What is a dark store and why are more and more retailers turning the lights out? Welcome to the supermarket world 3.0 that includes robots, artificial intelligence and the addition of dark stores.

Margins on grocery delivery can be tight, and are continuing to shrink closer to zero. The trouble is, convenience is on the rise, and grocery delivery plays a huge role in this. Earlier this year Coles entered an agreement with Ocado that saw the business access Ocado’s Smart Platform technology – the world’s leading online grocery website, automated single pick fulfilment technology and home delivery solution. This looks to significantly enhance customer experience and see two-state of the art automated customer fulfilment centres built. This partnership provides a unique opportunity for Coles to deliver a best-in-class customer experience driven by greater range, improved product availability and freshness, a significantly enhanced online capability and more regular delivery windows. The introduction of the CFCs will also provide a safer working environment for Coles’ team members.

Within the next ten years it is expected that majority of online grocery delivery will come from dark stores. In the USA, Ocado and Amazon have dedicated dark stores and as a result, have a wider range, lower overheads, and fewer substitutions. There is great scope for technology development and increase margins as well. Although there is a reasonably large investment required, dark stores offer retailers a way to address profitability issues that come with traditional online grocery delivery services. GlobalData research shows that in the next two years, online sales will represent 9.8 percent of the UK grocery market and it is only a matter of time before the trend will be seen on local shores. Retailers need to look at the fact that although frequency of purchase is increasing, the average transaction value is declining, therefore the ROI on online orders is on a downward slope. The future of online grocery is dark, but this could be a good thing.

Countdown have announced that it will open its first dark store in April 2020 to service the growing demand for online shopping. Online home delivery orders from 10 of Countdown’s Auckland stores will move to the new eStore (otherwise known as a 'dark store'), which will have 27,000 products on the shelves and a team of 165 personal shoppers dedicated to serving thousands of online delivery customers.  Online orders for Pick Up will remain at customers’ local supermarkets for collection in-store.

The new dedicated online eStore in Penrose, Auckland, will also introduce partially automated micro fulfillment capabilities in partnership with Takeoff Technologies.  This moves products closer to Countdown’s team of personal shoppers, saving team members from walking up and down the aisles to locate products.

Sally Copland, Countdown’s general manager digital, said customer expectations are changing at pace, with more and more people turning to Countdown online shopping every week.

“At Countdown we’ve seen massive demand for our online shopping services over the last few years - in the last quarter alone we’ve had 38 per cent growth.  The new eStore will enable us to improve our customer experience for online shoppers as well as free-up space in-store and improve the experience for our team," said Copland.

“It will also allow us to really accelerate the speed at which we can make online orders available for our customers, with more same-day ordering and delivery windows.  That’s what today’s online shoppers are telling us they need."

Takeoff Technologies is an eGrocery startup, based in Boston, USA, that builds compact, automated micro fulfillment centres. Using a store’s existing footprint to improve online operations, the automation minimises the space required by using innovative technology that functions in compact vertical spaces.

“We see the future of grocery shopping as a mix of services that are fundamentally focused on meeting our customers’ needs and expectations, and importantly, their lifestyle."

“Whether that’s a dedicated online eStore to service customer demand for ultra-convenient deliveries, free Pick Up nationwide*, and a network of stores that is localised to where our customers live and work, we don’t see the growth in online shopping slowing down.”

Countdown’s Penrose eStore is expected to employ 165 online personal shoppers and support team, across a mix of full-time and part-time roles.  The company isn’t anticipating any redundancies or job loss as a result of the change given the rapid growth in online and demand for Pick Up orders as well.

The company will evaluate how well the technology works for customers and team before making decisions on further roll-out.