Dark Store Market

Market Overview

The global dark store market size was valued at USD 15.1 billion in 2023 and is projected to reach  USD 275.5 billion by 2032, registering a CAGR of 38.0% during the forecast period (2024-2032). The changing lifestyle, combined with the expansion of online buying activities, has begun to fuel the demand for dark stores' market growth.

Dark stores are retail distribution operations that are not open to the public but are meant to process Internet orders rapidly. They resemble traditional supermarkets or retail stores but are designed for picking and packing orders rather than client browsing. The concept arose as merchants attempted to address the increased demand for speedy and efficient online order fulfillment.

The global dark store market share is expected to grow significantly during the projected period, with a notable increase in overall revenue growth. This development trajectory is supported by extensive market research analysis that identifies changing consumer preferences and behaviors, particularly the increasing need for faster e-commerce services. Dark stores, which serve as dedicated fulfillment hubs for online sales, are becoming more popular as the demand for efficient, quick, and frictionless order fulfillment grows. This spike is also due to the post-pandemic context, in which consumers continue to seek convenient shopping experiences while companies strive for operational agility. As the market landscape shifts, prominent firms are expected to invest heavily in dark store infrastructure and technology, paving the way for a profitable market opportunity in the following years.

Key Highlights

• Groceries generate the highest revenue share by category.
• Adults account for the largest share of the market by age group.
• Curbside Pickup influenced the market through its distribution channel.

Market Dynamics

Global Dark Store Market Drivers

Rise in E-Commerce Sector

The rapid proliferation of e-commerce is a significant driver of the dark store sector. Statista estimates that global e-commerce revenues will reach USD 5.8 trillion by 2023. This is predicted to increase by 39% in the following years to more than USD 8 trillion by 2027. Shopify predicts worldwide e-commerce sales will reach USD 6.33 trillion in 2024, representing an 8.8% growth over 2023. This constant growth reflects the increasing consumer preference for online purchasing due to its convenience, variety, and competitive pricing.

According to a Wedbush Securities survey, 42% of US consumers intend to spend more online in 2024 than in 2023. According to Adobe Analytics, US customers spent USD 331.6 billion purchasing online in the first four months of 2024, a 7% increase over the same period in 2023. Adobe anticipates online spending to exceed USD 500 billion in the first half of 2024, representing a 6.8% growth year on year. In 2023, e-commerce sales in emerging economies, including the Philippines and Mexico, increased by 24.1% and 25.1%, respectively, reflecting this behavioral shift.

Furthermore, global smartphone shipments will rise by 3% in 2024 to 1.2 billion devices. This expansion is projected to be fueled by rising markets such as India and the Middle East, with affordable phones (USD 150-USD 249) and premium phones (USD 600-USD 799) leading the way. Counterpoint predicts that the smartphone market in India will expand in the single digits by 2024, driven by 5G adoption, post-COVID upgrades, and strong premiumization. This trend underscores the importance of effective logistics and fulfillment solutions, which dark retailers may offer. 

Global Dark Store Market Restraints

Competition from Traditional Retail and Other Fulfillment Models

Dark stores meant to fulfill online sales efficiently often have more significant fulfillment costs than traditional retail models. These costs are primarily due to manual picking and last-mile delivery fees. Manual picking labor costs approximately USD 8 for each USD 100 food basket, and last-mile delivery adds USD 8, which is significant given the generally narrow margins in supermarket retail. This can make dark store operations less viable, especially when competing against standard retailers with reduced operational costs.

Despite the convenience of Internet purchasing, many customers prefer the in-person shopping experience for some products. Customers frequently visit physical establishments to view fresh vegetables and perishable goods. Grocery stores that provide online ordering and in-store pickup preserve their market share. 

Furthermore, quick-commerce players such as Zepto and Blinkit in India use underground storefronts to offer lightning-fast deliveries, often in minutes. Although this strategy is gaining popularity, it also increases competition. These companies have developed sophisticated methods to pack quickly and transport items, but their high operational expenses and the necessity for a dense network of dark storefronts make them unsustainable. For example, Zepto, which operates approximately 200-250 dark stores in major Indian cities, can deliver orders in as short as 6.35 minutes. However, there are significant expenditures and logistical challenges. 

Global Dark Store Market Opportunity

Urbanization and Demographic Trends

The growing urban population creates a high demand for fast delivery services. Dark retailers may benefit from this trend by locating themselves in heavily populated regions and providing quick and convenient delivery alternatives. According to the United Nations, 68% of the world's population is predicted to reside in cities by 2050, up from 55%. This is due to a mix of population increase and urbanization, which is the steady movement of people from rural to urban areas. The United Nations predicts that 2.5 billion people will move to cities by 2050, with Asia and Africa accounting for 90% of the increase. By 2050, India's urban population is predicted to be between 850 and 900 million. 

Similarly, urban areas with high population density are ideal for dark stores. Dark businesses can efficiently fulfill more orders due to their proximity to many potential clients. For example, in places such as New York, London, and Berlin, dark retailers can use their position to assure fast delivery times, frequently within hours, giving them a considerable competitive edge.

In Southeast Asia, urbanization has also fostered the growth of dark establishments. Cities such as Singapore and Jakarta have experienced significant urbanization, with e-commerce emerging as a dominant retail driver. The efficiency of urban dark businesses is critical for achieving the high expectations of metropolitan consumers. For example, e-commerce in China has notably profited from the strategic positioning of dark stores, which contribute to lowering urban carbon emissions by streamlining delivery routes and avoiding the need for massive storage facilities.

Regional Analysis

The global dark store market analysis is conducted in North America, Europe, Asia-Pacific, the Middle East and Africa, and Latin America.

North America Dominates the Global Market

North America is the most significant global dark store market shareholder and is estimated to grow at a CAGR of 38.1% over the forecast period. As a result of the pandemic, major cities in the United States have shifted their client focus from offline to online ordering. The companies deliver in 10 to 30 minutes for everything from confectionery and alcoholic beverages to coffee filters and batteries. The quickness that distinguishes them from other food delivery applications, such as Fresh Direct and Instacart, is done by opening dark storefronts in their towns. According to CBRE's Head of Retail Research for the Americas, e-commerce's proportion of overall retail in the United States might reach 29.3% by 2030. However, other experts believe e-commerce is growing slowly, which may impact industry growth.

Furthermore, the COVID-19 epidemic has long-lasting influenced the retail sector. Small businesses are rapidly adopting e-commerce platforms and exploiting them in creative ways. Canadians' decisions to continue utilizing e-commerce or return to traditional purchasing ways can potentially transform the structure of Canada's retail trade business. The retail landscape will indeed have an impact. Furthermore, Canadian consumers rely heavily on the Internet to place orders. In recent years, internet consumer sales have outpaced traditional retail sales. Most Canadian retailers have implemented internet-based systems and wireless technology to strengthen business-to-business and business-to-consumer relationships. Manufacturing enterprises and government organizations are increasing their Internet use to make purchases, particularly for minor recurring transactions. Although nearly 94% of Canadians have access to reliable internet connectivity, most users reside in the country's urban areas. 

Asia-Pacific is anticipated to exhibit a CAGR of 38.3% over the forecast period. India and China are growing their inhabitants' per capita incomes. As a result, technology adoption exceeds that of its counterparts. India's internet economy has expanded, attracting concepts such as dark marketplaces. With thousands of firms in operation, dark store startups are thriving in the country's cities. With a more confined economy, China has established its infrastructure for regulating dark businesses, making enlisting and delivering merchandise easier.

Europe has the moderately most significant market share during the projection period. However, Barcelona prohibits grocery delivery firms' 'dark storefronts.' Barcelona's city government has adopted a comprehensive ban on so-called "dark stores" - distribution hubs used by grocery home delivery companies - joining European cities like Amsterdam in imposing limits in 2022.

Segmental Analysis

The global dark store market is segmented based on category, age group, and distribution channel.

The market is further segmented by category into Meat, Dairy, and Groceries.

The grocery segment led the market, accounting for over 40%. The grocery segment of the dark store market includes a diverse range of ordinary home food items, such as pantry staples, fresh produce, beverages, and packaged goods. Dark retailers focusing on foodstuffs often offer a wide range of products to meet the different needs of online customers. They may use modern inventory management systems and automated picking technologies to handle high orders while ensuring accurate fulfillment efficiently. A diverse range of foods can be delivered through a single platform. The groceries can be of many types, such as non-vegetarian, vegetarian, or vegan. Dairy supplies are limited due to the high demand for vegan products.

The meat area of the worldwide dark store market specializes in fulfilling online orders for a variety of meat items such as beef, poultry, pig, and shellfish. Dark businesses that specialize in meat frequently focus on maintaining rigorous quality standards to preserve the freshness and safety of their products. They may use specialized refrigeration and packaging technologies to protect the meat's quality throughout storage and transportation. Furthermore, these dark establishments may provide a vast range of cuts and types to meet the needs of a diversified customer base. Given the perishability of meat products, efficient inventory management and quick order fulfillment are critical components of this market.

Based on age group, the market is fragmented into the Elderly, Children, and Adults.

Adults dominated the market, accounting for over 35% of the total in 2023. The adult area of the dark store market includes a diverse selection of products designed to meet the needs and tastes of working professionals, homemakers, and those who live busy lifestyles. Dark stores for adults may sell various things, including groceries, household essentials, personal care items, electronics, fashion, and workout equipment. These retailers may distinguish themselves by offering a streamlined online shopping experience, competitive pricing, and various high-quality products from reputable manufacturers. According to the statistics obtained by Kesari Mahratta Trust, the majority of respondents, around 42%, were between the ages of 31 and 40.

Dark stores dedicated to the elderly section of the market offer items and services suited to the needs and interests of older clients. This population frequently prioritizes efficiency, accessibility, and dependability in their shopping experience. Dark stores geared toward the elderly may have a curated variety of simple products, have clear labeling, and address specific dietary needs or health issues typical among older adults. Furthermore, these companies may offer specialist customer service and assistance to help senior customers navigate the online shopping platform and easily place purchases. Offering various delivery options and refund policies can help improve the purchasing experience for this population.

The market can be further bifurcated by distribution channels into In-Store Pickup, Curbside Pickup, and Home Delivery.

The curbside collection segment led the market, accounting for almost 45%. Curbside pickup is a distribution channel where clients order things online and pick them up from a designated location outside the store, usually along the curb. Customers who prefer a frictionless and convenient way to acquire their products without entering the store premises may find dark stores that provide curbside pickup appealing. These dark establishments may designate specific parking areas or pickup zones where customers can wait for store staff to deliver their goods to their vehicles. Curbside pickup became common during the COVID-19 epidemic because of safety concerns and social distancing tactics. It gives customers a quick and easy way to get their orders while reducing personal interaction.

In-store pickup is a distribution channel where customers order things online and pick them up from a designated spot within an actual store. Dark retailers that provide in-store pickup serve customers who enjoy the ease of online shopping but also want to be able to pick up their items in person. These dark establishments often set aside a separate store area for order pickup, with signage and staff to help customers. Customers can save money on shipping by choosing in-store pickup, and their goods may arrive faster than if delivered at home. It also creates opportunities for additional sales because customers can browse other things in the store while picking up their orders.

Recent Developments

• April - Flipkart, India's e-commerce platform, opened a new grocery fulfilment centre in Hubli, Karnataka. This move strengthens the company's commitment to providing customers with next-day grocery deliveries.
• April 2024 - Swiggy Mall connection enables Swiggy Instamart to deliver from 35+ categories in minutes.
• May - Target Corporation (NYSE: TGT) said it would reduce everyday regular pricing on around 5,000 frequently bought items across its selection.1 The store has dropped prices on over 1,500 goods, with thousands more scheduled during the summer.