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4 Key Areas Where Automation Strengthens the Retail Industry
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November 1, 2022 Blog

Authored By: Clement Yew, Director of Business Development, Southeast Asia AutoStore

 

The retail industry has seen dramatic shifts in the last three years. We saw a dramatic shift where consumers embraced online shopping during the pandemic with global lockdowns and “work from home (WFH)” in place. And when the world reopened, consumers and tourists returned to malls and shops, enjoying a real-world, in-person, multi-sensory experiences all over again.

These retail shifts exerted pressure on businesses to provide smooth e-commerce and in-store retail experiences, while creating challenges on a logistics level, where some existing systems were unable to cater to an increase in processing times or the need for larger storage spaces.

In the past, retailers heavily relied on human labour to conduct operations in the warehouse. Now, it is no longer possible to keep up with growth with just manual operations. Retailers are moving to automated systems at their warehouses.

According to Technavio, the global retail automation market size is estimated to grow by USD $8.80 billion from 2021 to 2026, accelerating at a CAGR of 10.2%. It was reported that Asia Pacific will have the highest market share growth during the forecast period, with China and Japan being the key countries for the retail automation market in the region.

Automation has become a cornerstone in the ever-growing retail and e-commerce market. This brought about a rise in automated storage and retrieval systems (ASRS). The rapid rise of the retail industry offers many great opportunities, but demand is unpredictable and hard to maintain. The automated systems replace large areas of shelving to reduce floor space while ensuring that goods are stored securely and retrieved efficiently. The systems at AutoStore scale up and down with ease, allowing retailers to stay on top of ever-changing consumer behaviour.

The ASRS market in Asia Pacific reported a CAGR of 9.95% over the forecast period of 2021 to 2026. According to Mordor Intelligence, an increasing focus towards automation has been continuously witnessed, driving a market for ASRS in the Asia Pacific region. In addition, it was revealed that the retail industry generated the second-highest demand for ASRS in the region. As the retail sector continues to grow, it becomes imperative for retailers to explore solutions to cater to the limited labour storage spaces. However, selecting an automated storage or order fulfillment system requires sufficient research to understand what works for retail businesses.

“In the past, retailers heavily relied on human labour to conduct operations in the warehouse. Now, it is no longer possible to keep up with growth with just manual operations. Retailers are moving to automated systems at their warehouses.”

1.  Density

Having a greater density within the retail space allows companies to store more products on a smaller floor area. The ability to scale down storage space in terms of floor area, by building upwards into a cubic structure with clever automation means, more orders are fulfilled, larger bins are used, and margins can be increased.

As shipping costs continue to rise due to recent global conflicts, retailers need to find ways to cut costs to remain competitive and afloat. Utilising technology such as a localised dense automated system boosts order fulfillment efficiency and speed, while providing an opportunity to offer lower-cost delivery options such as a one-hour pickup.

2.  Flexibility 

Flexibility is always crucial for any business in a fast-changing world of pandemics and global conflicts. E-commerce is expected to continue to grow in the years ahead, probably beyond traditional projections.

Apart from the seasonal trends, there are many unknown variables retailers must be primed to respond to—from the size of customer baskets, to the assortment of goods customers want to buy. Flexibility will be crucial to stay ahead of market demands. Robotic technology offers the ability to pivot seamlessly to meet new expectations as they emerge. This could be anything from an increase in orders that demands increased productivity, to needing additional space to accommodate legacy and new stock items added to inventory.

3.  Reliability

There is also a significant difference between the effectiveness of mechanical and automated systems and their reliability.

When orders are coming in, the last thing a retailer needs to worry about is system downtime. Failing to access inventory or fulfil orders is detrimental to business. Accessing all inventory at all times without a reduction in density is imperative to remain competitive. A system that provides as close to 100% system uptime should be a high priority.

4.  Visibility

Finally, the newest area for retailers to consider is visibility. This includes visibility of stock, price, order demand, and shipping expectations.

According to eConsultancy, 38% of online shoppers will abandon their cart if it takes longer than a week to receive their order. While that is not a huge number and a week is forgivable, 69% of those shoppers are less likely to return for future purchases if that arrival date is not honoured.

Visibility also applies to inventory accuracy, which is crucial when it comes to gaining new customers, fulfilling orders, increasing basket sizes, and reducing cart abandonment. Shoppers loathe placing an order only to receive a message that the item is no longer in stock.

Combining these four key areas supports an increase in efficiency, productivity, healthy profit margins, and a decrease in order errors. Automation can remove repetitive tasks from staff, and when applied at the store level, can address cross-channel orders with a higher rate of accuracy and productivity. It is an offering that allows the store to maintain its position as a physical store, but also support returns, fulfil local e-commerce orders, and improve the overall efficiency of these stores.

 

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