minutes. Take a moment and think about it.?

The company's facility must print the invoice, pick and pack items and hand it over to a delivery agent, who will then travel to the customer's location to fulfil the order—all of it in less than 20 minutes. That's faster than the time some may take to get ready to go grocery shopping. Wondering how these hyperlocal delivery firms are managing to fulfil orders in minutes? They are doing so by establishing a small facility close to their customers known as 'dark stores'.?

Dark stores are a new focus area of e-commerce companies. Think of them as mini warehouses within a few kilometers of customers' homes or offices.?Until now, most e-commerce companies delivered goods to customers from warehouses located on the city outskirts. Such warehouses are multi-storey facilities, with truck ramps and docks located on various floors. They require sophisticated planning and additional fire safety measures, adding to the overall cost.?

Dark stores are much smaller spaces ranging between 2,000-25,000 sq. ft. Even though their rentals could be higher, it's cheaper to set them up compared to a full-fledged warehouse. It can be a new or a repurposed facility built on abandoned industrial units, underutilized parking lots, traditional brick-and-mortar retail stores (that are not doing well), basements, marriage halls with a ground, or single-screen theatres.?As the online retail industry grows, so will the demand for dark stores. India's online retail market is estimated to be 25% of the total organised retail market and is expected to reach 37 per cent by 2030, according to IBEF. Online retailers now deliver 15,000-20,000 pin codes out of nearly 100,000 pin codes in the country.?There can be an additional demand for 7 million sq. ft. of in-city warehouse space by 2022 spread across Tier-1 and Tier-2 cities. While the Tier-1 cities are expected to drive most of the planned growth demand, Tier 2 cities like Jaipur, Lucknow, Kochi, Surat, Vizag, Vijayawada, Nagpur, Guwahati, among others, are contributing to a total demand of approximately 2 million sq. ft.?

Dark stores not only help in faster deliveries but can bring down the cost of logistics. Companies are experiencing an increase in the last-mile delivery costs because of the rising delivery-related complexities and expenses incurred in fuel, labour cost, reverse logistics, refund, replacement, congestion, maintenance, and storage. There is a growing need to have fulfilment centres to optimise cost and time for last-mile delivery.?While the covid-19 pandemic accelerated their need, and the shift is expected to stay even as the situation normalises as dark stores can help e-commerce companies save costs and deliver fresher products in minutes.?We also believe that collaborative logistics could be the game-changer in sustainable urban logistics for India. Initiatives like vehicle load consolidation, automatic route mapping, data gathering, analysis, etc., will lead to lower delivery vehicles on the road, savings on fuel and emission.?

Through collaboration, brands can reduce the distribution cost by 20-30%, increase the quality and freshness of the product by 20%, and eventually, reduce the damage and obsolescence by 40% with up to 50% lesser carbon emission.?With the changing consumer behavior and technology adoption, urban logistics spaces like dark stores can be a game-changer to cater to the rising demand in cities with faster order fulfilment rates at lower costs.?