In The Wall Street Journal, Jennifer Smith outlines the characters of the grocery store of the future: small, local, and robotic. She writes:
Grocers looking to fill online orders more quickly are testing micro-fulfillment systems that can spit out as many as 4,000 orders a week but can still be housed in the back of stores or in urban areas where space is at a premium. The store owners are evaluating whether automation can help tamp down costs while speeding up deliveries and they are turning to a new set of startups aiming to make e-commerce fulfillment more efficient in a small footprint.
U.S.-Israeli robotics startup Fabric, which builds automated micro-fulfillment centers for retail customers, is starting construction on its first U.S. grocery site this quarter. The project, for a regional grocer in the Southeast that it wouldn’t identify, will be about 10,000 square feet, Fabric Chief Commercial Officer Steve Hornyak said. By contrast, regional distribution centers serving grocery chains typically can be 600,000 square feet or more.
The company expects to have up to six smaller fulfillment centers in various stages of construction for grocery stores in the U.S. this year.
Online orders still account for a fraction of the domestic grocery market, about 3.5% of overall food and beverage sales, according to market researcher Forrester, but sales are rising quickly. Food and beverage is the fastest-growing U.S. e-commerce segment, according to research firm eMarketer, with an estimated $22.63 billion in sales last year and projected to nearly double by 2022, to $40.04 billion.
The growth has food retailers scrambling to retool operations as they take on tasks customers once handled themselves, from picking out groceries to taking them home. The shifts echo broader logistics trends tied to e-commerce, as retailers looking to speed delivery move inventory closer to big population centers and use automation to build more compact distribution operations.
Grocers face big challenges in getting a piece of the growing market, however. The delivery of perishable food products leaves little room for error and low margins in the grocery business leave little to invest in upgrades.
Supermarkets are weighing short-term strategies, such as sending employees through the aisles to pick online orders, against costly investments in large centralized distribution centers that use robotics to cut down on handling and other expenses.
Micro-fulfillment centers provide another, potentially less costly option. Takeoff Technologies Inc.’s 10,000-square-foot systems, for example, cost around $3 million and can be up and running in about four months, said Chief Operating Officer Laura Scott. The centers hold some 15,000 different products and require about a dozen workers to operate, including some manual picking.
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