Dark stores

COVID-19 drives boom in e-commerce and dark stores in Latin America.

A ‘dark store’ is a retail company that sells all of its products online. The strategy of these businesses consists in prescinding of physical shops while exclusively relying on logistic operation centres. 

The COVID-19 pandemic has resulted in a boom of e-commerce sales across Latin America. In Mexico, e-commerce profits are expected to reach USD 34 billion in profit in 2023 while Chile, Colombia and Peru have seen significant increases in e-commerce sales profits.

Mexico’s largest e-commerce platforms, Walmart, Amazon and MercadoLibre all posted significant growth in 2020 according to a local retail analyst, “There was a huge shift online during the pandemic and as a result the larger retail platforms saw their volume and profits grow rapidly. In the case of Walmart, e-commerce profits tripled!”

“There was a huge shift online during the pandemic and as a result the larger retail platforms saw their volume and profits grow rapidly.”

Retail analyst, Mexico

Large retail companies are implementing hybrid stores and are devoting more space to logistics and less space to showcase their products. Those of you in the UK will be familiar with the retailer Argos, well, take the catalogs away and put them online and you’ve got a hybrid store. The logic behind this strategy is a change in consumer behaviour which has grown accustomed to choosing their products online.

Taking this shift to logistics to the extreme, sector experts affirm that dark stores will speed up e-commerce, as products can be delivered faster to clients who can also choose to collect their purchase instantly and at their convenience. 

At global level, the penetration of dark stores in Latin America is still low compared to US, the EU and Asia but Mexico, Brazil, Colombia, Chile, Uruguay and Panama are catching up. In this context, Walmart recently opened two dark stores in Chile while the Uruguayan delivery platform Pedidos Ya inaugurated a number of dark stores in Uruguay, Argentina and Chile.

An executive at a larger online retailer in Latin America told us, “E-commerce and dark stores are disrupting the grocery delivery market across Latin America, several retailers are starting to open dark stores and many more plan to. Penetration is less than 10% today but it is growing rapidly.”

“E-commerce and dark stores are disrupting the grocery delivery market across Latin America […]. Penetration is less than 10% today but it is growing rapidly.”

Executive, large online retailer, Latin America

In addition to dark stores, microfulfillment centres are dense, scalable and flexible storage facilities designed to cater to a specific neighbourhood. Microfulfillment centres can generally support USD 10 million in sales and increase delivery efficiency from 50% to 100%. However, their use is limited to small consumer goods such as beauty, sporting goods and electronics.

Latin America has traditionally been a laggard in adopting e-commerce but the pandemic forced many to try it for the first time and as a result confidence in the model is building all the time.

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