Some retailers are turning their shops into 'dark stores' as consumers turn to online shopping. Here's what experts say about the trend.

  • With Australians ramping up their online shopping during the coronavirus pandemic, some retailers have turned to ‘dark stores’.
  • These stores are not opened to the public and instead have staff that pick inventory that is then sent to those who order online.
  • Business Insider Australia spoke to consumer behaviour experts to find out whether now is the best time to retailers to open dark stores.
  • Visit Business Insider Australia’s homepage for more stories.

Some retailers are turning their shops into ‘dark stores’ as more Aussies shop online during the coronavirus pandemic. But is now the best time to do so?

A dark store is a warehouse or distribution centre set up with products for online shopping only. They are not open to the public.

Accent Group, the parent company of retailers including Platypus and The Athlete’s Foot, turned some of its retail locations into dark stores to help address the surge in demand it has experienced online. It came after the group shut its physical locations amid the coronavirus pandemic, but continued to operate online. In the last two weeks of April, its online sales have jumped to between $800,000 and $1.1 million a day.

Gary Mortimer, professor of marketing and consumer behaviour at the Queensland University of Technology Business School, explained that a dark store is like a mini-warehouse but with a major difference.

“The only difference is it doesn’t actually have any customers in it,” he told Business Insider Australia. “It only has pickers or team members that pick that inventory.” These goods are then shipped to where they need to go.

Kmart has also converted three of its locations into dark stores to help support its increasing online business. These include the Kmarts in Caboolture, Queensland, Top Ryde, New South Wales and Brandon Park, Victoria.

Mortimer said these dark stores allow retailers to get closer to where their customers are.

“Dark stores are a really efficient way to get product to your customer in the lowest possible cost,” he said. He compared it to the traditional method of online selling where inventory goes from a supplier to a distribution centre to a retail store. When someone makes an order online, the product is picked from the retail store, packed and shipped off to them.

Are dark stores beneficial for businesses?

Mortimer explained that the benefits of dark stores depend on the number of business locations you have.

“If you’ve got three or 400 stores it tends to make sense to have one or two dark stores where you can do all of your online fulfilment from,” he said. “Rather than having say 100 team members in 100 stores all picking, individually packing [and] individually dispatching parcels to homes. That becomes a very costly exercise.”

Dr Rohan Miller, senior lecturer at the University of Sydney Business School, told Business Insider Australia the advantages of dark stores depend on where it is located and what the retailer does.

“There’s no reason why you have to have a big storefront and carry stock anymore,” he said. “You can have a storefront and have people in there to show [customers] or a really good website that enables people to see and do.”

And once a transaction is made, all you need to do is the delivery. “It’s a lot cheaper than the cost of inner-city store space,” Miller said.

The coronavirus has pushed Australian businesses to think of new business models

Miller said online sales in Australia had been growing at a slow rate before the coronavirus. But since the pandemic, online sales have sped up and “has just pushed us with a rush into the 21st century, into acceptance of new business models.”

Mortimer said the COVID-19 pandemic has shifted consumer shopping behaviour, particularly around how they engage with retailers.

“We’ve seen a significant uptake of online shopping,” he said. “Those that have previously shopped online have probably shopped more online more frequently – they may have shopped online for clothing and accessories but now they’re actually shopping for food and groceries. And then there’s also a new segment of shopper [that has] probably never shopped online, but now finds that they need to shop online because of social distancing.”

Mortimer also pointed out that the pandemic has shown whether businesses have truly been investing in their online channels.

“It’s clearly evident that they’re not – because when there was a significant influx in online shopping, what we’ve seen is that many big brands like Coles and Woolworths for a short time paused the online shopping and their click and collect facilities because they simply didn’t have the resources to facilitate [it].” he said.

On top of that, Mortimer pointed out the rise in delivery times from companies like Australia Post. “In the past [customers have] ordered something that’s turned up in three or four days, now it’s taking almost two weeks to get there,” he said. “So the pandemic has impacted consumer behaviour as well as businesses getting ready for moving into a digital sphere.”

When asked whether now is the time for businesses to do more in the dark store space, Miller said, “Now is a time for new concepts, for sure.”

“What the coronavirus has done is it’s broken our habits. Most consumptions [are] habitual and we have our patterns and lifestyles – It’s been totally shaken up now. We’ve had time to reconsider what we do and reconsider how we do it.”

It’s also a time for businesses to rethink how they are operating.

“Businesses at the same time are reconsidering what they offer and how they offer it and also reconsidering the nature of competition,” Miller added. “So now’s the time to make these changes and explore and be exciting. So it should be a really good time ahead for retailers and shoppers.”

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