Automation a win-win for grocers, consumers

The COVID-19 pandemic delivered reams of change in the retail segment and one substantial wave took place within the grocery segment as online ordering rose to new heights.

Now, two years since COVID hit, online grocery popularity hasn't dipped even as masks and social distancing rules are no longer in play. It's not dipped even in the face of inflation and consumers' economic concerns.

In fact, over the next five years, online grocery sales are projected to enjoy a compound annual growth rate of 11.7%.

The growth will bump the e-commerce share of overall grocery spend from 2022's 11.2% to 13.6% in four short years, according to a forecast by Brick Meets Click and Mercatus.

Part of the growth prediction may be tied to a generational factor. Groceries, as it turns out, have become a top spending priority for consumers between the age of 24 and 26 years old, according to Numerator research.

Considering all the grocery sector trends there is one technology gaining traction — automation. Specifically, the deployments of the micro fulfillment center. It's an approach that can save grocers money, which means lower costs to consumers and improve the online grocery customer experience.

The power within

Micro fulfillment centers are, in essence, robot-driven warehouses, typically boasting a small footprint so they can be integrated into grocery stores and retail locations.

They serve as a mini distribution center for fulfilling e-commerce orders which means grocers avoid having the online pick and order process take place within a store's main consumer aisles.

Woolworths has adopted the technology and quickly lowered its average time of the pick and dispatch process. Well-known grocer Albertson's launched a micro-fulfillment center in Laguna Niguel, California at the start of 2023 to gain efficiency while simultaneously meeting its customers when and how they want to shop.

Both companies have deployed the micro-fulfillment center from Takeoff Technologies, which has 22 sites in operation. Its client list also includes Safeway, Jewel Osco and Carrefour.

"The micro-fulfillment center model is a key element in the store of the future. It combines the efficiency of automation with the ease of meeting customers when and how they want to shop," Vivek Sankaran, CEO and president of Albertsons, said in a press release announcing the technology strategy.

Takeoff contends that its automated fulfillment process is 20 times faster than manual picking on the store floor.

The win-win scenario

The ability to automate just 70% of online orders can reap benefits for grocers, according to Takeoff.

One benefit is that in-store labor forces can be put into more customer-facing roles which can drive a more fulfilling customer experience and that then boosts customer loyalty.

As with most tech investments, there are costs involved, ranging from hardware to AI as well as analytics and system support.

But the return on investment is multi-fold. Not only can it reduce labor costs and drive operational efficiencies, but automation can also provide real-time inventory insight and avoid the out-of-stock experience for consumers. Micro fulfillment centers can also offer features for tracking product expiration dates and categorizing items based on food safety guidelines.

Given all the gains it's not surprising automation in grocery is predicted to grow to $26.3 billion by 2027, according to research from Gitnux.

"Automation is becoming increasingly popular in the grocery industry due to changing consumer behaviors, technological progress and innovation, and increased e-commerce adoption, stated a Gitnux blog.

The many misconceptions

Automation is "rapidly advancing," according to Curt Avallone, Takeoff's chief business officer, due to the increasing demand for convenience for the customer and thirst for greater efficiency as well as industry competitiveness.

A common misconception is that automated technology will replace human workers, Avallone said in an email interview.

"Automation can replace some manual tasks, but it is more likely to enhance the work of human workers, allowing them to focus on higher-level tasks and increase efficiency," he said, adding that micro fulfillment centers also address increasing labor costs and shortages.

"E-commerce retailers rely heavily on workers in areas such as warehousing, delivery and customer service. The pandemic and increasing labor costs have both caused significant disruptions to the labor market. A shortage of available workers can make it difficult for retailers to meet customer demand and provide quality service."

Another misconception is that automated technology is too expensive to implement.

"Although there are upfront costs, the long-term benefits will outweigh the investment. Micro fulfillment automation reduces labor costs, increases efficiency and customer satisfaction," said Avallone, adding that his company's centers mean that online orders can be fulfilled 20 times faster than a manual process.

Down the road

Avallone expects micro fulfillment centers to become more widespread as retailers and grocers begin to fully understand all the potential benefits.

"Online ordering and delivery will continue to accelerate post-COVID-19 as more consumers continue to seek out contactless delivery or pickup options," he said, adding fulfillment technologies will continue to advance with the use of robotics and AI to optimize efficiency while keeping costs low.

"Micro fulfillment solutions are an optimal way to build a low-cost delivery ecosystem that can meet the end shoppers' demand for quick and convenient delivery. As a plus, they also eliminate clutter in restoring the in-store experience for shoppers that decide to shop in a retail grocery store."