Robots, Retail & $1T Gone AWOL

Perfect gig for robots?
If you are a robot designer and builder, the following retail scenario might seem like the perfect challenge: Robot vs. inventory management. No heavy lifting for the robot, in fact, no lifting at all. Always a flat, clean, dry surface for operation within a pleasant environment. Plenty of power, light, Wi-Fi, and easy access to the corporate management system.

The robot challenge involves a job that humans aren’t particularly good at. KPMG’s Eugene Kublanov, a consultant in procurement and business services remarks: “Stores now rely on hourly employees to manage and track inventory. The work is tedious and often leads to errors.”

One error in particular is shockingly expensive: out of stock. IHL Group puts the global tab for out-of-stock items at $1 trillion annually.

When errands become nightmares
It’s happened to most of us at one time or another: a quick trip to the supermarket for just a few items is marred when we find many or most are disappointingly out of stock. Especially the ones you really wanted and needed. Damn!

And it happens not only at supermarkets, but in all of retail. Out of stock plays no retail favorites, and it’s global.

According to RetailDive, out of stock includes:

• Empty shelves (encountered by 32% of shoppers)
• Failure to find staff to help (16%)
• Found staff, but not merchandise (17%)
• Price in store didn’t match an ad (18%)
• Other reasons (17%)

“In all, some $36.3 billion in the U.S. is lost to brick-and-mortar competition and another $34.8 billion is lost to Amazon or another e-retailer, according to IHL Group. Sometimes shoppers just give up on the purchase, and that costs retailers another $26 billion.”

The situation is especially grievous to the world’s largest industry…food, both fresh and packaged. Grievous to both disappointed customers and to the disappointed retailer over lost sales. Lost sales with the hard-to-believe, crazy price tag of $1 trillion worldwide. In Asia/Pacific, it’s worst at $520 billion annually; North America $145 billion, with EU+M/A $190 billion.

Department and specialty stores miss out on $457 billion in revenue; food, drug & mass merchandisers bid adieu to $325 billion; while restaurants and hospitality forego $202 billion.

Outages involve 25 percent of retailers overall wares; 75 percent of the time what customers seek is in stock. Not surprisingly, if you’re a customer hunting for anything among the 25 percent of outages, you’re not a happy customer, having spent travel time just to be frustrated.

And the condition is frequent: “Shoppers encounter out of stocks in as often as one in three shopping trips,” according to a report from RetailDive. With shoppers visiting a supermarket on average 1.6 times per week, staying 40+ minutes each time, not finding wanted items from their shopping list can be particularly annoying…and costly to a shopper, who’s otherwise ready to spend.

All of which does nothing for customer loyalty at a time, like during this two-year pandemic, when brick and mortar retail is getting killed (except if you are Walmart or Costco or maybe Target). The not-so-lucky retailers in the U.S. have shuttered 20,000 stores just in 2020 alone. Out of stock is a significant part of those global retailer woes.

Out of stock is an annual $1 trillion disruptor on the rise, which e-commerce is gobbling up with speed and alacrity. Greatest beneficiary of retailer woes is the usual suspect: Amazon. Research shows that 24 percent of Amazon’s revenue derives from orders from miffed customers who ran into empty product slots on a retailer’s shelves. 24 percent of revenues. Outrageous!

Just for the record, Amazon’s annual revenue for 2020 was $386 billion, up 38 percent, with a yearly increase of over $100 billion. Here’s the incredulous but true part: ILH Group’s research claims that “missed sales” by retailers account for 24 percent of Amazon’s annual revenue. All of which means that for 2020 Amazon made $86.4 billion from others’ out-of-stock items.

$86 billion equals the price tag NASA will spend to send Artemis to the Moon. Out of stock is literally a moonshot (a bad one!).

As Kublanov sees it: “The technology is there and proven. Inventory management and material stock issues cost the retail industry billions of dollars each year, so having a robot that can more efficiently and accurately track inventory data is going to be an advantage.”

Inventory management is a perfect gig for a robot. Some, like Simbe Robotics,  actually have robots in the field doing just that.

There’s not many. Plenty of room remains for those willing to specialize in automating inventory management. A robot seems like a natural tool.