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Beating Back Amazon with Automated Grocery Stores

two robots racing along a conveyer belt stretched across a grocery aisle amid the booming idea of an automated grocery store

Gone are the days when folks could get all their groceries at the small “mom and pop” shop down the street. Which is fine–the U.S. grocery retail market is a massive industry, with grocers accounting for $900 billion in sales. Competition is fierce, with major companies jockeying for consumer loyalty. But unlike the grocers of old, modern grocery retailers are becoming much more technologically savvy. From an automated checkout to a fully automated grocery store, grocers of tomorrow will look much different. That means a lot of change not only for customers but for the competitive retailer landscape as well.

Perhaps one of the most significant pressures facing grocer retailers today is the new kid on the block—Amazon. In addition to taking over Whole Foods, Amazon now threatens to change the way Americans shop and collect their groceries. Amazon Go stores already employ a form of automated checkout. Likewise, its automated grocery store is expected to become much more pervasive over the next few years. That, combined with robotic warehouses and home delivery algorithms, has other grocers nervous. And it is a significant reason other retail chains are exploring their own versions of an automated grocery store.

photo containing an excerpt from a report from McKinsey & Co. in relation to the topic of an automated grocery store
Competition is fierce – fierce enough to force industry-wide change.

An Automated Grocery Store Offers Many Advantages

Given recent industry report statistics, a significant degree of improvement could be made among grocery retailers. Reportedly, grocery stores lose over $325 billion in sales because shelves are not stocked. Likewise, traditional grocers no longer dominate the industry. Newcomers like Aldi’s and Lidl, as well as Amazon, have made a significant impact. As a result, traditional grocers now only own 44 percent of the market. Yet, three decades ago, this figure was as high as 90 percent. Because of this development, many grocers are considering an automated grocery store as a potential step in the right direction.

Many grocery stores already have some version of an automated checkout. However, the future version of an automated grocery store is much, much more. In addition to automated checkout, an automated grocery store will have shelf-scanning robots. Likewise, grocery carts will become “smart carts” that can track, scan and provide automated checkout. And retailers will progressively adopt dynamic pricing software using data analytics. From arrival to departure, an automated grocery store will soon streamline the process while optimizing sales and the experience.

Back-of-the-House in an Automated Grocery Store

Though grocery delivery and curbside pickup remain a small percentage of sales, volumes are increasing. The success of companies like Instacart highlights that this segment of grocery retail appeals to millions. Understanding this fact, many grocers are now exploring the use of automated mini-warehouses as part of their automated grocery store. These areas represent sizable areas attached to retail stores that are primarily run by robots. Also termed “micro-fulfillment centers”, automated mini-warehouses can receive, fill and prepare grocery orders for delivery. If successful, this strategy could drive companies like Instacart out of business.

The other major addition to an automated grocery store that works behind the scenes is predictive analytics software. In the past, grocers used historical data and trends in determining product price changes. But soon, an automated grocery store will employ predictive pricing changes based on consumer behaviors and automated checkout data. Stores using such software are already seeing positive results. In fact, one has already reported a 2 percent increase in sales and a 5 percent increase in profits using these new technologies.

Automated Checkout, Automated Orders and the Human Effect

In recent years, the number of robotics purchases made by grocers has climbed substantially. In fact, over $3.5 billion was spent on robotics alone in 2018. Given this matter, many are concerned regarding the human displacement effect that an automated grocery store may have. Some retailers, like Target, are resisting robotics or fully automated checkout systems because of the valued personal touch. However, there are mounting pressures that are forcing retailers to reconsider such stances. Efficiencies and enhanced processes are certainly driving the move to a more fully automated grocery store.

In some areas, human labor costs support the shift to automation. For example, automated checkout systems are used by many retailers because it completely eliminates employee costs without impacting customer service. The same is being experienced in automated mini-warehouses where grocery order fulfillment can be better achieved through robotics. Still, some human efforts are still required. For example, restocking shelves and placing frozen goods in delivery orders cannot be performed by robots yet. Regardless, it’s rather clear that a significant human displacement effect will be seen as the automated grocery store concept evolves.

cartoon of four grocery retailers with their versions of an automated checkout competing with an Amazon drone on a race track
Grocery retailers are moving to compete against Amazon and its innovations. How will these industry players impact the way Americans do their groceries?

New Kids on the Automated Grocery Store Block

Understanding that many grocery retailers are interested in pursuing an automated grocery store, several new companies have emerged to help. From automated checkout assistance to data analytics support, various startups and technology firms offer cutting-edge services. For example, Simbe Robotics now makes roughly 50 different robots used by retailers in the U.S., Europe and the Middle East. These shelf-scanning robots reportedly reduce out-of-stock items by more than 20 percent on average. Bossa Nova, another shelf-scanning robotics company, is one that now services Walmart stores across the nation. It seems evident that robotics will become a permanent fixture in the automated grocery store of the future.

Other new companies are involved in other aspects of an automated grocery store process. For instance, Grabango uses ceiling-mounted cameras to facilitate automated checkout for grocery shoppers. Takeoff Technologies provides automated robotics systems in mini-warehouse grocery-order-fulfillment centers. And Eversight produces predictive analytics software that aids with automated pricing algorithms. These companies are a significant reason why many grocers believe they will be able to compete with industry players like Amazon.

Survival of the Grocery Store Fittest

It’s clear that the grocery store landscape is changing. Amazon has certainly made an impact on the industry through its automated checkout and other systems. Likewise, some grocers have been forced to file bankruptcy amid rising competition, such as Winn Dixie. For those who want to survive, they must consider pursuing a fully automated grocery store. The challenge will be employing these concepts in a way that consumers want. Everyone wants efficiency, lower prices, and convenience. At the same time, human touch and personal interactions have value as well. Finding this perfect recipe will be the goal for modern grocery retailers if they wish to remain relevant tomorrow.

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