Why is it becoming difficult to succeed at dark store business?

Dark stores are supposed to play a big part in the future of retail. But what is happening is quite the contrary. Like startups in other business formats, dark stores are also toeing the same line.

Counts of them are appearing and disappearing. And yet the lesson is still the same – compromise with business basics.

Failure to build a niche, lack of strong operations, and flawed financial assessments run to the roots of the problem. The idea of a dark store is lucratively tempting but not addressing the fundamentals of business can be punishing.

The three issues mentioned above deserve a report.

Achieving operational efficiency is not easy in dark stores. Operation management is so critical here that it would not be wrong to treat it as a core business function.

There is a wide range of activities that goes on behind the screen in a dark store .

These include purchase/procurement decisions, inventory management, logistical coordination, order processing, staffing decisions and preparation of rosters and routines, delivery operations, handling of the business-IT system, digital marketing,. These are all interconnected processes.

For instance, a sale conversion originating from a social media platform has to go to the order processing unit through the IT system also roping in the delivery operations. Furthermore, every order leads to a fall in inventory levels.

Therefore, every time an order is processed, the resultant changes must be reflected in the inventory records. Without proper business architecture, customized IT systems, and robust SOP-based operational roadmaps, such high levels of enterprise-wide coordination is nearly unthinkable.

These attributes are not easy to attain in the first place. It requires some amount of expertise in each of the fields and there is always a bill attached to it.

An even bigger obstacle is that of foreseeability. If a problem is not identified as probable, one may not even try to find a solution for it.

Dark stores also have to face cross-channel competition. Almost every big brand nowadays has the omnichannel wing.

Deep pockets, rich experience, best teams, and visionary leadership help them materialize their business ambitions in a very less time. For startups, even with their funding needs covered, getting it right from the word go could be a big challenge in the event of lack of sufficient experience and expertise.

Then there are the local businesses that already have the locational advantage. Albeit, the market they hold individually might be small, collectively they enjoy a humongous majority of the market share because of their count and spread.

Dark stores cannot afford to confine themselves into smaller markets. They need volume for commercial viability and expansion.

And unlike brick and mortar, dark stores are also limited to regions with good internet penetration. With these external constants in place, what dark stores need to focus on is creating a niche and strong value-based brand positioning.

UVP is the thunder of a dark store otherwise they are all the same. The fundamental requirements here are asking the right questions and finding the most relevant answers and insights through market research and formulating a strong UVP-based business model.

Leaving a strong impression with investors about a business idea or project has never been easy for any businessman or entrepreneur. While the focus remains on the pitch deck and speech delivery, investors are eagerly waiting to see how their money is being planned to be spent and recovered.

In short, investors want to see the strength and reliability of the business plan. A good business plan highlights the financial or commercial viability of the business project covering all the important aspects like estimated capital/initial investments, operational expenditures, sales projections, margins, purchase planning, inventory calculations, estimated profit and loss statements, ROI, break-even.

A good business plan does not seek to cover up for flaws in the business idea or the business model. If the product/service idea is strong enough and a sound business model has been formulated around it followed by relevant business strategies and operational planning, the business plan is a reality check based on financial or commercial projections.

If the business plan is not working, efforts should be made to see what could be changed in the earlier stages of conceptualization and planning. If the flaws in financial projections are spotted and answers are not satisfactory, it will be a gone deal.

Dark stores are expected to remain in a ‘disappeared state’ and not disappear. The bridge between the two states is doing business like a professional.

This report was intended to showcase the importance of staying true to business fundamentals through three key issues that are wrecking the future of dark stores. It is a concept worth not to be spoiled with poor execution skills and smear it with more failures than triumphs.

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YourRetailCoach
Category: eCommerce Solutions and Developers Profile: Your Retail Coach (YRC) is a retail consulting and outsourcing company in India offering a wide range of services in retail offline, retail eCommerce, and retail omnichannel catering to a multitude of industries. Your Retail Coach (YRC) helps retailers and retail enterprises set up their eCommerce business right from planning (eCommerce business consulting) to implementation. Our experience and expertise in both offline and online retail channels will help businesses overcome challenges in adop ...