My City, My Warehouse

Dark stores, ghost kitchens, and/or micro fulfillment centers are the latest assault on urban topography. These warehouses live right in your neighborhood, in order to get goods and meals delivered faster than ever.

When I first moved to Manhattan years ago, one of its big draws was that you could get a carton of milk any hour of the day or night. As a young working mother, this was my idea of Nirvana.

How antiquated. I actually had to leave the apartment to buy that milk. Today, in major cities, not only is there no need to get off the couch, but you have so many options that you can choose between five, ten, and twenty minutes for a delivery.

That said, the landscape of the urban neighborhood is enormous. (The customers may be getting more enormous, too, thanks to the “couch potato 10”  they may gain as their sedentary selves seldom rise from that couch.) Already, armies of DoorDash and UberEats delivery people hang out curbside all over the city, ready to spring into action when you hanker for a bite to eat. And their electric bikes knock you down if you aren’t careful walking off the curb–or even on it.

But the ongoing food delivery wars pale in comparison next to the latest assault on urban topography. They’re called dark stores, ghost kitchens, and/or micro fulfillment centers.  These warehouses live right in your neighborhood, in order to get goods and meals delivered to you faster than ever.

I’ve written about them before.  They are restaurants with no seating, and grocery stores you can’t enter. They don’t even show up on a Google Map of the neighborhood — though they can occupy considerable amounts of real estate in unmarked storefronts and hidden offices or garages (often 10,000 – 30,000 sq. feet each).  And those that have already emerged in dense Manhattan, my city, are modest in size relative to the 340,000 square foot  delivery warehouses planned in Red Hook, Brooklyn and elsewhere that have local residents in a tizzy.

Getting a warehouse on the street where you live has huge implications for livability. A stroll down Broadway in my uptown Manhattan neighborhood features a newly opened GoPuff facility (replacing a paint store that moved to a smaller location). Across the street is a Gorillas (replacing an Urban Outfitters). Across town, there’s 1520.  And we’re just about to get our Getir.  Other Manhattan dark stores close by include Jokr and Byuk. Each of these is operated by a relatively-new startup devoted to ultra-fast delivery of food or other stuff Manhattanites may need in an instant.

All of these “stores” share similar features.  First, their doors are not open to visitors or to browsing.  If you press your nose against the frosted glass or hang out and wait for the door to be opened by a staff member, you’ll see orderly shelves and freezers, but no shoppers. Second, they promise to have groceries in your hot little hands in under 20 minutes at a remarkably low service fee– typically $2. And finally, like just about everything else, they were a product of the pandemic, when people went out less and ordered in more.

A GoPuff fulfillment location in Manhattan. Photo by Robin Raskin

In the earliest days of these startups, I thought they were catering to hungry stoners. Cookies, chips, ice cream, and soda pop seemed to be the main fare. But, as they learn about their neighborhoods they target better. My local GoPuff sells a Covid safety kit including masks, tests and wipes, plus special locally-sourced products. Deborah Weinswig, CEO and Founder of Coresight Research, told me that the GoPuff on 14th Street carries different inventory than the one uptown, for example.

GoPuff is one of the largest and fastest-growing of these low-cost, speed-delivery services. It was started by two Drexel college students who wanted late-night snacks but didn’t feel like going to a convenience store. Today, according to Progressive Grocer, GoPuff can deliver more than 4,000 SKUs in 20 minutes or less, and operates 500 micro-fulfillment centers (MFCs). The flat fee regardless of order size is $2.  The company is now valued by investors at a reported $40 billion, believe it or not, is opening 40 to 50 MFCs each month in the U.S., and could go public as early as this spring.

Sustainability, Efficiency and Real Estate

Regardless of my personal feelings about living in a newly-created warehouse zone, there are cogent arguments in favor of what’s called “micro fulfillment”. According to Chain Store Age, the average consumer made 2.3 trips to a grocery store each week before the pandemic. One of those occasions is typically a stock-up trip, with the others generally supplemental for last-minute needs or wants. A typical shopping trip takes about 41 minutes, which means we’ll spend 53 hours each year buying groceries. That’s not efficient in either time or energy.

We discussed many of these at CES during a panel I helped organize called The Changing Face of Retail. The establishment of micro fulfillment centers arguably saves energy.  If you forget the tomato paste, it’s there for you in 15 minutes — before the pasta water even boils, as Jokr’s website brags. Panelist Deborah Weinswig added to the efficiency narrative with an environmental spin, regarding food waste.  “If I can buy today what I eat tonight I can be more sustainable,” she said.

Another panelist was Michael Jordan, senior research analyst at Shopcore, an owner of large outdoor retail spaces. He said that the GoPuffs of the world are also interested in buying space in a shopping center. And also that traditional grocers are “repurposing their real estate, using part of the store for dark-store delivery.”

Dark stores are not happening in a vacuum. The very nature of physical retail space is in upheaval. Traditional grocers are allotting store space to dark stores and order fulfillment. Amazon is setting up physical stores.  Supermarkets are bringing in entertainment or guest chefs.  Grocers are beefing up made-to-order cooking, and some restaurants, like at the Eataly chain, for example, are finding themselves acting like grocers. “Retailers” says Weinswig, “are becoming platforms, selling a variety of goods and services.”

Michael Schatzberg, a restauranteur who’s also a food tech investor, was another panelist, and urged the audience to “think of food as a platform” and “reimagine the four walls.”  In the restaurant business, traditionally “70% was front of house and 30% back of the house,” he says. Now that’s flipped. You can create for both in-house and out-of-house delivery.  “Excess capacity in real estate forces us to ask what we could do,” says Schatzberg. “Ghost kitchens, cloud kitchens — they give you the opportunity to expand your footprint.” When you call in to a ghost kitchen, “the family can have what they want–Chinese food, pizza, hamburger — it’ll all be cooked in the same kitchen and delivered simultaneously.”

Jordan concurred: “We’re rethinking how we allot space.  We used to want to allocate all the space to merchandize, but now stores are different ideas, from showrooms to locker pickups to robot fulfillment.”

While the conversation left me feeling a Luddite, I totally understand why retailers have to rethink real estate.  And I sorta get the idea of immediate gratification. Not having to shop is a luxury.  But as cities become fulfillment warehouses, dark kitchens, and ghost stores, we’re going to get a lot of time on our pudgy hands to contemplate how we got here.

This slide was shown by Deborah Weinswig on a panel at CES called that looked at retail trends like “instant-needs”.

 

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