Ever since the Covid-19 pandemic strained supply chains across organizations, retailers have been playing catch-up with competitors like Amazon and Walmart that began experimenting with robotics years ago to supplement their human workforce and deliver on faster warehouse and in-store order fulfillment and shipping. So when retailers found themselves in uncharted waters – those without robotics capabilities struggled to keep shelves stocked and get orders to customers.
Robotics automation is not new to warehouses or to store floors. Think of conveyor belts and self-checkout as the first generation of the technology. Now, with more robotics companies starting up and increased investment in research and development, the technology has made significant leaps. Robots can now be used behind the scenes for everything from unloading and counting pallets of inventory to scanning shelves and scrubbing floors.
But, there are limits to what tasks robots can handle. “Robots are good at any number of things, but their fine motor skills are terrible,” said Bryan Gildenberg, senior vice president of commerce at Omnicom Retail Group. “They are very good at getting pallets off the truck; they are not very good at stocking [store] shelves.”
Many failed robotics ventures have shown that robotics technology is still far from completely replacing human workers for most functions. Customers still want to interact with humans in stores, especially for service complaints or requests, and shoppers can still find fully autonomous stores unnerving. In warehouses, human workers are needed to supervise and report any malfunctions, as well as handle tasks requiring either more manual dexterity or critical thinking.
In April 2022, Amazon announced plans to spend $1 billion on supply chain technology by investing in various warehouse tech startups like AgilityRobotics, creators of a robot called Digit that can perform basic warehouse tasks. In June 2022, Walmart said it planned to open four new automated fulfillment warehouses. And Target and Lowe’s made similar announcements last year, racing to keep up with those retail giants.
With large retailers leading the pack and doubling down on robotics-powered automation, smaller competitors may find themselves pulled along in their wake. With all of this in mind, Modern Retail has taken a deeper look into robotics usage and its future retail relevance – alongside the possible roadblocks that companies will face when adopting this newer technology.
For this case study, Modern Retail surveyed 388 industry professionals including publishers, agencies, brands and retailers to uncover how they’re currently using robotics technologies and how they plan to in the future.
- Robotics demand increased 48% among those surveyed, since 2020 and the start of the Covid-19 pandemic.
- Big retailers bulked up autonomous operations last year. Faced with a new retail landscape, smaller retailers reveal plans for future investment in robotics technologies.
- Retailers have found robotics most useful behind the scenes – in areas such as packaging, shipping and manufacturing – rather than for consumer-facing applications.
- Third-party vendors are making robotics technologies more affordable and attainable for smaller retailers.
Although adoption of robotics is still low within Modern Retail’s surveyed group — only 9% of respondents said they have invested in or used robotics at their company — the number of retailers experimenting with the technology has accelerated since the start of the pandemic.
Nearly half (48%) of respondents currently using robotics said that their company’s use of robotics has increased since 2020. Propelled by supply chain blockages, an e-commerce boom, Covid-related storefront safety protocols and a diminished labor market, many retailers turned to robotics technology to ease pressure on stores and workers.
All retailers, especially those providing essential services like grocery stores and pharmacies, faced dramatic changes to business practices during the pandemic. Physical stores altered floor plans to make the shopping process safer and more efficient for consumers. But despite those improvements, many people no longer felt safe spending long amounts of time shopping in public. So, shoppers turned to ordering their groceries online instead.
Simultaneously with these changes in protocols and shopping behaviors, stores had many workers calling in sick or considering quitting out of concern over possible exposure to the virus. Dubbed the Great Resignation, 4.2 million workers quit their jobs in August 2021, according to the US. Bureau of Labor Statistics . With fewer workers available to maintain frequent store cleanings or to fulfill the influx of digital orders, many stores began building fully autonomous micro-fulfillment centers — some of these inside physical store locations closed off to the public — or employing robots to work alongside smaller human work teams.
Even today, 73% of American warehouses continue to be short on labor, according to Instawork. And U.S. retailers reported spending 4% more cash on labor costs in the fourth quarter of 2021 compared to the same period in 2020.
In response, retailers have started partnering with third-party vendors to upgrade their technology and build high-tech warehouses, fulfillment centers, distribution facilities and delivery operations. Third-party vendors not only supply the hardware and software for these projects, but also provide relevant expertise and knowledge of best practices.
According to some robotics vendors, their services have never been as in-demand, with clients asking how quickly they can deploy their technologies. “The utilization of BrainOS-powered robots increased 13% [between January and April 2020] in retail locations” according to Brand Corp., developers of an autonomous operating system of floor-scrubbing robots. In fact, according to the Association for Advancing Automation (A3), sales of robotics units in North America increased 24% from January to September 2022, making 2022 the year with the highest number of robotics sales in North America for the second year in a row.
However, retailers’ choices in technology partners – and the capacity and bandwidth of those partners – is still limited. PJ Stafford, vp of sales and marketing at Alert Innovation, an e-grocery automation developer, said that the company’s micro-fulfillment technology has “a lot more demand than there is supply.”
Long after the release of Covid-19 vaccines, permanent effects of the pandemic on the retail landscape are still being revealed. Most notably, while down from their pandemic peak, the e-commerce floodgates have burst open and sales are surging. Online orders will account for 30.5% of total retail sales by 2026, according to Edge by Ascential data. As the largest driver of retail growth in the U.S., online order fulfillment will be a priority for retailers to stay competitive in a booming digital retail market.
Some retail giants, anticipating the arrival of an e-commerce boom, invested in robotics technology early on. Amazon, for instance, spent $775 million to purchase Kiva systems in 2012, considered by some to be a risky investment at the time, as Kiva was a young robotics company with a fleet of mobile robots only capable of simple tasks. However, those simple tasks, like moving products from warehouse shelves to workers, have eliminated warehouse inefficiencies and reduced strenuous physical labor for workers.
And workers’ health, especially in labor intensive roles, became a hot topic during the pandemic. In some instances, robotics has been able to help companies maintain productivity while diminishing the burden on the people they work alongside. The New York Times reported in July 2019 that Amazon’s robots “have raised the average picker’s productivity from 100 items per hour to what others have said is a target of around 300 or 400.”
This ability to package three or four times the amount of digital orders was a major contributor to Amazon’s ability to keep up its two-day shipping promise. An added bonus: Human workers are no longer walking 12 miles a day on concrete floors to pick orders. “If you’re not 20 years old, you’re a broken person at the end of the week,” said Marc Wulfraat, founder and president of supply chain consultancy MWPVL International. Robotics-fueled collaborations with human workers have augmented productivity – and the employee experience.
When Modern Retail asked survey respondents using robotics technology how they’re applying it to their businesses, over half (52%) said they’re using robotics for packaging and shipping. But other behind-the-scenes operational applications for order fulfillment, such as manufacturing, factory stocking and delivery, are also seeing some use.
Following years of chain retailers using stores as local fulfillment centers, automation of warehouses and distribution facilities is the logical next step to strengthen order fulfillment processes.
For some time, Target has relied on in-store inventory and employees to ship out digital orders. But in March of 2022, it announced a $5 billion investment in new high-tech warehouses. Walmart – which uses over 3,500 of its stores to fulfill digital orders – nearly 75% of overall locations – made a similar announcement last year. The retail titan will build four fully automated warehouses and add robotic technologies to 42 of its distribution centers over the next few years. Robotics-powered fulfillment will continue to ramp up as physical retailers use it to keep up with Amazon’s high-tech operation.
Cautionary tales of failed robotics ventures, like robotic pizza maker Zume Pizza and robotic barista Cafe X show how consumer experience preferences can trump robotic capabilities in retail. These expensive and difficult experiments in more fully replacing human interactions demonstrated that the technology is not yet developed enough to be cost-effective and reliable for consumer-facing operations, with customers often finding them unnerving. Terry L. Esper, a professor of logistics at Ohio State University explained the industry’s reluctance: “One of the biggest impediments to get beyond just the testing [phase] is more about the acceptance of these bots, not the technology, because I think the technology is there.”
Modern Retail also saw a similar trend when asking survey respondents who did not use robotics why they hadn’t yet invested in the technology. The majority (83%) said lack of relevance to their core business was the greatest deterrent. For retailers not looking to rebuild their back end, this kind of technology may still feel like a luxury. Integrations less infrastructural in scope – and more augmentative of human functions – may be easier and more relevant ways to wade in. For example, beauty and fashion brands often use robotics to enhance in-person experiences with a store associate rather than wholly automate the experiences, as seen with automatic shade finders available at some beauty retailers.
The second most cited reason for not investing in robotics was the cost of building and implementing the technology. Companies looking for quick cost-saving solutions, rather than considering cutting costs long-term, may not be able to afford the high entry price and upfront investment required by robotics. But, with recent leaps in technological advancement and the development of various tech start-ups by larger retailers, the cost is lowering. With the technology becoming cheaper and more available – robot rentals can be as low as $1,000 per month – it’s becoming a more viable option for smaller retailers.
And indeed, a minority is signaling future interest. When Modern Retail asked respondents who did not use robotics to describe their company’s attitude towards the technology, 9% revealed they are making plans to invest in the future.
Smaller retailers should expect these practices to naturally trickle down soon, especially as the technology becomes more accessible. For instance, Skims, the shapewear brand founded by Kim Kardashian, is already using autonomous robots in its fulfillment center in Romeoville, Illinois. To do this, Skims partnered with Locus, a robotics company, and Radial, an e-commerce fulfillment company, to design robots able to do menial tasks like moving packages around the warehouse. This allows Skims employees to focus on higher-level tasks like processing orders and returns or tracking inventory data.
More broadly, robotics use in warehouses is expected to increase by 50% or more in the next five years, according to surveys by the Material Handling Institute, an industry trade group. The pandemic’s sudden and dramatic changes to the retail landscape has clearly forced greater experimentation and focus on the efficiencies provided by this technology.
The Covid-19 pandemic revealed the need for more resilient supply chains, especially to handle unprecedented events in a highly globalized world. Retail giants that had started investing in robotics automation years ago, were able to weather the storm of the pandemic smoother than smaller competitors. And the industry as a whole took note.
High-tech warehouses and fulfillment centers built by big retailers have inspired the founding of more robotics tech-startups and, subsequently, the research and development of the technology. These new warehouses and fulfillment centers are the blueprints others entering robotics are following to build their own automated facilities. Now that automation has become more attainable for smaller players, expect more partnerships with third-party vendors and continued development of these technologies.
Additionally, in such a highly competitive and volatile environment, retailers are undergoing constant restructuring and facing consistent pressure to produce products quickly and stay on trend. For example, several big-box retailers kicked off 2023 with store closures all over the U.S. in the first week of January. Instead, they’re focusing on enhancing their digital shopping experiences as they adapt to how – and where – people prefer to shop. With so much uncertainty in the market, retailers beyond Amazon and Walmart are choosing to take back some control and manage long-term costs with help from robotics.