Where are all the ‘Dark Stores’?

For those unaware of the term ‘Dark Store’ then its best described as a food store variant on the Amazon Warehouse concept.  It is a warehouse which processes the online orders for groceries and services areas where supermarkets have no ‘retail’ presence in the sense of a supermarket shop as we all know them.

Asda probably pioneered the ‘Dark Store’ concept in the UK but the others are following.  The attractions of dark stores for the retailers are considerable – cheaper warehouses rather than expensive retail space; 24 x 7 operations; ability to serve larger catchments; cheap taxes (they pay less in rates on an equivalent area basis) etc.

Dark Stores are also favoured by retailers over home deliveries from retail outlets.  Dark Stores will often have a collection facility for customers, as supermarkets have realised that home deliveries are more costly and difficult to organise.  It’s far easier (and cheaper!) to get the customer to come to you to collect a ready picked order, than to employ staff, and purchase vehicles, to deliver to the customer’s home.  This does require “trust” in the retailer as the selection of produce, particularly fresh goods, is taken out of the customer’s hands.  Nevertheless, confidence and trust in produce selection is growing, and previous concerns from consumers over the lack of selection of ‘actual’ goods appear to be diminishing as consumers appreciate the convenience and savings in time with not having to walk around supermarkets once or twice a week!

I think all of us in the property industry expected a lot more ‘dark store’ acquisitions by the grocers in the last 18 months.  It may be that the grocery trade being in the doldrums for a while now may have held things back – look at the difficulties Morrisons have been having.

Awareness that more ‘dark stores’ may be a feature of the next few years is clear when you look at some of the quotes from senior property industry figures.

Dan Batteron, Head of UK Development at Legal & General recently stated that:-

“Commercial property investors need to be aware of the trend for ‘dark stores’ as internet shopping replaces the high street.”

He also said:-

“The nature of commercial property was changing.  It was a warning to advisers with

clients in commercial property funds or who hold property in their Sipp.”

“There’s a new type of shop that’s called a dark store.  There are only about a dozen of them and they’re increasing’, he said. ‘It’s basically a supermarket that you can’t go to.  It is exactly like a supermarket, stacked like a supermarket, they even have the signs up like a supermarket, but no tills, no car parking, because it is for internet shopping.”

He said this new area is something property funds need to watch closely.

“This is an example of the way the internet is creating a demand for a new type of property.  And we just have to keep ahead of that and make sure we have the ability to provide them.”

The context of size in dark store terms was set out well in a piece I saw by the CEO of the Independent Retailers Association who made the following point:-

“So the excitingly-named ‘Dark Store’ can be big, as big as is needed by its catchment area, which can be very very big.  Ocado have been proving this for a while.  Dark stores can easily replace multiple superstores.  A replacement rate above one-to-ten looks easily achievable.  There are no more than about 5,000 superstore-class outlets in the UK, so 500 dark stores should replace them nicely and Tesco, Sainsbury’s et al are in the process of building their replacements.  It’s a commonplace that a national retailer can now cover the country with 200 stores or less, so that all sounds quite do-able.”

To try and give my view on “where are all the ‘Dark Stores’,” I think I’d say: – ‘watch out, they’re coming’.