“From time to time, my wife surprises me with a shopping list a few minutes before I leave the office. It’s hassling to drop by the supermarket in the rush hour. I resort to grocery and supermarket dark store apps to get things delivered before or a little after I get home,” said Abdulla in a discussion with his friends on the different ways of grocery shopping. More and more Saudi and non-Saudi couples and individuals, both males and females, who are getting involved in the local labor market find that the luxury of time is not as available as before.
“For me, dark store apps are the best solution. I have been witnessing more branded stores that don’t cater to the public, but exclusively to online shoppers. The industry is booming while the competition is heating up,” Abdulla added.
Dark Store and Physical Store
When we order from Amazon, for instance, we get our goods packed, shipped and delivered from dark stores to our registered address. Dark stores or warehouses cater to people whose lifestyles do not allow time for physical shopping, so they order the daily groceries, electronics, furniture, and food online.
“My mom was cooking lunch, and suddenly she realized she had a missing ingredient. She couldn’t leave my little sisters alone, so she picked up her phone and ordered salt and bread. Everything was ready before we all got home,” said Maysa, a young digital marketer.
“The business model of dark stores or dark supermarkets appeared in Europe a little over a decade ago. It started with supermarkets dedicating ghost stores that catered exclusively to online shoppers. After the outbreak of Covid-19, shoppers relied heavily on dark stores apps to get their groceries and everything they needed to live under lockdown. Now, although life is 95% back to normal, this consumer behavior continues. There are millions of daily orders that are being handled by smart phone apps, from food to groceries, and from electronics to cars,” she added.
GEOGRAPHIC COVERAGE AND BRAND PROMISE
With more investments that are attracted by seeding and bridge rounds, new startups in the field of dark stores are raising funds to expand in major cities. Riyadh is the focal point amid the unprecedented expansion of Riyadh in preparation for Saudi official plans to make the capital city one of the top 10 world’s biggest economies by 2030 while raising the population to around 15 to 20 million from 7.5 million currently.
The dark store-based apps are flourishing under a bigger umbrella called “e-commerce,” which is a key driver of growth that reached around USD 16 billion according to data collected from a variety of Saudi sources. Saudi has international companies such as Amazon, iHerb as well as Saudi local dark store-based brands including Noon, Talabat and Nana. The latter recently raised USD 50 million in a bridge round, having reached a total of USD 80 million in funds according to the company’s announcement in LEAP, a conference that celebrates digital transformation achievements which was held last February in Riyadh.
“This kind of business is expanding with double or triple-digit growth in transactions, orders, revenues, and expenses as well. More money is invested in branding, and rebranding with brand promises of delivery within 15-30 minutes. If dark store apps want to continue to compete, they need to play on a couple of factors: speed and service fees. Tech-savvy online customers look for added values and peace of mind,” said Elias Wessam, 28, an observer of the dark store trend in Saudi, who believes that more and more applications of the dark store concept will be set up to cover the F&B sector through cloud kitchens.
Elias believes that a cloud or dark or even a ghost kitchen, which is a cooking area that caters exclusively to online orders without any physical presence or dining-in experience, is trending in the Kingdom, or “booming” as he prefers to call it. Foods and beverages are prepared and handed to delivery drivers, called “captains” in Saudi, to be at customer’s doorstep as fast as possible. “The concept of ghosting is setting the trend for a heated competition,” he added.
The bigger the cities, the more traffic jams they have. The dark stores help customers with the stress caused by longer rides, parking availability, etc. However, people still prefer the real shopping experience, especially when it comes to fresh vegetables and fruits. Some believe that shopping in malls is good as a physical activity. However, with the growing population of the Kingdom, growth of sales for both actual stores/supermarkets and for dark store platforms will continue. Some customers order online but can also be found in malls and shopping centers.
“Convenience is what customers look for. This includes SKU availability, hygiene, offers, and commitment to delivery time. This is the recipe of success for the dark store industry,” concluded Elias.