Dark stores and micro fulfilment centres: How retailers can survive this year’s ‘Golden Quarter’

Op-ed

As Coronavirus continues to influence many aspects of our daily lives, there’s one thing we can say for certain. Every industry has had to adapt to the unprecedented situation presented this year, or risk losing significant revenue and custom.

In retail, brands have seen consumers shift the majority of their purchasing habits online, with ecommerce spend skyrocketing. In fact, ONS retail data from July 2020 revealed that online sales were 50.4% higher than they were in February, before the pandemic hit the UK

Even before the pandemic, falling high street sales and increased online competition meant that some retailers were already struggling. COVID has amplified this situation tenfold. But the changes retailers have made to their operations to best respond to these challenging circumstances may also inadvertently be storing up problems for this year’s Christmas peak. Unless they flex again, they may find this year’s Golden Quarter a more challenging one than it needs to be.

Thanks to the rise in ecommerce activity, the physical capacity at many distribution centres is already stretched, with facilities operating at maximum capacity as a result of the pandemic, with little additional space to cater to the higher volumes of Black Friday and Christmas. This could be a very problematic stumbling block. And this year there is likely to be extra pressure on the Christmas period, as people seek to make up for a difficult year and indulge in festive fun (even if purse strings are tightened).

Any disappointments from retailers in this heightened context will be disastrous for their reputation and customer loyalty, so it’s important to realise the retail landscape won’t ‘return to normal’ in time for the Golden Quarter. They must therefore act quickly — in partnership with their logistics providers — to build additional capacity in their distribution network.

With local lockdowns continuing to be imposed and the immediate future uncertain, it’s vital that retailers unlock the full potential of their local high-street stores. Leveraging these as local or micro-distribution centres will alleviate the increased pressure on retail operations (and mounting rent costs) and help them achieve business continuity.

READ MORE: Supermarket ‘dark stores’ dealing with online-only orders are “the future model of grocery in the UK”

While switching on physical stores as local-level distribution centres is not always a straightforward proposition — especially for those who do not already have click and collect options in place — there are a number of clear-cut benefits to doing this and some unique issues this year that make this more appealing.

Firstly, it’s a simple fact that at a time when demand for online shopping is so high, the old model of shipping from a handful of strategically placed distribution centers isn’t agile enough to meet customer demands. While a retailer may have a number of strategically placed distribution centres across the country, these will likely not be as widely dispersed as their brick and mortar stores.

By enhancing local high-street stores as micro fulfilment centres, retailers can bring distribution closer to the consumer. This is an extremely cost-effective way of expanding their distribution capacity as it utilises existing facilities that are already close to where their customers live — creating more responsive fulfilment and increasing satisfaction and loyalty for shoppers.

With many high-street stores having been closed or receiving dramatically reduced footfall this summer, a significant amount of retail stock or excess product is currently at the wrong location — with finite capacity at main distribution centres to change this. By shipping items from in-store, retailers can prevent their inventory from stockpiling, thus limiting excess stock taking up storage space when it’s needed most.

It’s not just delivery-from-store that will help, however. Considering the wider breadth of fulfilment options on offer — such as longer delivery times for less crucial items and click and collect from both store and elsewhere — will help retailers manage demand and flow this peak period.

It’s been a difficult year for retailers. But with Christmas 2020 just around the corner, they will need to think wisely and strategically, and take action now to get operations set up for peak. Maintaining flexibility of logistics is essential for retailers to limit the disruption to their services — even if this means adopting new options and ways of working. The investment will be well worth it.

Nic Pentelow, Director of Retail at leading same day distribution business CitySprint

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