Retailers look to DCs and dark stores to serve consumers during Covid-19 crisis

The global coronavirus crisis is forcing retailers to accelerate their transition to becoming purely omnichannel, instead of operating primarily as an online or as a brick-and-mortar store, industry executives say.

Even before the Covid-19 pandemic hit, the line between online and offline was becoming increasingly blurred, according to Bing Fu, the head of strategy for Chinese e-commerce marketplace operator JD Logistics.

That trend has sped up tremendously during the health crisis, as customers are hustling to buy products in any way available. Buyers will immediately turn to online platforms if offline markets cannot meet their demand, Fu said in a blog post. “While Covid-19 is not welcomed, it promotes digitization of consumption, which concurrently drives supply chain upgrade,” Fu said. “Only by shortening and digitizing the fulfillment process can we increase efficiency and access customers faster with increased precision.”

In recent weeks, some retailers have even turned to their own storefronts as ways to position inventory closer to desperate shoppers, whether those consumers are buying online, in person, or through curbside pickup, also known as buy-online-pickup-in-store (BOPIS).

Companies like grocery retailer Kroger, the electronics store Best Buy, and the housewares retailers Bed, Bath & Beyond and The Container Store have voluntarily slashed the number of shoppers allowed in each store, or even closed many sites to physical shopping entirely. As a result, those facilities now operate as “dark stores” that are full of inventory and employees, but serve customers only through curbside pickup. Likewise, logistics giant UPS Inc. recently expanded its “access point locations” to add 800 Michaels craft stores to the array of places where consumers can access “contactless curbside pickup of packages and return drop-offs,” all without entering the building.

Another example of how coronavirus market stresses are pushing retailers to combine their online and in-store inventory comes from the Glen Mills, Pennsylvania-based transportation and logistics service provider Pilot Freight Services.

As a result of store closures triggered by market shutdowns and the economic recession, retailers have a growing need to find warehouse space for unsold products, as well as to ship and introduce new seasonal goods, Pilot’s president and chief commercial officer, John Hill, said in a release. The company says its multi-client warehouse stations are designed to handle that rising demand, since they are strategically located near major population centers, allowing them to position goods closer to customers. 

According to Pilot, that approach pays off for both online and showroom sales. The firm says its multi-client warehouses enable clients to move their inventory efficiently through the company’s ground transportation network, placing it closer to the point of sale—whether that sale occurs in a retail storefront or through a home delivery process that is shortened by positioning e-commerce freight in advantageous locations.

Likewise, the rising prevalence of curbside pick-up is pushing both retailers and e-commerce companies to shift inventory to new locations, especially as states begin to loosen social distancing restrictions over the coming weeks. “We’re adapting Pilot’s existing services to meet our clients’ unique needs during this uncertain time. Our goal is to provide transparency and help generate cash flow faster by storing and staging our clients’ products closer to retailers and consumers,” Hill said in a release.

In the longer term, companies can cope with the rise of true omnichannel operations by following five steps, JD Logistics’ Fu said: take an integrated inventory approach to manage all sales channels and reduce inventory costs; integrate supply chain planning and optimization functions; leverage consumption data to design a more efficient supply chain that helps products reach customers faster; drive supply chain optimization with big data and smart algorithms; and use a transparent parcel tracking system to satisfy customers’ demands for fast, precise delivery.

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— Bed Bath & Beyond (@BedBathBeyond) March 20, 2020