Indian Logistics Firms Betting Big On Dark Stores, But Without An Actual Roadmap

Last month, logistics player DTDC announced its first dark store in Bengaluru, citing a need to meet the growing demand for quicker deliveries. The dark store, they said, would provide two to four-hour deliveries and same-day deliveries. DTDC follows several other logistics companies, such as Ecom Express, Delhivery, and Shadowfax, that have also shifted their focus towards providing same-day and quick deliveries of e-commerce products.

In an era where e-commerce players constantly seek ways to gain a competitive edge, dark stores — mini-warehouses catering solely to fast-paced online orders — have emerged as a supposed game-changer.

“Quick commerce players have successfully created a market for fast deliveries. Since this model is here to stay and we enable all forms of commerce — be it quick commerce, e-commerce, or beyond — it’s all about how fast we can adopt, adapt and differentiate,” Vishwachetan Nadamani, COO at Ecom Express, told The Core.

Unlike quick commerce platforms such as Zepto, Blinkit, Swiggy Instamart, and others that primarily deliver groceries, logistics dark stores want to focus on a broader range of e-commerce categories, including fashion, makeup, and electronics.

However, even among the grocery delivery apps mentioned above, only Zomato-owned Blinkit has been able to break even in this business. Zepto and Swiggy Instamart, the other two leaders, are still burning cash on their quick commerce business.

Logistics companies are betting big on dark stores for faster deliveries. While even quick commerce, which focuses on daily essentials, has yet to show profitability for some companies, the dark stores of logistics companies are meant for categories like fashion and electronics, where demand for instant delivery is less clear. There are further hurdles beyond India's tier one cities. With so many challenges at hand, questions arise about whether this will grow into a profitable new way of logistics or another money-burning investment that companies will eventually abandon.

Trial And Error Or FOMO?

Nayaan Ratandharaya, founder and CEO at Shipyaari, believes that all companies opening dark stores were doing it because of FOMO, a Gen Z term that is the short for ‘fear of missing out’. “I don’t see long-term sustainability in this model,” Ratandharaya said.

Quick commerce platforms have significantly invested in infrastructure to establish their model. Meanwhile, Ecom Express, already present in 3,500+ locations, is leveraging its existing warehouses to deliver faster while still experimenting with its larger approach.

"If a particular centre has limited space, I will simply expand it rather than open a new one. It’s about understanding the model and assessing demand before making large-scale commitments," Nadamani said.

Quick commerce is still in flux, with no proven model yet. The sector has exploded by 280% in two years, with gross merchandise value, soaring from $0.5 billion in FY22 to $3.3 billion in FY24. But for logistics players, the game is all about two things: experience and cost.

Shadowfax has entered the quick delivery race with dark stores with both exclusive and multi-brand tie-ups, managing inventory and last-mile deliveries. An exclusive tie up with a brand means only providing last-mile delivery service, while maintenance, warehousing, and other operations are under the brand’s purview. Multibrand tie ups include running and operating the dark stores, which are shared by multiple brands, and also provide last-mile delivery.

By mid-2024, it had piloted 10 dark stores across Mumbai, Delhi and Bengaluru. And no one is making money yet.

While it managed to cut after-tax losses by 19% in FY23 (Rs 142.63 crore), revenue surged 42.6% to Rs 1,423 crore. Profitability is a challenge as operating costs are 20-30% higher than traditional models.

The company's net loss decreased by 92%, falling to Rs 11.8 crore in FY24 from Rs 142.6 crore in FY23. When adjusted for Employee Stock Ownership Plans (ESOPs), Shadowfax reported a profit after tax of Rs 2 crore in FY24, compared to a loss of Rs 123.8 crore in the preceding fiscal year.

Not only have profits been elusive, but the expense of running a quick commerce operation has pushed one of the earliest players in the game out of business. In FY23, Dunzo’s losses skyrocketed to Rs 1,801 crore from Rs 464 crore in FY22. Total costs surged 286% to Rs 2,054.4 crore, with procurement and advertising taking the biggest hit. Financial strain forced Dunzo to shut most dark stores and pivot to a partner-store model.

Swiggy isn't immune to the quick commerce burn either. In Q3 FY25, it reported a Rs 7.99 billion loss, worsening from Rs 5.74 billion a year ago. Costs surged 32% to Rs 48.98 billion, driven by an aggressive expansion of dark stores and fulfilment centres. Despite mounting losses, revenue climbed 31%, with quick commerce sales more than doubling.

Beyond Groceries And Big Cities

So far, the success of quick commerce has been limited to India’s tier-one cities and within the segments of groceries and everyday essentials, where impulse buying and urgent needs fuel transactions.

The same can’t be said for the products that are housed in the darks stores of larger logistics players such as clothing or electronic appliances.

“For categories like fashion, where customers want to explore different styles, trends, and patterns, quick commerce doesn’t quite fit the bill,” Kushal Bhatnagar, associate partner at Redseer, told The Core.

These goods are also less frequently bought than everyday groceries, where quick commerce has so far been growing.

In the 2023-2024 fiscal year, tier 1 cities in India experienced a substantial 31.1% year-over-year growth in e-commerce order volumes, according to a report by Unicommerce. This growth rate was higher compared to tier 2 and tier 3 cities, which saw increases of 23.3% and 22.4%, respectively.

The report also highlighted that tier 1 cities accounted for 44.3% of the market share in FY-2023, slightly up from 42.2% in the previous fiscal year. This indicates a continued dominance of these urban centres in the e-commerce sector, while also acknowledging the significant growth potential in smaller cities.

“In tier 3 and 4 cities, both market intensity and overall consumption drop significantly,” Vivek Mathur, an industry expert, told The Core.

Dark stores may work in major cities, but their economics in smaller cities are questionable. Market heterogeneity increases beyond tier 1 cities, making it difficult to create a one-size-fits-all strategy.

“Assortment strategies will need to evolve as market homogeneity decreases in smaller cities,” Mathur explained. This means deciding what products and how much of each product to sell in a given area.

Financial Sinkhole

The biggest issue with dark stores is their financial burden. Logistics players have heavily invested in warehousing and automation, but returns remain uncertain.  

“Why does everything need to be delivered in 10 minutes? No company can sustain a model that demands delivery in 10 minutes,” Prodipto Roy, co-founder of QuickShift told The Core.

Unlike quick commerce, where customers pay a premium for speed, logistics dark stores face unique challenges. Traditional e-commerce allows for bulk shipments, optimising last-mile costs, whereas dark stores demand near-instantaneous fulfilment, dramatically increasing operational expenses.

“Marketplaces naturally attract customers due to their wider selection, but price still plays a huge role. Take sunscreen, for example—if it’s available on Zepto and also on the brand’s website, where a logistics partner like Ecom Express delivers it from a dark store in 30 minutes at 15% less than a quick commerce platform, many customers would choose the cheaper option,” Nadamani said.

The Logistics Nightmare of Managing Inventory

The logistics of stocking dark stores with sufficient quantities and the right product mix are another significant challenge. Rajat Jain, CEO of the 7-10 shoe brand, points out the issue of high minimum order quantities (MOQs).

“If a city has 100 dark stores, I would need to supply all the sizes of X, Y, and Z t-shirts across 10 different styles. With each style having 4-5 sizes, that adds up to 50 variations, multiplied by 100 dark stores, 5000 MOQs in total. This could become a significant problem,” Jain told The Core.

Beyond inventory management, dark stores also struggle with SKU availability. A customer may want a three-product combo, but if even one item is out of stock, the entire purchase falls apart.

“Eventually, you’ll end up spreading your inventory across so many locations,” Roy said.

Will the Dark Store Model Survive?

While quick commerce has carved out a profitable niche in groceries, its expansion into other categories via dark stores seems more like a money-burning experiment than a viable business strategy.

With demand density, operational costs, and logistical hurdles working against them, logistics-driven dark stores may struggle to sustain themselves in the long run. Companies may soon realise that ultra-fast delivery isn’t always necessary — perhaps a two-hour delivery window is just as effective.

“Quick commerce works best when customers are clear about the brand or product they need to order, and customers are usually exploring options when they are purchasing e-commerce products,” explains Bhatnagar.

The distinction between impulsive needs (such as an urgent need for ginger while cooking) and more thoughtful purchases (like a new TV/new clothes) is critical to understanding the limitations of quick commerce.

“There’s a difference between impulsive needs, necessities, and luxuries. If I’m cooking and realise I’m out of something, I will order it immediately—that’s an impulsive need. But I’m not going to impulsively order a TV or new clothes,” Ratandharaya added.

Ultimately, dark stores might not be the golden ticket logistics players were hoping for. They may just be another case of businesses chasing trends without considering long-term profitability.

“Quick delivery products are, on average, priced 25–40% higher than traditional products, making them a premium offering. In contrast, traditional e-commerce allocates about 50% of costs to the last mile, whereas in quick delivery products, nearly 80% of the cost goes into the last mile,” Nadamani concludes.

With such high costs and low margins, the dark store model may soon prove to be just another expensive industry fad.