The arrival of check-out-free shopping signals the start of a new era. But this is just the tip of the iceberg in terms of retail store automation. Multiple factors are forcing the acceleration of retail store automation as businesses with bricks-and-mortar outlets battle to remain efficient and competitive.
This blog explores how retail store automation is changing the way retailers operate – and how to generate business value from the technology.
What is retail store automation?
Retail store automation is primarily a process of harnessing technology to take on specific tasks that have historically required manual work. The main drivers are reducing costs, increasing productivity, and providing a smoother customer experience.
Technology to enable automation in retail stores, from checkout-free shopping to robotic inventory management, is evolving rapidly. At the same time, wide-ranging macro-economic trends are accelerating uptake.
Key drivers of retail store automation include:
- Labour shortages: The ‘great resignation’ triggered by the COVID pandemic has depleted frontline workforces. The retail sector is among the worst affected by shortages. Vacancies are at record levels. Employers must empower over-stretched staff to focus where they can add the most value by handing over mundane, repetitive tasks to technology.
- Rising costs: Retailers face cost increases on several fronts – from retail worker salaries to surging energy bills. Retail store automation helps reduce reliance on workers so that routine tasks can be completed more efficiently. The result is that employers are effectively doing more with less.
- Intense competition: The rapid rise of online shopping has intensified competition in the retail space. However, physical stores have a more robust future than they are often credited with, especially in food retail. It has been estimated that by 2023, e-commerce will still only account for 5 per cent of grocery sales. Retailers must still focus on optimising the customer experience. Automation can enable faster, more convenient services.
- Consumer expectations: The pandemic has changed consumer expectations. Retailers that thrive will need to be responsive, customer-centric and adaptable. The demands of omnichannel delivery are unrelenting. Retail store automation enables speed and efficiency gains.
- Appetite for insight: Retail store automation provides real-time data streams that allow for detailed insight, dynamic decision-making and continuous improvement. Without automation, workers depend on manual reporting methods such as paper checklists and spreadsheets, which give managers a limited picture of frontline operations.
Examples of retail store automation
Retail store automation comes in many shapes and sizes. Let’s look at three of the most prominent examples.
The move toward checkout-free shopping started in 2019 with a pilot programme allowing customers with a mobile app to scan and pay for items before leaving the store. Amazon took the concept a step further in its fledgling physical stores with ‘Just Walk Out’ technology, which removed the need for scanning. Instead, a combination of in-store cameras and weight sensors on shelves allows Amazon to track what has been picked up and by whom, so they can be billed accordingly. Since then, dozens of retailers have launched checkout-free shopping services.
There are approximately 32,000 stores worldwide offering mobile self-scanning, either using the shopper’s smartphone or a device supplied by the store. That’s according to the Retail Banking Research (RBR) consultancy. The consultancy also estimates that there are 75 outlets that have no checkout, operated mainly by Amazon.
Juniper Research has predicted the total value of smart checkout technology. transactions will rise from £1.5bn in 2020 to $290bn in 2025.
This is one of the best-known examples of retail store automation, but its future is not yet clear. The trend is currently most prevalent in smaller urban convenience stores. Smaller floor spaces are easier to track, and individual purchasing volumes are lower than larger supermarkets.
Supply chain automation
Supply chain disruption that started during the pandemic continues to send shockwaves through the retail sector today. A McKinsey report noted: “Retailers are now sprinting to get the product from manufacturer to customer, but supply chains remain snarled. Logistics carriers reduced capacity to match falling demand and have been challenged to accommodate the rising volume. From ocean freight through the middle and last miles, carriers are experiencing unprecedented congestion that has caused service disruptions and rate increases.”
One of the challenges retailers face in addressing supply chain disruption is that multiple, disconnected data systems stretch along the supply chain. These make it difficult for retailers to build a picture of what is happening. It’s a concept Checkit describes as ‘dark operations’.
On the flip side, increased visibility is one of the most significant benefits of retail store automation. McKinsey analysts recommend the creation of a digital control tower. The aim is to connect data systems and generate insights across the end-to-end supply chain to identify bottlenecks and accelerate response times. Analysts say that “this approach typically improves fill rate by 10 per cent and reduces excess inventory by more than 30 per cent”.
Automation and robotic systems born in factories are moving into warehouses and distribution centres. The Internet of Things allows products to be tracked across continents or on shelves with unprecedented precision. RFID scanners and machine vision systems could become commonplace.
Increasing efficiency is critical. Introducing automation into the supply chain has boosted productivity, from inventory management software to warehouse robots.
Retail staff shortages have forced forward-thinking leaders to look at where their workers are spending time. With limited human resources, employees must be focused on areas where they add the most value, such as one-to-one customer interactions. This means taking away mundane tasks that can be better handled by technology.
The evolution of the Internet of Things has delivered a range of sensors to monitor a wide range of building and equipment parameters. This is a powerful force in retail store automation. In some cases, such as fridge and freezer temperature monitoring, regularly temperature checks have traditionally been a staff responsibility. Today, wireless sensors enable the storage of sensitive food to be monitored continuously, with data streaming to an intelligent dashboard for alerts, analysis and remedial action. This helps prevent stock loss and improves the efficient utilisation of maintenance engineers.
Other examples of environmental monitoring improve safety. Legionella prevention means rarely-used taps and pipework must be flushed regularly and tested for temperatures. But this can now be done more consistently, accurately and efficiently using tiny, self-adhesive sensors. Brand standards are another area where environmental monitoring can help. For example, toilets can be cleaned according to sensor data from footfall, ensuring consistent cleanliness.
The future of retail store automation
The benefits of retail store automation are wide-ranging, and analysts have pointed to measurable impact on profitability.
The authors of a McKinsey report on the store of the future said: “Overall, we believe the store of the future is likely to achieve EBIT margins twice those of today, with the added benefits of improved customer experience, better employee engagement, and an easier-to-run store.”
Data analytics are crucial to this equation. In a separate survey by Fujitsu, over two-thirds of retail respondents said they were investing in technologies such as IoT. AI, machine learning and data analytics were cited by 68.7%. The report said: “These technologies are attractive as they can help retailers improve customer experience and insights, plus support operational efficiencies.”
Retail store automation may seem a mammoth undertaking. But smaller use cases can be addressed with rapid pilot programmes to test and measure.
Employee advocacy is crucial during the early stages, and consultations should be set up to gain direct feedback from frontline teams.
A benefit of retail store automation is that the technology produces data streams enabling continual analysis and improvement in processes.
At a challenging time for the retail sector, automation will be an increasingly important tool for change.
Ready to learn more?
- Find out how this multinational retailer harnessed automation to create intelligent retail store operations.
Photo by John Cameron on Unsplash