Spain: From store to 'dark store'
Updated: Apr 6, 2021
What is most surprising after passing through the doors of Maxi Dia, on Avenida de Europa in Alcorcón, (Madrid) is that the store's line of boxes has disappeared. A good part of that space is occupied by pallets of milk and water (the products most demanded by online consumers). The rest of the store is neatly laid out and neat. There are no sideboards with hook products, nor the usual posters advertising offers.
The reason is that the store is closed to the public. In it, the only ones who make the purchase are the employees equipped with tablets and scanners in hand who guide them through the store and help them quickly register the products with which to prepare the orders.
During the harshest confinement The demand for online food reached 8.4%“Everything is thinking and organized to make it easier for employees to complete orders as quickly as possible and to meet the demand that tripled during confinement,” explains Diego Sebastián de Erice, Dia's Ecommerce director, when he presented this store concept that in the jargon of the sector it is known as “dark stores”, an Anglo-Saxon term that refers to the conversion of stores into warehouses to exclusively satisfy the demand for online orders. Dark stores are a distribution model designed by British and American supermarkets to seek efficiency in home delivery of food. "They are exempt from commercial time restrictions, they have fewer staff, but more trained, which achieves more quality and more efficiency in delivery by better planning shipments," explains the expert in the sector, Bernabé Muñoz Sandoval. Diego Sebastián de Erice, Director of Ecommerce at Dia Emilia Gutiérrez de Frutos
In Spain, some distribution chains had tested them without reaching conclusive conclusions about their efficiency, since until last March the demand for 'online' food was very minority. The situation changed with the mandatory confinement when the increase in demand overwhelmed small and large.
According to data from the Association of Manufacturers and Distributors, Aecoc, online demand for food went from 3.8% in February 2020 to surpass peaks of 8.4% between March and April to stabilize at 5.7% in May and June. But this is average data, they warn. In the main national distribution chains, the demand could have been much higher around the month of April.
Dia, the chain with the most dark storesGiven the need to respond to this extreme situation, the dark store became an emergency measure. “In Día we have been testing in Madrid and Barcelona since 2018 the dark store model on three platforms. This previous experience has allowed us to react in an agile and efficient way to the great increase in demand for the online shopping service that we experienced after the lockdown in March, which tripled. In just over two weeks, we managed to articulate a plan designed for years, ”explains Diego Sebastián de Erice.
Día has been the distribution chain that has opted the most for this model with the launch of 14 Dark Stores (3 of them in the province of Barcelona), 12 of which continue to operate with the capacity to satisfy some 400 daily orders. To a lesser extent, other chains such as Bompreu, Eroski, Consum and among others pulled dark stores to respond to the increase in demand.
Werable used by El Corte Inglés employees to order online The English CourtEven El Corte Inglés decided to close its Bricor store in Alcalá de Henares, a municipality on the outskirts of Madrid, to transform it into a dark store in just two weeks with the capacity to serve 1,000 daily orders. It was not the only strategy they implemented. All the stores became providers for the online service and department employees paralyzed by the confinement worked to provide food service with multiple versions of delivery beyond home delivery, such as delivery in the store itself or collection by car directly in the car parks.
Large and well connectedThe key to a good operation of a dark store, as explained from Dia is “choosing large stores, Maxi DIA, that have other stores nearby where they can refer physical customers, thus giving them an alternative to satisfy their shopping needs. It was essential that, like this establishment in Alcorcón, they be well communicated in order to cover large delivery areas quickly and efficiently ”. Although, as its ecommerce director acknowledges, “we are in a time of change, in which each operator must find their own business model”.
Beyond the obligations imposed by the confinement, the bet of the leading distributors in the online food trade is very versatile. To the pure dark stores, Día adds distribution centers around the big cities to cover more population.
Technology to reduce costsUntil March, the El Corte Inglés model was what could be called the most efficient and sophisticated version of the dark store. What the sector calls 'micro fulfillment center'.
Warehouses closed to the public that require a strong investment in logistics and technology to gain efficiency in the distribution of food at home. With techniques both to facilitate the physical fulfillment of the order, and to manage shipping hours and routes with maximum efficiency.
This is what El Corte Inglés did when launching the Food Distribution Center (Cedial) in 2014, a 10,000 square meter enclosure located on the outskirts of Madrid that was overwhelmed in March.
That strong bet is also what Mercadona had played since it opened its “beehive” in Valencia in 2018 with an investment of 12 million euros to mechanize and digitize the delivery of online orders. A year later, the one in Barcelona arrived, with an investment of 7 million euros, and in the midst of the pandemic it opened in Getafe, on the outskirts of Madrid in a project to which it has dedicated 12 million euros. But even so, it was not enough. Once the moment of greatest tension in the attention of physical stores has passed, these have also become providers of online demand.
A dark store Reduce the cost of the order by a third“With a micro fulfillment center, the increase in efficiency is very high. The cost of the order can be two-thirds less than one made in an open store. But it also implies a strong investment. Meanwhile, in the dark store the reduction in the cost of placing an order is lower, a third less, but also the investment made is much lower. It all depends on the volume of orders and the density of the area to be covered, ”explains Álvaro García Lombardero, partner at the Kearney consultancy.
In his opinion, in large cities such as Madrid or Barcelona, micro fulfillment centers work well "because a few well located around the city can cover large areas". Pure dark stores, on the other hand, are a good option for areas of lower density, such as provincial capitals, where the volume of orders is lower and it is not worth making technological investments for order preparation.
Employee at the Mercadona Beehive in Madrid Emilia Gutiérrez de FrutosBut betting on this concept is not easy in any case. It means closing a store to the public requires having another close enough so as not to lose the clientele who regularly visit it in person.
“Dia is doing moderately well. It has taken advantage of the fact that it has a large number of stores to give a new utility to the less profitable ones at a time when the demand was elsewhere ”, explains Francisco González, professor at ESIC, an expert in logistics.
The future of this concept is linked to the evolution of large cities, according to the expert in the sector Bernabé Muñoz Sandoval. "At present, before closing a store, it is necessary to carefully analyze whether the risk of losing physical customers compensates for the increase in online stores," he says.
But if in the future, city councils make access to the city center even more difficult in their own vehicles and people cannot use their cars to go to the stores to make the heaviest purchases, then, says Bernabé Muñoz, “close physical stores to attend orders online it will be more necessary. " And even more, he points out "the consumer is increasingly more environmentally conscious and it is much more efficient for a dealer to use a single vehicle to carry 50 orders than the alternative of 50 private cars traveling to buy".
Ecology in your favorIn any case, what seems certain is that there will be no winning model. “Our philosophy is to grow little by little. The investment has to go hand in hand with demand, which has risen a lot, but which is still far from being the majority channel and less so in a country like Spain, where the physical food trade has a strong capillarity ”, Diego Sebastián de Erice acknowledges.
“In the future, it is most likely that there will not be a single model but hybrid models adapted to the demand of each operator. The online purchase of food will continue and will continue to grow, but it will not replace the physical store, ”says Álvaro García Lombardero.
See here for more: https://www.lavanguardia.com/economia/20210103/6162742/tienda-dark-store-distribucion-compra-online-alimentacion.html