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Roger Sowerbutts, SVP of Product and Marketing, Go Instore considers the changing landscape of ecommerce and the role of the darkstore
Retail as we knew and loved it has altered dramatically and been replaced by a landscape shaped by changed consumer behaviours and a demand for different shopping options for in-store and on-line that very few retailers are equipped to deliver.
Since investing in their online offering, many forward-thinking retailers have realised that they do not need to rely so heavily on physical stores in prime retail locations. Efforts to map out the post-pandemic retail landscape have unearthed many different approaches, one of which being the emergence and re-thinking of the ‘darkstore’ or studio without customers physically present.
Darkstores are physical hubs dedicated purely to showcasing product and fulfilling eCommerce sales enquiries. Some retailers have transformed their traditional storefronts into darkstores to support online shopping and ship items out to customers quicker than they have been able to before. Others have moved out of town to low-cost locations to both reduce cost and attract staff.
The Rise of the darkstore
Retailers like HP, Whole Foods and Lush have dabbled in their own darkstore offering, with the latter using its flagship on Oxford Street as a pilot for its ‘Lush Local’ scheme in lockdown. Technology giant HP created its own virtual experience by building a darkstore in Barcelona and is keeping customers connected through live video calls with product experts. Calls are intelligently routed from the country and language of origin to the right language and product expert automatically in the Barcelona dark store to provide the optimum customer experience and maximise efficiency. The move has seen customers spend on average 47% more and increased customer satisfaction scores. HP has cited the darkstore as being vitally important to its online operations during the pandemic. A dramatic increase in on-line conversion rates is also being achieved from a typical 1-2% online through to 20% to 50% sales conversion rate using live video advisors.
In large countries with big populations spread over large distances, such as the US, the darkstore concept makes perfect sense, allowing retailers to convert shopping spaces to distribution hubs. These stores can then operate as regional fulfilment centres and thus speed up deliveries while reducing the strain on the main fulfilment hubs. The same concept is also working on a smaller scale in the UK where stores are transformed into micro-fulfilment centres to allow local communities to get their deliveries faster.
The pandemic has been a catalyst for more retailers to investigate the idea, but many retail premises ended up becoming darkstores out of necessity as their doors shut and customers forced to shop online by mandatory Covid measures. As with several accelerations in trends caused by the pandemic, such as remote working, companies have started to see the advantages.
Live Video at the heart of the darkstore
As opposed to warehouse-based operations, darkstores have conventional retail spaces at their disposal. This means that customers can connect with in-store experts, who have the products available to demonstrate, via live video. Customers click on a link and can either talk one-on-one with a sales representative, receiving personalised advice, recommendations, and product demonstrations as if they were in-store; or join a larger audience for a livestreamed demonstration of products and the chance to ask questions.
This interest is even more marked in the retail verticals where detailed product knowledge is an important part of customer engagement, like jewellery or consumer electronics. Customers can easily be connected to an in-store expert where they can then enjoy a dialogue enabled via HD video.
The darkstore can also serve more than one geographic territory at once, supporting different languages, product lines, and time zones. Perhaps even more intriguingly, the product does not even have to be physically present in the darkstore. The developments in Augmented Reality (AR) mean that in the future, virtual products can be blended seamlessly into the live video, negating the need for products to be in darkstores. This gives retailers and store staff more flexibility in the way they work, as product experts do not need to be in stores to provide demonstrations and advice to customers, meaning staff can still drive sales, just from their own homes.
One of the most intriguing aspects of the movement towards darkstores is the way that it enables retailers to develop a new form of customer engagement with the online audience. It humanises a traditionally inhuman experience and marries the convenience of online shopping with the engaging interaction of being in a store.
A Competitive Edge
The pandemic has changed the way that consumers interact with retail forever. It will never return to stores dominating the industry and online taking a step back. Online is here to stay and retailers need to respond. Footfall in retail locations around the world has plummeted and, while there is a rebound underway to an extent, it is not as strong as was once hoped. Equally, research shows that more consumers are not only happy with online shopping, but they are increasingly happy to buy bigger ticket items via online channels than they were before. Technology like live video is making this easier as research and the chance to ask questions can be done online, giving the customer confidence that their considered purchase can be made online.
Darkstores are more than just a way for retailers to simply ride out the aftershocks of the pandemic. Their increased efficiencies, lower costs, and useful location in the fulfilment chain make them a central part of the future retail fabric. Their ability to offer the best of both worlds and blend the physical and online retail spaces, together with the use of new technologies such as live video and AR, will give retailers that deploy them a valuable edge when it comes to customer engagement and satisfaction.
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