Get ready for the store of the future.
From Walmart’s order-picking Alphabot to Kroger’s automated fulfillment center, technology is already changing how we shop. We’re ordering online for at-home delivery or we use click-and-collect to pick up already-packaged items at the store. We even have others shopping for us: Witness Instacart and its competitors.
But even with all these conveniences, a shopper from the past would still recognize today’s shopping experience – grabbing items off shelves and paying for them near store exits.
Ten years from now, however, that process will become much rarer.
Taking its place? Micro fulfillment. The ramifications will ripple through every aspect of retail, impacting shoppers and merchants alike.
Goodbye, shopping cart
Here’s what it will look like: Imagine a highly experiential and engaging environment centered on multiple stores-within-a-store. Specific brands or categories will have their own islands or kiosks.
There’s a precursor already: Just think about the Apple or Samsung sections found in Best Buy. Now add an automated system that will pick and deliver most items to the exit. This micro-fulfillment system will become the norm.
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As a consumer, you’ll get to touch and interact with products ranging from makeup to electronics, but you won’t be able to put them in your basket – you won’t need to.
A human will educate you about the advantages of one offering versus another. When you find something you like, the customer service associate will punch in the order. In some cases, touchpads, rather than people, will give information and facilitate orders.
Out of view, a human or a robot will place your product into a tote. The tote will then wind its way down a conveyor belt toward a pickup point. No need for checkout stands: You will have already paid for your item online.
Listen up, companies:Americans are spending money according to their values.
Here’s where things really get exciting. Maybe after visiting one kiosk to purchase, say, a camera lens, you saunter over to another one to purchase a Bluetooth speaker. Micro-fulfillment systems will consolidate each item with the rest of your order, so you can hop from island to island. Everything will be waiting when you’re ready to leave.
Already, Manhattan-based B&H Photo Video uses a system of conveyor belts and vertical lifts to deliver customers’ new cameras to them before they leave the store.
This won’t be limited to electronics or sophisticated devices. It applies to items of every type, from toilet paper to grocery staples to appliances. Kids will love the mechanics. Busy professionals and harried parents will appreciate the convenience. Even those who enjoy browsing will relish a new form of exploration.
What’s more, shoppers can save money. Smaller, more compact stores help retailers cut real estate costs and pass on the savings. Stores like Walmart can use tech like Alert Innovation’s Alphabot to get items out the door faster, slashing costs for itself and its consumers.
Retail revolution is coming
The lesson for retailers: Beyond the loyalty prompted by the high-touch store-within-a-store experience, micro fulfillment will become the reason many consumers visit.
Currently, the popularity of click-and-collect means an employee is usually picking and packing the items. That labor isn’t free. Consumers want the convenience, but they’re not necessarily willing to pay more for it.
Micro-fulfillment automation means the economics of each order can improve drastically. The units per hour a store can pick goes way up, and costs come down. Investment bank Jefferies estimates this process will cut costs by 75%, compared with manual order picking. Retailers can cut costs further by eliminating checkouts.
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Automation is more cost efficient than paying others to shop – the Instacart model. It has the added benefit of making the store a truly engaging experience, rather than a disruptive one where armies of personal shoppers compete with consumers. Instacart is now scaling up its plans to use robots to automate fulfillment.
Retailers are already on board. The micro-fulfillment market is expected to climb to $10 billion in five years, growing at a compound annual growth rate of 60% over that period, according to research and advisory firm LogisticsIQ.
Does this growing wave of automation mean people should worry about their jobs? No. While many are understandably fearful, we’ve learned that the automation of repetitive tasks with high accuracy has been a net positive for the human race.
It has freed people to focus on elements of their jobs that can’t be handled by machines. The printing press, steamboats – they didn’t destroy jobs. They created new and better ones. The advent of computers has allowed us to manage huge amounts of information more accurately; new positions are being created daily to sort and manage it.
Micro fulfillment is the next step in our evolution. Robots can’t design the applications themselves – you’ll always need people to design, monitor and maintain the systems. Over time, automation helps the economic outlook of the general population. Not hurt it.
What about small mom-and-pop stores that can’t afford to invest in robotics or automated fulfillment? Will they become irrelevant?
Again, no. Small, hometown-type retail stores are focused on a fairly narrow selection of curated items. They’ve already created an experiential environment. People don’t go to these stores because they want endless aisles of selection. They go because they want to walk around and enjoy the distinct style that an individual small-town retailer can bring.
Ultimately, we all have skin in the game when it comes to the store of the future: consumers, retailers and suppliers alike. A brand new shopping experience awaits.
Get ready to enjoy the ride.
Doug Straton is chief digital officer of Hershey.