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Coles just opened its new “dark store” (due to the use of dimmer lights) in Melbourne. This store is meant to be its online-only dark store and it has a plan to expand into other areas with dense population.

Coles Dark Stores
Coles managing director John Durkan Photo: Louise Kennerley

During Westfarmers’ annual strategy briefing last June, John Durkan the Coles’ boss stated that his dark stores will be closed to public and only open for dedicated staff who will pick and deliver products to customers who purchase online. The opening itself took place after Woolworths opened that kind of store in Sydney back in 2014.

Dr. En Li, an online shopping expert from Central Queensland University warned that the presence of these dark stores could alienate about 50% of shoppers. Because if you just pay attention to supermarket shoppers you will see that half of them like to touch their products while the other half don’t.

The tendency to move towards online stores by Coles is an effort to capitalize on the growing demand of online grocery shopping. This new dark store is located in the Melbourne suburb of Richmond, which currently serves a 5km radius.

According to Durkan, even though this strategy is going to be profitable, but it won’t be ragingly profitable. He also added that the only way he could see the store works is by serving high density areas only. In 2013, there was an analysis report on British dark stores published by AT Kearny which found that dark stores actually could be three times more effective to bring in profit compared with conventional supermarkets. So looks like there’s a bright future awaits after all for this kind of business.

Dark stores are designed for optimum efficiency in serving online customers. Unlike traditional supermarkets that also serve online customers, where the staff should negotiate trolleys around customers, managing queues and promotional setups in order to collect products for online orders.

Coles made the announcement just a few weeks after there was a news that Amazon was planning to launch AmazonFresh, its online grocery service in Australia. With Coles and Amazon, two giant retail companies are racing to penetrate the online grocery market in Australia, looks like online grocery shopping is going to be the new lifestyle of many Australians in the near future.

That said, the online customers behavior expert, Dr. En Li, still thinks that the trend will not eliminate physical stores, even though he also believes that it’s a highly profitable move for supermarkets.

Furthermore he added that not all product categories are online friendly, like those products that you need to feel, touch or smell in order to know their quality. Also remember that half of the supermarket shoppers like to touch their products before buying while the rest don’t. So that means there is still something that only conventional supermarkets can offer.

The dark store concept will work especially in high density areas with a crowded traffic condition. People in these areas really value the simplicity of online shopping. They always want to get a product easier and that’s why the dark store can be really acceptable in these areas.

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