Saturday, April 20, 2024

A Fridge No More location in Long Island City, New York. (Photo: Fridge No More via Facebook)

Local business owners are increasingly concerned that a growing “dark store” presence in Cambridge and the wider Boston area may push out local retailers – the newest wave of the gentrification of small businesses.

Dark stores in Cambridge are a new phenomenon, but one poised to take a prominent spot in the future of retail. These stores are physical retail store locations transformed into fulfillment centers for online orders, functioning as mini-distribution centers not open to the public. While most of these distribution centers are outside of city centers, these stores are directly in the heart of urban areas.

In 2020, these quick commerce services exploded in New York City with roughly six start-up companies guaranteeing online grocery purchases delivered in 10 to 20 minutes. Their growth is mirrored in cities around the country.

Cambridge is not exempt, and dark stores have come. Fridge No More opened last year at 1036 Cambridge St., Wellington-Harrington, replacing AdoEma Realty, and was serving the eastern half of Cambridge and parts of Somerville. Then, three weeks ago, Fridge No More abruptly closed its doors after burning through its funds.

As part of an effort to better understand the possible impacts of dark stores in Cambridge, we at the small-business advocacy group Cambridge Local First gathered testimony from members. Local business owners pointed to two primary concerns: increasing concentrated market power and declining quality of experience of residents and visitors in urban centers.

  • Concentrated market power is the single biggest threat facing independent businesses in Cambridge, and dark stores give more power to the giants. Big businesses such as Whole Foods and Macy’s forge ahead with dark store strategies, and entrants generally have the advantage of international venture funding supporting their rapid growth. Gopuff raised $3.5 billion in venture capital by its funding round in July. Gorillas announced a $1 billion round of funding in October. The ultrafast delivery sector overall received $5.8 billion in funding as of mid-October. These venture capital-funded businesses compete for business with Cambridge’s local and independent institutions, which already struggle to compete with global retail businesses such as Amazon.
  • Businesses cite concerns around declining residential experience in city centers where dark stores locate. “When I studied urban planning in college, we discussed the safety and economic benefits of street-level stores offering a variety of retail options all open to the public. In my observation of the effects of dark, empty or inaccessible places in an urban streetscape, I see and feel more clearly how this is so,” Rachael Solem, the owner of the Irving House bed and breakfast, notes, Additionally, dark stores reduce human interaction and are criticized for promoting excessive consumerism.

In other cities, dark stores have asked for lower property tax assessments and compare themselves to small businesses. But these are venture capital-funded businesses that can afford to argue extensively at a trial; the independent owner of a local business is unlikely to have the resources to fight their assessment.

Some business owners feel differently. They feel dark stores solve a market problem by removing pressure from constrained supply chains, innovating and empowering retailers to deliver products to customers more quickly. The pandemic has highlighted supply chain fragility and how disruptions can trickle down and deteriorate the customer experience. These individuals feel that dark stores can help solve this problem because, after all, some people may want to sit at home and have something delivered quickly.

By design, these businesses are not required to go through a special permitting process that governs how a space is used. For example, a former mattress store could turn into an instant delivery warehouse overnight, without community input.

Strategic zoning efforts may limit the venture capital-fueled growth of these companies if we take action soon. An ordinance to classify dark stores as warehouses, since they are subject to different regulations, could help. The Cambridge Inspectional Services Department is looking into the issue, and Cambridge Local First encourages residents to email the City Council to share their concern about a growing dark store presence in Cambridge.

The worst implications of expanding dark stores, and notably rapid delivery grocers and the quick-commerce sector, are yet to be seen.

Cambridge Local First represents nearly 500 unique small businesses in Cambridge. A key part of its mission is to promote and celebrate a “local economy community” and support hometown businesses.