Automation in groceries could be the next step in want it-need-it-get-it now

Craig Guillot
January 21, 2019

Robotics is emerging as an important element in retail. While consumer-facing robots remain a challenge, their efficiency and accuracy is helping them gain ground on the back end — especially in the grocery sector.

Unlike apparel or sporting goods, consumers visit grocery stores on a regular basis. The typical consumer now makes 1.6 grocery trips per week, according to recent data from Statista. Count drive time, traffic, wandering the aisles and standing in line, and it easily adds up to a few hours each week. In an age where consumers want instant gratification and are increasingly pressed for time, they have interest in other options when available. While most consumers still shop in-store, the 2017 Valassis Coupon Intelligence Report found more are interested in using their mobile devices for information, fulfillment and convenience, much as they are with other types of retail.

“We call them the 2-2-2s. It’s two jobs, two kids, too little time,” says Jose Vicente Aguerrevere, chairman and CEO of Takeoff Technologies. “They don’t even want to visit the supermarket. They want to purchase it all and get it delivered to their doorstep or drive-through at the end of their work. It’s a very clear customer segment.”

A recent report by the Food Marketing Institute and Nielsen forecasts that 70 percent of consumers will be making some grocery purchases online within the next few years. The report found that omnichannel shopping has passed the tipping point, with online grocery shopping on an accelerated path to industry saturation. Nearly half of all U.S. consumers now shop for goods and products online.

Grocers have already been moving to forms of automation behind the scenes; many are using robotics in warehouse and fulfillment centers, says Peter Sheldon, senior director of strategy at Magento. British online-only supermarket chain Ocado uses more than 1,000 robots to pick nearly 3.5 million items and 65,000 orders per week. Amazon acquired Kiva Robots in 2012 to expand its use of automation, and companies like Instacart and Shipt are growing with same-day grocery deliveries.

Financial-market data provider PitchBook noted that venture capital firms have invested more than $1.2 billion in grocery technology last year, double the total for 2017.

“I think we’re going to see continued investment in [robotics and automation]for both online ecommerce orders and grocery orders,” Sheldon says.

Takeoff Technologies’ end-to-end system uses robotics and automation to perform “in-store hyperlocal fulfillment.” The company has raised $50 million and is working with five supermarket chains in the United States. In October, Takeoff worked with Sedano’s Supermarkets to create the world’s first fully automated robotic supermarket. The hyperlocal micro-fulfillment center will offer consumer pickup services and serve 14 Sedano’s locations throughout Miami. Customers can order through an app, and artificial intelligence-enabled robots assemble orders of up to 60 items in only a few minutes and ready them for pickup.

Albertsons also hired Takeoff to construct a network of smaller warehouses where AI-driven robots can help fulfill online orders. It will be the first national grocery to implement an automated ecommerce fulfillment system for customers and enable them to get groceries how and when they want. “This is a major step in our commitment to being a customer-centric player in the digital food and wellness ecosystem,” says Narayan Iyengar, senior vice president of digital and ecommerce at Albertsons Companies.

From phone to fulfillment

Takeoff’s concept is unique because it automates nearly the entire grocery shopping process. The automation addresses the two major costs of e-grocery retailing — the cost of pick-and-pack and the cost of the last mile. “Automation at the store level is going to transform profoundly the economics of e-grocery,” Aguerrevere says. “It’s finally going to make it viable.”

The company uses four modules to automate the process, says Max Pedro, co-founder and president of Takeoff Technologies. The first part is the client-facing user interface, which offers a personalized, seamless shopping experience via laptop or mobile device. The second part is real-time inventory control through enterprise resource planning and warehouse management systems. This helps prevent the common problem of substitutions when food products are out of stock, Pedro says.

The third module ensures the right picking mechanisms for every item. Part of the “secret sauce” is that bulk, high-moving items are picked from a dock located on the premises. The fourth component is the pickup experience at the stores, along with crowdsourcing deliveries through a partnership with Deliv.

Takeoff’s concept appeals to several shopper segments. Some consumers want their “needs” filled online but still want to shop for their “wants” on foot, Pedro says — these are consumers that might order paper products and food commodities online but prefer to go to the store to find the right mangoes or rack of lamb.

“The co-location in that store enables them to just get all of their needs in the trunk while they’re doing the rest of the purchases,” Aguerrevere says.

The final segment is the value-seeking bulk consumer who often visits supercenters or warehouse clubs on Saturday or Sunday. With the low prices and convenience, Aguerrevere says they can match the end result without taking up consumers’ time. The key is to ensure consumers don’t have to pay more for that convenience.

“Because our ecosystem is so efficient, you can actually sell at the same prices at the supermarket without any fees,” Aguerrevere says, “and make even more money than selling through the supermarket.”

Behind the scenes

In a typical deployment, Takeoff will occupy up to 10,000 square feet, usually in the back area. Equipment including automated picking devices, conveyors and stations is supplied from Knapp, one of the largest materials handling automation companies in the world. Yet unlike typical applications that can take up to three years to implement, Takeoff’s system can be deployed in any supermarket in only 12 weeks.

“It’s simple to install. It’s very fast to market and can handle 95 percent of the products that you sell in a supermarket,” Aguerrevere says. “We take those technologies and place them right in the supermarket.”

Other concepts are also using automation and scale to bring groceries straight to consumers. Boxed offers an online version of a wholesale club only without the membership fee. The online retailer focuses on large-size packs of products with a limited SKU count. Boxed’s flagship facility in Union, N.J., uses conveyor-based automation and robotic carts to help expedite orders in its Dallas and Las Vegas facilities. Boxed just finished design of its first-generation cart and is preparing to deploy it in its Dallas facility early this year.

Some pain points remain between grocery delivery and ecommerce, one being that many people still want to choose things like produce or meats. “I think it’s about providing a lot of different options, whether it’s pickup, delivery, better windows, transparency into the freshness of the produce, as well as what happens when something is not in stock,” says Will Fong, co-founder of Boxed.

On the floor

It’s inevitable that robotics will expand beyond distribution centers and store floors, Sheldon says. Tally, a robot designed by Simbe Robotics that is being deployed in several grocery stores, has high-resolution cameras and is designed to travel up and down store aisles to capture images on shelves and assist with inventory counts.

Simbe is currently working with eight global retailers, including Schnuck Markets in St. Louis. Schnucks announced plans in late October to move beyond the pilot with a full rollout in four more stores in December.

“In a grocery store/mass merchandise scenario like Walmart or Target, there are already armies of shelf stockers that work in the early hours replenishing shelves. I could see a short- to medium-term change where some of these stores start experimenting with robotics,” Sheldon says.

Nearly all Simbe’s installations run during normal store hours with customers in the vicinity, says Brad Bogolea, CEO and co-founder. The robots have logged more than 10,000 miles in stores, with the average robot traveling up to one mile with up to three or more trips through the store per day. Yet, having a fully autonomous robot in the front of the store is a different environment due to safety considerations, Bogolea says. Tally has lights and sounds to alert customers of its presence, moves slowly and is programmed to avoid movement near customers.

“It’s actually designed as a shy robot,” Bogolea says. “If there’s an aisle that is very congested, it won’t go down it. It will yield to customers, stay 10 feet away and give them space. We’ve spent a lot of time on the navigational behaviors.”

He says Tally offers several benefits. First, it enables employees to focus on fixing problems rather than discovering them. The labor savings are repurposed to allow greater efficiency in the business. It also helps close the data gap by gathering information from the shelf and tying it to the point-of-sale system and supply chain. While average retailers lose 4 percent of annual revenues from products not being on shelves, pilots have demonstrated Tally can help reduce that to 2 percent by better use of data.

Tally is based on a subscription model that depends on the size of the store, something Bogolea says can equate to “pennies per product per month.” It also offers valuable data to brands such as Unilever and Procter & Gamble, which are already sending people to stores to check how their products are performing.

This data can also offer relevance to consumers. Tally can produce a high-quality map that demonstrates exactly where every product resides, something that can be implemented in a mobile engagement to offer customers turn-by-turn instructions on where to find the items they are looking for. “I would say the customer perception, as well as the consumer perception, has been quite positive,” Bogolea says.

Craig Guillot is based in New Orleans and writes about retail, real estate, business and personal finance.