Young woman counts warehouse inventory on iPad
Posted by: Marc Jamieson

As more and more retailers start settling into our new normal, automation is proving to be a game changer as a driver of efficiencies and competitiveness.

It’s no secret that COVID has accelerated the pace of innovation across the retail industry. Retailers have done in ‘weeks’ what would’ve been done in ‘years’, and much of that innovation has been powered by automation. AI and automation are now at the core of the brick & mortar evolution, and McKinsey found in a 2021 report that a full 52 percent of current retail activities could be automated, at least partially.

As many likely know, automation has been playing a role in retail for years with baseline benefits such as the ability to streamline routine jobs including inventory and pricing, which result in both cost and labour-related savings. Yet as the possibilities with automation expand and grow, it is driving a fundamental and lasting shift in the industry. Artificial intelligence (AI) and automation are providing retail leaders with visibility, operational efficiencies, and resource efficiencies that free up time for both store associates and management to spend on strategic activities with a strong ROI.

It’s also providing retailers with a timely opportunity to pivot in the face of a severe labour shortage in retail. Many retailers are finally returning to pre-pandemic levels of hiring, yet as The Financial Times recently reported, there are currently 1 million empty retail positions in the US right now – a challenge at any time, but even more so as the pandemic restrictions are increasingly lifted and as we move back to normal. With such a critical time for retailers around the corner, looking at ways to incorporate automation can help brands utilize talent in the most impactful way possible while streamlining operations through AI and automation, leading to improved store performance.

Overcoming barriers to the adoption of automation

Despite the opportunities presented by automation, McKinsey noted in a report on automation in retail a few years ago that the adoption of retail automation is lower than in other industries. Given its obvious benefits, most are left wondering why. The report focused on the role of automation in retail and how it will reshape retail business models. The paper focused on four key findings and realities facing retailers:

  1. Margin pressure has made automation a requirement, not a choice
  2. The bottleneck to automation is internal, not external
  3. If you aren’t already implementing automation, you are falling behind
  4. The automation opportunity is bigger than operations

Taken together, McKinsey’s findings point to not only an opportunity, but an imperative for retailers who are looking to remain competitive. As the report notes, “automation will reshape retail business models and the broader value chain, creating organizations with fewer layers and a better trained and trusted workforce empowered by real-time data and analytics. The winners in the sector will be those who understand these implications and act quickly to address them.” With the additional impact of COVID, the need has never been greater.

Automated operational efficiencies

Automation is increasingly benefiting retailers through operational efficiencies that have the potential to greatly impact store performance. With retail management platform features that have a focus on SKU optimization, they can integrate retail data and retail analytics around inventory, sales data, and heat mapping. The result is more insights into store fixtures, a more informed visual merchandising strategy, and an improved customer journey.

Resource efficiencies can also be strengthened with a tech savvy retail management platform. From automating print and fulfillment tracking to one-click planogramming, retailers can plan with precision, execute to perfection, and collaborate with clarity. Printing and distribution can be improved to accurately order the right quantities for each store, saving HQ time and money. Gone are the days of manually reviewing images sent by stores. AI is now being used by sophisticated retail management platforms to confirm planogram execution and compliance via a smartphone camera. Ticketing is integrated in the case of noncompliance even. Saving more time and money for HQ and frontline again.

Engaging the frontline through automation

Automation is shifting retail business models and driving competitiveness, while creating more empowered employees who can focus their time on more meaningful work

Across the retail industry, the role of frontline staff remains more important than ever in fostering a meaningful customer experience. While some still equate automation with job losses, the reality is the opposite, with automation carrying the potential to positively impact the employee experience while allowing brand leaders to gain labour-related savings. Automation is shifting retail business models and driving competitiveness, while creating more empowered employees who can focus their time on more meaningful work, and can leverage visibility into insights and analytics to help drive performance at the store level through stronger customer engagement. And as previously noted, with ongoing retail labour shortages across the US and around the globe, leveraging automation for tasks that previously fell to employees is no longer optional.

The evolution of brick & mortar stores into fulfillment centres

A recent study by Colliers found that nearly a third of all online retail transactions are expected be fulfilled by a brick & mortar stores as the result of an increasing number of online purchases being connected to stores.  In 2020, just under 22% of digital sales were fulfilled by omnichannel methods, indicating a significant evolution of the role physical stores play. As a result of this shift to mini-distribution centres, AI is expected to play an even greater role for retailers who need to adapt their operations to accommodate customers. Regarding the impact of automation on the workforce, Colliers noted that “Despite initial fears, implementing automation is expected to create more new jobs than it replaces by 2025”, underscoring the significant and fundamental shift automation is driving in brick & mortar retail. Given its benefits, its not surprising that automation is strengthening the competitiveness of retailers who are looking to transform the customer experience and improve their bottom line. Automation is not only increasing operational efficiencies for brands looking to gain visibility, streamline processes and save costs, it is also freeing up frontline workers so that they focus on engaging consumers and creating brand loyalty in new ways.

The future of retail is automated and as McKinsey noted, if you aren’t already implementing automation, you are falling behind.