Dark Stores and the South African Supermarket Owner

What is actually happening in the market

Most of the local commentary on dark stores reads like technology advertising. A warehouse with no customers, an app that promises delivery in under an hour, a picture of a rider on a scooter. Owners nod politely and go back to trying to make wage bill on a Tuesday.

The actual numbers deserve more respect than that.

Checkers’ Sixty60 turned over R11.9 billion in the six months to 28 December 2025, up 34.6% on a year earlier, and R18.9 billion for the 52 weeks to 29 June 2025, up 47.7%. By late 2025 it was fulfilling from roughly 875 stores using about 10 000 Pingo drivers, and it passed 100 million cumulative orders in March 2025. Shoprite bought the remaining 50% of Pingo in October 2024, so the last-mile layer is now inside the group.

Woolworths is smaller but moving the same direction. Its first dark store opened in the Cape Town CBD in August 2024; a second followed in Wynberg in June 2026. In its 2025 financial year, online sales reached R7.78 billion, Woolies Dash turnover grew 41.6%, online food sales hit R3.33 billion, and Dash accounted for 6.6% of South African food sales. The group has said more dark stores are planned without saying where, how many or at what cost.

Checkers opened two confirmed stand-alone dark stores in Gardens and Maitland in Cape Town in November 2024. Zulzi, the technology company that built the original Sixty60 platform, runs seven of its own dark stores across Johannesburg North, Pretoria and Centurion, carries grocery, liquor and pharmaceutical lines, and quotes around 5 000 daily orders with roughly 300 drivers. Takealot’s chief executive has publicly floated “a dark store or mini-warehouse in the township” as a future move.

Set against that, the entire South African online retail market crossed R130 billion in 2025, roughly 8–10% of total retail, growing at around 38% a year according to World Wide Worx, Mastercard and Peach Payments. On-demand grocery is the engine pulling that number.

The three fulfilment models — and why the difference decides the economics

The phrase “dark store” is being used loosely. Owners need to separate three things because they carry different costs, different risks and different implications for a franchise agreement.

International benchmarks below are converted at approximate August 2026 rates: US$1 ≈ R16.50; £1 ≈ R22.00. Original source figures are shown in brackets for traceability.

In-store picking is what most South African on-demand grocery still is. A customer orders on the app; an employee walks the aisles of an ordinary supermarket with a trolley or tote; the order is handed to a rider. This is how the vast majority of Sixty60, Woolies Dash, asap! and SPAR2U orders are fulfilled today. Converted at the August 2026 rate of roughly R16.50/US$, McKinsey’s work on e-grocery economics puts manual picking labour at roughly R130 on a R1 650 basket (the original US$8 on a US$100 benchmark), with last-mile delivery adding another R130 before any overhead. In-store picking is cheap to start and ruinously expensive to scale because pickers compete with customers for aisle space, create congestion at fresh and deli counters, damage shelf availability, and introduce substitution errors that the store — not the app — usually has to fix.

A dark store is a retail-sized facility, closed to the public, laid out for picking rather than browsing. Aisles can be narrower, racking taller, and the entire operation optimised around order throughput. The UK evidence, used here only as a directional benchmark and converted at roughly R22/£, puts a dark-store-picked grocery order at about R260 against R400–R440 for an order picked in a live store (the original £12 vs £18–20 benchmark). The Checkers facilities in Gardens and Maitland and the Woolworths facilities in Cape Town CBD and Wynberg fit this model. They are not giant automated warehouses; they are compact, high-throughput picking nodes placed close to dense demand.

A dark warehouse is something larger and closer to a distribution centre — higher SKU count, more automation, often multi-retailer or B2B inventory. Zulzi’s seven facilities sit between the two; Takealot’s mini-warehouses lean toward the warehouse end. A dark warehouse is a capital decision a listed group or a well-funded logistics business makes. It is not something a single-store owner builds.

The 12-month story is not that every South African grocer is about to open a network of automated warehouses. It is that the chains are quietly moving high-volume, high-density catchments out of in-store picking and into compact dark stores, and they are using third-party platforms to extend reach everywhere else. For a franchisee or an independent, the question is whether your catchment is one of those high-density nodes — and if it is, whether the turnover that leaves your store ever comes back.

The franchisee impact: where the next 12 months will bite

Franchisees face a structurally different risk from corporate-owned stores. A Checkers or Woolworths store that loses online turnover to a nearby dark store still belongs to the same balance sheet. The group can reallocate rent, labour and range across the network. A franchisee cannot. The store’s rent, franchise fees, wage bill and stock investment are fixed against the turnover of that one site. Move 10% of that turnover to a dark node two suburbs away and the franchisee’s P&L changes immediately, with no corresponding reduction in fixed costs.

The franchise groups most exposed are those where on-demand orders are picked inside the franchisee’s store today. That is the reality for most SPAR and TOPS franchisees running SPAR2U, for Pick n Pay franchise stores running asap! orders, and for any franchised liquor outlet fulfilling through a third-party app.

3.1 The turnover reallocation problem

SPAR2U volumes grew 174% year on year in the six months to March 2025 and 136% for the full 2025 financial year, and the service was live in 581 sites by March 2025. That growth is being presented as a win, and at a group level it may be. At store level, the picture is more complicated.

When a SPAR2U order is picked in a franchise store, the franchisee supplies the stock, the floor space, the fridge and freezer capacity, the picking labour, the bags, and the shrink on substitutions and damages. The franchisor controls the app, the pricing, the promotions, the customer data and the driver network (partly through its Uber Eats partnership in 130 stores). The sale is rung through the franchisee’s till, so turnover looks healthy. But the contribution margin on that online basket is almost always lower than on a walk-in basket, because picking, packaging and substitution costs sit in the store while the delivery fee and subscription economics sit at group level.

If SPAR then opens a dark store to serve the same catchment — as Checkers and Woolworths have done in Cape Town — the franchisee faces the worst of both sequences. For two or three years they carried the cost and congestion of proving the online demand. Once that demand is proven, the dark store takes the turnover, and the franchise store is left with the same rent, the same wage bill and a smaller basket base to carry it.

3.2 What the franchise agreement probably does not say

Most South African supermarket franchise agreements were written before on-demand grocery existed at scale. They cover territory, branding, supply, minimum wages, store standards and marketing levies. They rarely deal clearly with the following:

• Whether online sales delivered into a franchisee’s exclusive territory are recognised as the franchisee’s turnover, the franchisor’s turnover, or a hybrid.
• Whether the franchisee is obliged to provide picking labour and floor space for online orders, and if so at what recharge rate.
• Who owns the customer record and the transaction data generated by orders picked in the franchisee’s store.
• Whether the franchisor may open a dark store or appoint a third-party fulfilment partner inside the franchisee’s territory without consent or compensation.
• Whether online pricing must match in-store pricing, and who funds the gap when the app runs a promotion the store was not planning to run.
• How supplier rebates, listing fees and advertising support earned on online sales are split between franchisor and franchisee.
• What happens to the franchisee’s exclusive territory if the franchisor decides the catchment is better served from a closed facility.

These are not abstract legal questions. In the next 12 months, as dark-store networks expand out of Cape Town into Gauteng and Durban, franchisees in high-density nodes will discover the answers the hard way — usually when a dark store opens or when a new online addendum arrives for signature.

3.3 The labour and CCMA exposure

In-store picking is labour-intensive. A busy franchise store running 150 to 200 online orders a day needs dedicated pickers, a dispatcher, and someone managing substitutions and customer callbacks. Those people are employed by the franchisee, not the app. They are subject to the same BCEA, sectoral determination and CCMA rules as every other employee.

Three risks surface in the next 12 months. First, franchisees may have hired pickers on flexible or part-time contracts to handle a channel whose volume the franchisor controls. If the app reroutes orders to a dark store or throttles the store’s allocation, the franchisee is left with surplus staff and a potential Section 189 or unfair-labour-practice dispute. Second, pickers working under time pressure — 60-minute promises create real pressure — cut corners on cold-chain, age verification on liquor, and allergen handling. A single mistake on a pharmaceutical or liquor order can cost the store its licence. Third, riders and drivers are often independent contractors of a third-party logistics business, not employees of either franchisor or franchisee, but they operate in the franchisee’s name, wearing the brand. An accident or a labour dispute can pull the franchisee into a matter they did not negotiate and cannot control.

Franchisees should be asking, in writing, who carries the legal and financial consequence when an online order picked in their store goes wrong. The answer in most agreements today is “the franchisee”, which is not sustainable.

3.4 Stock, shrink and the fresh problem

A dark store carries its own stock. That is a second inventory pool sitting inside the same catchment, often supplied from the same distribution centre and carrying many of the same SKUs. For a franchisee, the implications are practical rather than theoretical.

When a chain opens a dark store nearby, the DC may start prioritising the dark node for scarce or promotional stock, because the dark store’s order volume is easier to plan and its service levels are measured at group level. The franchise store finds itself short on the exact high-velocity lines that drive footfall. In fresh and perishables, the effect is sharper. Dark stores can order to tighter forecasts because they only serve online demand; franchise stores carry the full range for walk-in customers and absorb the markdowns and waste when foot traffic softens. The franchisee ends up funding the category’s availability risk while the dark store takes the clean, pre-planned demand.

Shrinkage follows a similar pattern. In-store picking introduces a category of loss that is hard to allocate: items damaged during picking, substitutions the customer refuses, baskets abandoned at dispatch, and the everyday leakage that happens when staff are moving fast under pressure. Very few franchisees have a separate shrink line for online orders; most of it disappears into the store’s overall shrinkage number, which the franchisee is contractually required to control.

3.5 The liquor complication

For TOPS at SPAR franchisees and other franchised liquor outlets, the stakes are higher. Liquor carries higher gross margins, stricter licensing conditions, and real age-verification risk. Checkers, Woolworths and Zulzi all already move alcohol through on-demand channels. A dark liquor store is operationally attractive: controlled environment, no public browsing, easier CCTV coverage, and a picking process built around age verification.

From a franchisee’s seat, a franchisor that builds a dark liquor node inside a TOPS territory is not just moving turnover; it is moving the most profitable turnover in the basket. The franchise store keeps the rent, the security cost, the licence compliance burden and the slower-moving tail of the range. The dark node takes the fast-moving, high-margin lines. That is the conversation TOPS franchisees should be forcing now, before the first dark liquor site is announced in their region.

The independent supermarket owner: a different kind of threat

Independents do not have a franchisor reallocating their turnover. They have a wholesaler, a set of direct suppliers, and their own balance sheet. The dark-store threat to an independent is not that a corporate takes a slice of their existing online business — most independents do not have a meaningful online business. The threat is that a dark node five kilometres away starts delivering the same branded grocery basket to the independent’s best customers in under an hour, at prices the independent cannot match because the chain is buying better and spreading fulfilment cost across hundreds of stores.

That threat is real but it is narrower than the vendors will tell you.

4.1 Where the dark store actually competes with you

A dark store is an urban, density-dependent asset. It needs enough orders per day within a small radius to cover rent, labour and delivery. Gardens, Maitland, the Cape Town CBD, Wynberg, Sandton, Pretoria East and Centurion are exactly those kinds of catchments. A dark store does not work in a rural town, a sparse peri-urban node, or most township residential areas where address finding is hard, delivery distances are long, and average order values are lower. Takealot has talked about township mini-warehouses, but talk is cheap; the economics have not yet been demonstrated at scale in South Africa.

For an independent in a dense urban node within five kilometres of a Checkers or Woolworths that is ramping up dark-store fulfilment, the next 12 months will bring visible pressure on middle- and upper-income customers who already buy the same branded basket. For an independent in a township, rural town or outlying peri-urban area, the dark store is not coming for you next year. The informal trade, the spaza, the roadside butcher and the local wholesaler are still your real competition, alongside the nearest Shoprite or Boxer.

4.2 The fixed-cost gap you cannot close — and should not try to

The economic logic of a dark store only works at order volumes an independent cannot reach. McKinsey’s benchmarking suggests in-store picking remains viable up to roughly 800–1 000 orders per week per site; beyond that, dedicated fulfilment starts to earn its keep. An independent doing 200, 300 or even 500 online orders a week does not need a dark store. Building one would bolt a second rent bill, a second payroll and a second stock investment onto a business that is already absorbing load-shedding, wage increases and soft consumer spend.

That means knowing the customer by name, offering credit where it makes sense, stocking the specific cultural and regional lines the algorithms do not carry, and providing a collection and assisted-digital service that costs almost nothing to run.

4.3 The independent’s realistic “dark” channel for the next 12 months

The tools already exist and most independents underuse them. A WhatsApp business line, a simple typed or photographed price list, a dedicated staff member taking orders between 8am and 5pm, and a delivery arrangement with a local driver or a trusted third-party service can cover the top 15 to 20% of customers who want convenience without adding a single rand of fixed fulfilment cost. Click-and-collect — order on WhatsApp or by phone, collect at a dedicated till in 15 minutes — has no delivery cost at all and still solves the time-poverty problem that drives on-demand adoption.

The operational disciplines that make this work are the same disciplines RIDBS audits in a store anyway: accurate stock file, reliable pricing, a named person accountable for the order book, a substitution rule agreed up front, and a same-day cut-off for deliveries. None of this requires a R20 million facility. It requires a manager who treats the WhatsApp order line as seriously as the till.

For independents in denser nodes who want to test delivery without capital, third-party platforms such as Mr D, Uber Eats, OneCart, Bash and Zulzi offer access to fulfilment on a commission basis. The trap is the same one franchisees face: commission of 15–25% on a grocery basket with a gross margin of 18–22% does not leave a contribution unless basket size is tightly managed, substitutions are controlled, and menu prices are reviewed weekly. An independent that simply uploads its in-store prices to a marketplace and absorbs the commission will lose money on every order and make it up on volume, which is not a strategy.

4.4 The bottle-store independent

For independent bottle stores, the 12-month picture is mixed. On-demand alcohol is a real and growing channel, and the dark liquor node is well suited to it. But liquor licensing in South Africa is provincial, slow and heavily contested. A national chain cannot open a dark liquor store in every municipality overnight. An independent bottle store with a strong local licence, a known customer base and a reliable same-day or within-the-hour delivery offer can defend ground that a purely grocery dark store cannot reach, particularly on premium and craft lines, on credit relationships, and on the cultural role a local bottle store plays over weekends and month-end.

The risk is regulatory. Any independent moving alcohol through a third-party app needs to be certain the platform enforces age verification at the door, keeps delivery records, and is indemnified in writing. A single fine or licence suspension is more expensive than a year of delivery commissions.

The franchisor–franchisee relationship: what has to be looked at, line by line

The arrival of dark stores is not only an operational issue. It is a governance issue. A franchise agreement is a long-term contract in which one party (the franchisee) invests capital in a fixed location on the strength of territorial promises made by the other party (the franchisor). When the franchisor can build a closed facility inside that territory, serve the same customers, and recognise the turnover elsewhere, the balance of the contract changes fundamentally.

Franchisees and their advisors should be working through the following now, not after a dark store opens down the road.

5.1 Territory and exclusivity

Read the territory clause. Most agreements grant the franchisee a right to operate a store at a specific address, sometimes with a radius of exclusivity for “branded stores”. A dark store is not a branded store in the conventional sense — it has no shopfront, no public trading — but it is a retail operation selling the same products into the same households. The question is whether the agreement’s definition of “store” or “outlet” captures a closed fulfilment node. If it does not, the franchisor may legally be able to open one. If it does, the franchisee may have a consent right or a compensation claim.

Franchisees should be pushing for an explicit clause that any online, dark-store or third-party fulfilment operation delivering into the franchisee’s territory is treated as a competing outlet for the purposes of the agreement, with the same consent and compensation mechanics that would apply to a new corporate store.

5.2 Recognition of online turnover

This is the single most important commercial clause. Online sales have to sit somewhere in the P&L. There are three possible structures, and each creates a different relationship.

In the first, online sales delivered into the territory are recognised as the franchisee’s turnover, with the franchisee supplying the stock and earning the gross margin, and the franchisor charging a transparent fulfilment and technology fee for the app, drivers and marketing. This is the most franchisee-fair model and the easiest to defend.

In the second, online sales are recognised at group level, the franchise store is paid a fixed picking fee per order, and the franchisee has no claim on the customer or the basket margin. This is a logistics-provider model. It can work if the picking fee genuinely covers labour, packaging, space and shrink, but it converts the franchisee from a retailer into a 3PL, which is not what most people signed up for.

In the third, the worst model, the franchisee supplies stock and labour for online orders while the turnover is recognised elsewhere and the picking fee is set too low to cover cost. This is the model franchisees should refuse to sign or should renegotiate before volume grows.

5.3 Customer data and the customer relationship

A franchisee’s most valuable asset is its local customer base. In a store-based model that asset is visible: the customer walks in, the staff know them, the local marketing reaches them. In an app-based model the customer record belongs to whoever runs the app — usually the franchisor. The franchisee supplies the stock and the labour but does not see the customer’s name, order history, email or phone number, and cannot market to them directly.

Over a five-year franchise term this is a slow transfer of value. The franchisee’s local customer base becomes the franchisor’s national database, and when the franchise comes up for renewal the franchisor has a stronger hand because the customer relationship is no longer local.

Franchisees should negotiate, at minimum: access to the contact details and order history of customers whose orders are picked in their store; the right to market locally to those customers within brand guidelines; and a restriction on the franchisor using that data to divert those customers to a dark store or a corporate outlet without compensation.

5.4 Pricing, promotions and margin protection

Online grocery is promotion-heavy. Apps run flash discounts, free-delivery offers and subscription bundles (Xtra Savings Plus at R99 a month is the obvious example). When those promotions are funded centrally, they can drive volume that looks good on a dashboard but destroys margin at store level if the store is expected to supply stock at a discount it did not agree to.

The franchise agreement should state clearly which promotions are mandatory, how they are funded, and whether the franchisee is compensated for margin lost on online promotional lines. It should also address price parity: if the app sells an item for less than the in-store shelf price, either the store matches that price for walk-in customers (and takes the hit) or it does not (and customers notice and complain). Neither outcome is acceptable without a funding rule.

5.5 The cost of picking, packing and compliance

If the franchisee continues to pick online orders in-store, the agreement should specify a recharge mechanism that covers:

• Picker wages on actual time, including leave, UIF and bargaining council contributions where applicable.
• Packaging at cost plus a handling margin.
• Refrigerated staging space and equipment.
• Shrink and damages attributable to online picking, measured against an agreed baseline.
• The cost of a named online supervisor once order volumes cross a threshold.
• Age-verification and compliance costs on liquor and pharmaceutical lines.

A flat per-order picking fee that does not flex with wage increases, load-shedding costs or order complexity will quietly erode store profit. The fee should be reviewed at least annually against actual time-and-motion data from the store.

5.6 Dark-store opening and compensation

If the franchisor decides to open a dark store in or near a franchisee’s territory, the agreement should set out a process: written notice, disclosure of the expected impact on the franchisee’s turnover, a transition period, and a compensation mechanism if the dark store materially reduces the franchisee’s sales. This can take the form of a reduced franchise fee, a territory adjustment, a one-off payment, or a right of first refusal for the franchisee to operate the dark node under a separate agreement.

Franchisors will resist this because it limits their network flexibility. Franchisees should insist because without it, they are funding the proving of a channel they may then lose.

5.7 Dispute resolution and the duty of good faith

South African contract law increasingly recognises a duty of good faith in long-term commercial contracts, particularly in franchise relationships where there is an imbalance of power. The Consumer Protection Act and the Franchise Association of South Africa’s codes also impose disclosure and fairness obligations. A franchisor that uses an online channel to undermine a franchisee’s territory without consultation may find itself in a dispute it cannot win, even if the letter of an old agreement appears to allow it.

The practical point is that neither side benefits from a fight. A franchisor that erodes franchisee profitability will see store standards fall, expansion stall and new franchisees become harder to recruit. A franchisee that refuses to participate in digital channels will lose customers anyway. The relationship has to be reset around a shared, transparent per-order P&L, not around who can extract the most from the channel.

The 12-month timeline: what to watch and when

The year from August 2026 to August 2027 has a shape to it.

Practical actions: franchisees

Franchisees should leave this analysis with a short list of things to do in the next 30 days, not a vague intention to “look into digital”.

Practical actions: independents

Independents need a different list, because there is no franchisor to negotiate with and no national app to plug into.

The commercial truth underneath all of this

Dark stores are not a technology story. They are a cost-allocation story. The chains have worked out that picking online orders in front of customers is expensive and messy, and they are moving the expensive, messy part into closed facilities where they can control it. That is competent retailing. No one should apologise for it.

The problem is who pays for the transition. In a corporate-owned network, the same balance sheet pays and the same balance sheet benefits. In a franchised network, the franchisee has paid to prove the demand — through rent, wages, stock and congestion — and the franchisor is positioned to take the efficient, high-margin fulfilment into a dark node when the time is right. If that happens without a renegotiation of turnover recognition, picking costs, data ownership and territory, the franchise model in South African supermarket retail will come under real strain.

The early warning is already visible in SPAR’s Southern Africa operating margin, which fell from 3.2% in 2022 to 0.5% in the six months to March 2026 even as SPAR2U volumes grew by triple digits.

For independents, the message is less dramatic but no less important. The dark store is not coming for every store in every town. It is coming for the dense, affluent, branded-basket customer in selected urban nodes. If that is your customer, you have 12 months to make your shop worth visiting and your collection service worth using. If it is not, your competitors remain the ones you already know, and your job is to run the basics — availability, price, freshness, cleanliness, service — better than they do.

The owners who come through this well will not be the ones who spend the most on technology. They will be the ones who understand exactly where their profit is made, who pays for which cost, and who owns the customer. Those are not new questions. They are the same questions Walter has been asking on shop floors since 1979. The app has changed, but the arithmetic has not.