Dark stores: industrial warehousing and the growth of rapid delivery retailers.

A new breed of rapid delivery services are springing up in predominantly urban areas across the UK. App led businesses, such as Getir, which promise ‘groceries in minutes’, are taking advantage of increased customer demand for ultra-speedy delivery.

While the pandemic and associated lockdowns may have super-charged demand from consumers, this was a trend which was already starting to appear even pre-coronavirus.

A key part of being able to successfully keep to the ambitious delivery times promised is having access to the right warehouse or ‘dark store’ space. In the same way that ‘dark kitchens’ sprung up to support the increased demand for food delivery services without the need for more physical retail space, dark stores are warehouse-like distribution centres helping to support the increased demand for grocery deliveries.

The UK warehouse market has enjoyed a sustained period of growth in recent times, something which the ongoing pandemic has only added to. Space in the most desirable locations is at a premium and there are starting to be concerns in the market as to whether supply can keep up with continued demands.

According to the Office of National Statistics (ONS), the online share of grocery shopping in the UK was 5.4% in 2020 and 14.7% by February 2021. The growth came during the pandemic when 67% of consumers used online order deliveries or click-and-collect.

For those who already own warehouses, some may decide now is a good time to sell, while others may look to increase rents, especially in the most desirable locations.  For those businesses looking to lease warehouse space, competition for prime locations is likely to be fiercer than ever.

However, it is worth keeping front of mind that it is not necessarily the large, industrial, ‘out of town’ warehousing that is going to be in most demand for these new breed of delivery services, as it is proximity to customers that is key.

Dark stores can be used as pick-up points, distribution centres or for storage facilities to afford a wider reach to existing and new customers.

New trends in warehousing

Against this backdrop of increased demand for warehouse space in the right location to allow businesses to fulfil their incredibly tight delivery times, a variety of innovative new trends in warehousing have emerged.

Everything from railway arches and garages to disused office buildings are being harnessed as ‘micro-fulfilment’ centres, bringing online distribution centres into smaller, urban spaces. Ocado’s Zoom service, for example, runs out of a relatively modest 10,000 sq ft building in South West London.

The Arch Company, which rents out railway arches, has reported a huge increase in demand for its spaces, specifically from the likes of rapid grocery delivery companies. Its arches lend themselves perfectly as warehousing spaces as they all tend to be in urban areas and hence close enough to consumers to enable organisations to keep to their delivery time targets.

Technology

In addition to branding and market reach is the platform used. Most importantly, improving customer base and delivery times is key and improving last-mile challenges with top-notch delivery management software with great analytics is imperative.

Ultimately, convenience; speed; product quality and customer experience are key and focussing on these will be of benefit in the long run.