WHY IT MATTERS: Digital Transformation

WHY IT MATTERS: Amazon spends 14.2% of its net sales to fulfill orders and 12.2% to deliver them to consumers. Thus a quarter of the costs of products sold is allocated to logistical costs and this is the biggest hurdle to eCommerce wide adoption. Amazon and other pure plays have a number of key advantages over established brick-n-mortar retailers (no retail store costs, no store employees, etc.) but they have to battle with order preparation and delivery which traditional retailers delegate to their customers as they push their carts in the store aisle. In that context, recent announcement of Sobeys to leverage Ocado's automated warehouse technology or recent Amazon announcement to create a parcel delivery solution that competes with FedEx and UPS makes sense. Any retailer thinking of scaling its eCommerce operation should thus make sure that its business model is viable regarding fulfillment and shipping - all other elements of eCommerce are not an issue.

- Amazon SWA service: http://fmcs.digital/blog/amazon-package-delivery-service-to-compete-with-fedex-and-ups-swa-ecommerce-disruption-retailapocalypse/ 

- Sobeys Ocado partnership: http://fmcs.digital/blog/u-k-s-ocado-taps-into-canadas-online-grocery-market-with-sobeys-tie-up-is-canada-mature-enough-to-have-automated-grocery-fulfillment-centers-ecommerce-robots/ 

- Ocado's technology: http://fmcs.digital/blog/video-shows-ocado-warehouse-technology-that-sobeys-has-acquired-to-prepare-grocery-orders-is-based-on-an-army-of-small-robots-working-on-3d-hive/ 

WHY IT MATTERS: On the heals of recent technology deals between Ocado and Carrefour in France and Sobeys in Canada, this paper and others explain how the technology works.

HUMAN-LESS WAREHOUSE

The technology is akin to a huge vending machine, where products are stored in compartments that robots can access when required. More important is that this technology can apply to any product you can buy online, not only grocery. In fact, figuring grocery item picking is probably the most difficult product category - with 3 temperature items (room, cold, frozen) and lots of small and delicate products (think tomatoes and meat). This will help reduce the cost and errors of web order fulfilment, and potentially speed delivery to make 1hr delays possible. When coupled with robot manipulation and self-driving delivery vans, the days of human-free order preparation and delivery is fast approaching.

RETAIL ARMAGGEDON

This will revolutionize the way we think of retail and distribution by making the store useless. The value chain will become produce-warehouse-home.

https://www.theengineer.co.uk/grocery-4-0-ocado-reshapes-retail-grocery-with-robotics-and-automation/ 

https://www.youtube.com/watch?v=iogFXDWqDak 

WHY THIS IS IMPORTANT

This is one of the ways eCommerce will evolve in the near future: robotization. Orders are prepared automatically, without humans touching them. Even for grocery. Especially for grocery. Because it is a high volume, low margin operation, grocery mandates automated preparation. Of course, this level of investment can only be afforded at very high volume, which is the case in the UK where Ocado's warehouses like this can deliver 190,000 orders every week. No other country has this level of grocery eCommerce but when they do (think Amazon Fresh in the US), robotic warehouses like this will become mandatory to stay in business.

The last missing link will remain, of course, the last mile: delivery. There, self driving cars and drones may offer a solution.