Is automated micro-fulfillment the future of grocery ecommerce?

Date : 29 October 2019

Stewart Samuel

Program Director - Canada

Automated micro-fulfillment has emerged as one of the key trends in the US grocery ecommerce channel. We recently visited a site with Takeoff Technologies, the leading company in this space with multiple sites operational, to see its model in action.

Range of fulfillment models

The challenge of developing a profitable model for grocery ecommerce as it scales is underpinning much of the innovation that is being seen in the US. With a focus on the two major cost components of picking and delivery, a wide range of models have emerged and continue to be tested. In the US, most retailers rely on store-based picking, using either their own teams or crowd-sourced labour from companies such as Instacart and Shipt. Hybrid models such as Ahold Delhaize’s ‘warerooms’ and ‘dark stores’ provide an alternative model, while next year, Kroger’s partnership with Ocado will see the first of up to 20 planned automated fulfilment centres go live.

Source: IGD Research

Automating fulfillment

However, with most retailers looking to optimise their existing store assets, several companies have emerged which bring automation to the in-store picking process. Alert Innovation, Dematic and Takeoff Technologies are among the companies which have deployed, or are in the process of deploying, their solutions in the US. Fabric, formerly CommonSense Robotics, is working with one of Israel’s largest grocery chains to develop an automated warehouse. Essentially, the solution is an automated picking facility that is built within a store’s backroom, or a standalone facility, operating almost independently of the store where it is housed.

Leading US operator with international ambitions

Takeoff Technologies has developed several facilities in the US. It is currently working with Ahold Delhaize, Albertsons and Wakefern, while it has also announced plans to work with Woolworths in Australia. The site we visited is located at a Sedano’s supermarket in Miami, Florida. Sedano’s operates 34 stores in Florida, with a focus on Hispanic shoppers. The fulfillment centre services online orders for other stores in the network, using a hub and spoke model. The hardware for the fulfillment centre has been developed by Knapp. With a footprint of 10,000 sq ft, the store was remodelled to create the space for the installation.

Source: IGD Research

Industry-leading metrics

The growing interest in micro-fulfillment is driven by the industry-leading picking rates that can be achieved within a store-based environment. The model is a low-cost solution that can profitably generate tens of millions of dollars in sales from each site.

Source: IGD Research

With a range of around 15,000 products, around 80% of the products in each order are automated, with manual top-up for some bulkier and difficult to manage items.

Source: IGD Research

Future developments

Given the challenges of developing a profitable store-based picking model, there is likely to be growing interest in this type of solution. It also enables retailers to repurpose excess space in their stores as we continue to see a shift towards smaller formats. New stores could also be developed combining an automated core grocery offer with an experiential fresh and prepared food hall. The model could also be used to facilitate cross-channel partnerships, enabling grocery retailers to expand the reach of their ecommerce propositions. A model which is profitable could also further accelerate the growth the channel is experiencing in the US.

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