B&Q shines a light on the dark stores revolutionising retail

From the outside looking in, the B&Q store in New Malden was standing idle. Like much of the rest of British retail, it had been forced into Covid closure, its doors shut to customers by lockdowns. Behind the scenes, though, a transformation was beginning in response to the pandemic-driven rise of ecommerce.
As bricks-and-mortar shops were shuttered in 2020 and as the demand for online shopping soared, the DIY retailer transformed part of the outlet in southwest London into a mini-fulfilment centre, allowing it to make use of idle space and to process online orders more efficiently. Turn the clock forward to 2024 and it is a bustling hub of activity, processing about 250 online orders a day.
While customers continue to shop in the front of the store, the rear is now dedicated to picking and packing items for home delivery or click-and-collect, creating a hybrid model that integrates physical and online retail. Orders are shipped to customers’ homes through a mix of in-house delivery drivers and logistics partners such as DPD and GXO. For smaller items, the retailer is testing a partnership with Deliveroo, the takeaway meals courier.
• Delivery drivers ‘more popular than posties’
This adaptation has helped B&Q not only to manage the surge in online shopping and to process orders more efficiently, but also to avoid the fate of well-known high street names forced to close their shops. Since 2020 the chain has converted 53 of its 315 stores into these “digi hubs”, which now handle approximately 85 per cent of all its online orders. Only a small percentage are processed via traditional distribution centres. Online orders make up about 18 per cent of total sales across the group, up from 8 per cent in 2019-20.
“It’s been a significant change for B&Q in recent years in how we fulfil online orders,” Paddy Earnshaw, B&Q’s retail, property and technology director, said. “The majority of everything bought online, which includes click-and-collect and everything we do at our digi hubs, is effectively now fulfilled out of our store estate.”
B&Q is far from alone in this shift. Retailers throughout Britain have integrated mini fulfilment centres, sometimes referred to as “dark stores”, within their existing estates.
• Deliveroo teams up with B&Q to offers DIY products
Since 2020, Tesco has expanded its network of “urban fulfilment centres” to nine locations, including three new sites in east London, Norfolk and Coventry within the past year. They operate alongside its six customer fulfilment centres, standalone sites dedicated to handling online orders.
Mehool Mistry, Tesco’s fulfilment operations director, said the 1.2 million grocery orders it fulfilled each week were now “largely driven by store picking, but our fulfilment centres have also played a crucial role in being able to deliver to more customers, making shopping easy and convenient”.
The adaptation of stores is doing more than merely helping bricks-and-mortar retailers to avoid closure. It is making them more competitive in a market that increasingly values the convenience of online shopping. The model means that retailers are reducing their reliance on large, centralised warehouses that are costly to maintain and require constant technological upgrades.
Roy Horgan, senior vice-president of strategy at Vusion, a technology provider for retailers, is convinced that companies in the sector “no longer need to build new distribution centres and fulfilment centres that cost hundreds of millions. Why do you need them when you already have the built-in infrastructure and you’re just upgrading it? Pleasingly, this transition means that there is unlikely to be the ‘doomsday’ store closures that everyone predicted.”
Fulfilment centres in stores provide a speedier route to market than standalone dark stores because they are often in urban centres, closer to customers. Some retailers are even considering opening “micro” fulfilment centres in smaller sites, within city centre locations such as London, to improve last-mile efficiency.
Moreover, with their ability to fulfil both online and in-store orders from the same location, such stores are proving far from obsolete in the digital age, even posing a potential threat to online-only players. Ocado operates seven standalone warehouses around the UK, with heavy investment in cutting-edge technology to maintain its competitive edge. Its fulfilment centres are equipped with thousands of bots, which can pick a 50-item order in minutes, significantly reducing labour costs.
Yet despite the efficiency of Ocado’s model, some industry experts believe that the shift towards in-store fulfilment could reduce demand for specialist online operators. As bricks-and-mortar retailers invest in their own hybrid models, they are better positioned to compete with digital rivals by offering both in-store and online shopping at the same location.
Others beg to disagree. Hannah Gibson, chief executive of Ocado Retail, the group’s 50-50 joint venture with Marks & Spencer, argues that standalone centres continue to be more efficient. “In dark stores, you’re pushing out orders in a linear fashion, box-by-box. In [customer fulfilment centres], customer orders can be picked bit-by-bit. You don’t have to worry about the layout of the space. There is also an optimisation of delivery routes.”
She described the customer fulfilment centres model as “super-efficient. It allows us to do a lot of sales by going straight from the suppliers into the grid.” That was a reference to Ocado’s sophisticated grid system, which stores thousands of grocery products and automates the picking and packing process.
Some believe that in-store dark shops do not have the technology to compete at the same scale. As costs, volumes and the range you need to pick from grows, manual picking becomes more challenging, it is argued. While Ocado’s orders are packed using its robots, companies like B&Q pick and pack their orders manually. The items it sells, such as sheets of fibreboard, are too bulky to be picked up using robots.
Earnshaw said there was “enough efficiency in just increasing volume right now before we start looking at automation. I’d never say never to trials, though, and we’ve got much better at partnering [with other businesses].”According to Jamie McMillan, B&Q’s retail digital operations manager, the company is continuing to search for ways to optimise its manual pick-and-pack processes. “We’ve put dedicated picking teams into these stores and built a whole structure around it,” he said. “There is a digital hub manager, there’s a team leader, we’ve got admins, we’ve got pickers and we’ve got drivers. It’s helped us to build a new talent pool, a new development opportunity in our stores that we hadn’t had before.”