The Complete Guide to Retail Automation: Keeping Up with Modern Tendencies
Retail is going through hard times. Growing costs on supply chain management, increasing suppliers’ demands, high competition, and rising labor costs – all that may seem too hard to overcome. Luckily, there’s a solution.
According to McKinsey Global Institute’s report, half of the activities in retail can be automated with the help of current technologies. In turn, automation for retail helps to address margin strain and meet more demanding customer expectations. And this is vital on the market that saturated.
In our guide, we’re going to take a look at automation realities, strategies, retail automation software, and most promising real-life examples. All that needed to find out if automation’s going to work, and if so – where to start.
Retail Automation Realities
Automation in the retail industry is shifting the existing business models. So it’s a good idea to start with finding out what the new realities are.
Retail automation: demand, not an option
There's no way to compete on the fast-changing market with increased retail-margin pressure, investments in e-commerce, lack of specialists – and thus a high demand on them – using traditional cost-reduction means. That's primary why retailers are turning to automation to support and increase their profits.
Idle automation and its reasons
Retail and consumer products executives expect automated retail solutions to increase annual revenue growth by up to 10%. Still, few retailers rush to implement them in their stores.
The reasons are all about the lack of skills, capabilities, and money. In most companies, 90% of year's capital expenditures reprise those of the previous year. And it may be too hard for businesses to break free from the tight budget circle covering hardware and software expenditures.
No automating is losing a fight to competitors
Let’s check the famous Amazon example: they operate more than ten Amazon Go automated retail stores and plan to expand the business to 3,000 units by 2021. And Amazon isn't alone on this path. More and more companies like Walmart or Bingo Box start investing in automation and AI technologies – for the sake of their customers and employees.
An example of a completely automated retail shop - Amazon Go
For instance, Kroger (one of the US' largest supermarket chains) uses digital shelves that show prices, digital ads, nutrition details, and offer coupons. These details are updated directly from a central source, no need for local interruptions. And an eventual goal for the company is no less than moving the shelves to customers' smartphones.
Much bigger than operations
Retail automation allows vendors to spend more time on strategic activities. Planning is often a key to success, and advanced planning systems can easily automate analytics and help with developing scenarios. In turn, this reduces the time needed for merchandise planning and decision-making.
What's more, supply chains also offer some use cases for automatic retailing. For now, Walmart and Target partnered with Swisslog, a Swiss company specializing in automation solutions for warehouses. They’re planning to build warehouses with automated case picking.
Want to get deeper into warehouse automation? Check our 'Automation in warehouses' article for a detailed explanation.
Another company, Ocado, works on their own Smart Platform – a proprietary e-commerce warehousing solution – planning to sell it to other retailers.
Retail Automation Solutions and Strategies
Of course, automation isn’t just tools and technologies. No matter how modern the company is, people remain to be its driving force. So let's focus on the workforce of the future or find out how to create one.
Transforming the ways of working
Retail automation market brings new capabilities to the business, and new employees’ responsibilities come along. So it’s the right time for retailers to change their operating models: from headquarters to each store.
For example, robots with shelf-scanners can take care of most store managers' tasks. And the workers can switch to other, more important errands like assisting customers or checking online orders.
To fully benefit from automation in the retail sector, along with technologies, tools, and new roles, businesses should accept agile methods of working. This means moving from strict hierarchies to working in teams to end-to-end accountability.
The redeployment of the workforce
Most companies turn to automation due to its efficiency, but for retailers adoption of automated retail concepts is the best way to survive. By introducing the technology, they create a bank of hours with high-qualified employees. And workers can distribute some of these hours to more valuable tasks.
This way, Best Buy, a consumer electronics retailer, created new customer-service roles with their new programs. The company focused its attention and investments on In-Home Advisor and Total Tech Support, reskilling and deploying employees for them.
Prepare for skilling and reskilling
Retail process automation totally reshapes activities, skills, and their demand. The need for physical and manual skills declines, while the need for tech, social and emotional ones grows. For now, there are three options for retailers: hire new employees, outsource, or reskill hired workers.
Reskilling takes a great deal of effort, but it offers a higher return on investment. Besides, it saves HRs' time needed to find and recruit new workers. To start and complete the reskilling program, lots of companies turn to collaboration with schools and universities.
For instance, Walmart’s Dollar a Day tuition program was created with the help of Guild Education – company that provides coaches to help employees go through the university application process. What's more, Walmart partnered with Bellevue University, Brandman University, and the University of Florida that are known for their focus on adult learners and high graduation rates.
Updating hiring strategies
Now, employers pay more attention to workers’ comfort when making crucial decisions like choosing the location of their offices. And many are ready to move their headquarters to optimize for talent. For example, an online grocer Peapod has already moved their headquarters from the outskirts of Chicago to the heart of downtown.
Today, engaging gig workers and outsourcing are the main alternatives for hire. No wonder: one-third of US workers are freelancers, and their number will predictably be the majority of the workforce by 2027.
Retail jobs in the USA that will be affected (Source: McKinsley Global Institute analysis)
By turning to these options, retailers can not only fill the gaps quickly but reduce the costs. After all, they are paying only for the outcomes of the work done.
Both small and large retailers begin to understand these benefits. Coca-Cola, for example, invested in the gig-economy platform called Wonolo. It connects workers with employers, and Coca-Cola itself is among its top customers, along with North Face and Uniqlo.
Invest in wages, strategically
Automatic retailing leads to fewer but more skilled jobs. That's why vendors must invest in high wages and think of additional benefits for their workers. Many companies still offer higher wage only when they can't find or retain the right person. And that's a very unwinnable strategy, considering the market realities.
Retail Automation Software and Hardware
Now, as we're aware of retail automation meaning and its strategies, let's focus on tools for retail automation.
First, the software. We're going to review the main types of automated retail systems built to provide a top-notch shopping experience.
E-commerce solutions are used for selling products and services online. With the help of retail software development, store owners can list or remove products, check and process orders, payments, etc. The main features often include product list, search option, shopping cart, order and payment processing, and inventory management.
Example of an e-commerce website: a Shopify store
The inventory control system is responsible for inventory managing: goods tracking, organizing their storage, purchasing, etc. As for retail technology and automation, these systems often work with barcodes, wireless tracking, radio-frequencies. The main features include: inventory control, tracking and reporting, barcode management, label printing, and order management.
Examples of an inventory management solution
Payment processing solutions connect online stores with payment systems like Stripe or PayPal. They allow buyers to pay via a credit card or e-wallet. They are secure platforms where users add their payment details and get in touch with their banks to approve or decline transactions. Features: credit card processing, online payments, invoice issuing, storing of payment details, etc.
Retail automation software for payment processing
In the e-commerce sector, CRM system allows companies to better interact with their current and potential customers. It analyzes the history of purchases, transactions, preferences, etc. in order to improve relationships with buyers. These systems are mostly focused on customer retention and the company's sales growth. Customer data management, analytics, reporting, sales automation, and other features are used for that.
CRM systems keep all important customers' details at hand
Large enterprises also need business management tools. ERP systems integrate data across the company's departments, allowing to collect, store, manage and retrieve information from various business activities. Modules included in these systems take care of HR management, planning, and inventory management, and reporting.
Want to find out more about ERP solutions? Hurry to check our ‘ ERP basics’ article!
Finally, let’s take a quick look at the hardware used for retail store automation.
Common devices are:
- Shelf-edge labels
- Self-checkout terminals
- Shelf scanning robots
- Automated backroom unloading
- Electronic shelf labels
- Automated retail vending machines
- Label printers & compact labelers
- Touch POS terminals
- Mobile POS
- Info kiosks
- Vision AI cabinets
- Secure lockers
But where do companies get these software solutions? They either buy ready-made suites (which implies spending on the software license, staff training, and customization) or develop their own applications. As for software development, there are two options – hire in-house developers, or outsource. Each with its own benefits and drawbacks.
In-house development offers us:
- Cultural fit
- Easy communication
- Ability to make changes fast
And the drawbacks are:
- High cost
- Staff turnover
- Lack of IT experts
Can't decide which approach works for you? Take a look at our ‘In-House vs. Outsourcing’ article, covering the pros and cons of both options.
Advantages of outsource development:
- Flexible cost
- Experienced and talented engineers
- Fast project delivery
The only issues product owners may face include:
- Security risks
- Language barrier
As you see, the key to successful transition lies in the right strategies and tools. And software is not the least part of it.
Still, ready-made retail automation systems can rarely brag about top performance, reliability, and eye-pleasant design. Vice versa, users often face issues while updating product cost, slow or non-working synchronization, miss of integrations (and thus a need for own developers).
That’s why building a custom solution that meets the company’s requirements appears to be the best option. And if you feel the need for your business to grow and become more self-reliant, it’s time to look for a reliable tech vendor.
Cleveroad is experienced in building any-size products, including scalable e-commerce and m-commerce solution.
To prove it, we'd like to introduce a SaaS platform we've built – RetailOps
RetailOps is an intuitive and unified platform for back-office. Which comes with a suite of tools aimed at streamlining retail operations and saving money.
The main tools include warehouse management, inventory management, tracking, receiving, and many more. With real-time views of inventory and operations data.
Now, RetailOps platform focuses on e-commerce and omnichannel retail companies in the USA.
RetailOps tech stack