Micro-Fulfillment Centers, Robotics, and the Brave New World of Retail
In 2019 people were excited when online orders passed 3% of total grocery sales. Some big shots in fancy suits even predicted that in 5 years, that number would be in the double digits. But then a global pandemic hit, and online orders exploded past 10% for 2020.
Now things are shifting back to normal, and the increase in online adoption will slow, but we’re essentially five years in the future, and retailers need to catch up fast. The unexpected surge in consumer spending during the pandemic allowed retailers to play fast and loose with online fulfillment, but the honeymoon is coming to an end.
Online orders pose severe challenges for traditional retailers, and most are not ready to compete in the new omnichannel world we now inhabit. Why is this?
- When shoppers don’t come into the store, they impulse buy fewer things leading to smaller baskets.
- Delivering items to consumers or partnering with a service like Shipt is very expensive and eats into already tight margins.
- Paying employees to pick orders off of shelves designed for consumers is inefficient and interferes with the in-store shopping experience.
All told, online orders equate to fewer purchases and lower margins, which means stores will need to shift how they do business to keep up with disruptors like Amazon.
Micro-Fulfillment Centers Are the Future
The good news for traditional retailers is that micro-fulfillment centers may provide a clear pathway to stay competitive, and chains with existing space in crowded markets will have a built-in advantage. Especially when it comes to curbside pickup.
Micro-fulfillment centers are essentially small warehouses with all of the things a grocery retailer sells. But instead of floor space designed for consumers with fancy displays, plenty of room, and promotional materials, these compact warehouses are designed to maximize efficiency when it comes to picking orders. No frills necessary.
Fulfillment centers can be built into existing retail footprints or placed in small warehouses close to the locations they serve. To keep up with the surge in online orders, some retailers, including Whole Foods, have even started converting existing retail locations into “dark stores” that are no longer open for foot traffic.
Say Hello to Automation
Amazon may be unbeatable when it comes to long-range delivery logistics, but Walmart and other leading retailers are betting they can carve out a piece of the pie through automation. Micro-fulfillment centers aren’t just better for employees picking orders; they are ideal environments for advanced robotics.
While stores may stretch to pick 100 orders a day manually, micro-fulfillment centers equipped with automation can increase that number 10x to nearly 1,000 orders per day. According to industry consultancy L.E.K, “Automated picking means that Micro-fulfillment centers have the capability to provide online grocery pickup in under an hour’s turnaround time while saving on expensive manual labor.”
Plus, highly automated fulfillment centers enable an entirely new approach to how retail works. Soon, consumers may be able to pick up most of their groceries from something the size of a shipping container on their block instead of venturing further to visit a regular store.
Wrapping It Up: Vision of the Future
In the not-so-distant future, a majority of grocery orders will be placed online. Those orders will be picked in a matter of minutes by robots and either made available for pickup or delivered within the hour to consumers’ homes. Likely via drones.
It isn’t a question of if this will become the new normal, but when. Retailers who are quick to invest in online experiences, micro-fulfillment centers, and other advanced technology will be the ones who survive this rapid evolution. The rest will join the dinosaurs.
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