The latest sign of this: Whole Foods, owned by Amazon (AMZN), opened a new store last week in Brooklyn, New York, in a former warehouse space. It has no customers and is a so-called dark store, which is more warehouse than store. It allows Whole Foods workers inside to stock and pick items off shelves, and then Amazon drivers will deliver them to customers in the Brooklyn area.
Dark stores were a burgeoning trend before the pandemic. Walmart (WMT), Stop & Shop, Hy-Vee and others were all testing out similar concepts to deliver groceries.
Retail analysts say grocers were starting to experiment with dark stores for two main reasons.
Dark stores are smaller than large, centralized warehouses and can be located closer to where customers live. This is important because it enables companies to deliver perishable food to customers more quickly than delivering from warehouses on the outskirts of towns. It also helps grocers cut down on shipping costs.
Store and delivery app workers browsing aisles and picking customers' online orders in traditional stores was also leading to complaints from shoppers about clogged aisles and jammed stores. Moving the picking process out of regular locations helps chains solve this problem.
A surge in online grocery shopping amid the pandemic has prompted more grocers to turn to this model.
Online grocery sales tripled in Amazon's latest quarter from the same period last year.
"Grocery delivery continues to be one of the fastest-growing businesses at Amazon," the company said in a blog post last week.
Whole Foods previously closed down six stores during the pandemic and transitioned them into online-only stores, focused solely on deliveries. Of those six, four have gone back to normal stores, Whole Foods said. The location in Brooklyn is Whole Foods' first permanent online-only store.
Kroger (KR) and Giant Eagle have also switched stores to pickup and delivery-only locations during the pandemic.
The pandemic has "brought to light the value of the dark store," said Diana Sheehan, vice president at marketing research firm Incontext Solutions. "I expect to see more of this around the country."
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