From rising costs to fickle consumers, retailers’ margins are contracting and the room for error is shrinking. A key factor in retailer survivability in the future – let alone profitability – is supply chain automation. And according to supply chain specialist Peter Jones, many retailers are already out of time.
“Retail is a challenged industry right now, especially from a supply chain perspective,” he says. “It’s changing rapidly, it’s very hard to make money, and there’s a long list of brands in deep trouble. You don’t have to go back far to find plenty that no longer exist.”
Jones draws a stark line through the sector. On one side are what he calls the “haves”: Retailers that have invested in automated, next-generation supply chain technologies. On the other are the “have-nots”, still relying on manual processes to move, pick and pack goods – and increasingly struggling to keep up.
The distinction matters because the gap between the two groups is widening fast. “By the end of the decade, the have-nots are going to be struggling just to stay in the game,” Jones says. “The early adopters will have built market competency and distinctive capability. Late adopters – and especially those that still haven’t moved – will be in a far weaker position.”
A narrow window – and a missed opportunity
The inflection point came during the Covid disruption. For a brief period – roughly two years – warehouse automation shifted from being the preserve of global giants to something smaller retailers could realistically access.
Flush with cash they couldn’t deploy elsewhere, many businesses reinvested in what Jones describes as “next-generation supply chains”. Goods-to-person technology, such as automated storage and retrieval systems (ASRS) and autonomous mobile robots (AMRs), moved from optional extras to core infrastructure.
“That transition happened very quickly,” he says. “It was a tipping point. The companies that made the investment during that window are the haves. The ones that didn’t are the have-nots – and they’re the ones I worry about.”
At its most basic, supply chain logistics hasn’t changed. “There’s a widget at point A, and someone at point B wants it,” Jones says. “Our job is to make that happen.” The complexity stems from scale: Thousands of SKUs, rapid stock turnover, and customers who expect speed and certainty regardless of when they click ‘buy’.
Built for automation – or not at all
That complexity is now embedded in warehouse design itself. Next-generation facilities look and operate very differently from traditional sheds built for forklifts and manual picking.
“The strongest performers are the ones that have gone all-in: Automation, modern technology and warehouses designed for it from the start,” Jones says. “Their flexibility and responsiveness to market changes will be vastly superior to anyone missing even one of those elements – let alone retailers that still have none of them.”
Those differences were exposed sharply during last year’s Black Friday period. Jones says consumer behaviour shifted in a way many retailers failed to anticipate.
“Historically, sales were spread fairly evenly across four or five weeks leading into Black Friday,” he says. “But customers worked out that the closer you got to the day, the better the deals. So spending was delayed.”
The result was counterintuitive: Total sales were higher nationally, but they were concentrated into roughly 25 per cent of the usual timeframe. That compression disrupted labour-dependent fulfilment models.
Retailers had recruited and trained casual warehouse staff months earlier, expecting steady volumes. When early sales failed to materialise, there wasn’t enough work to justify keeping them on. Many left for other short-term roles. Then, when orders surged late in the month, there weren’t enough trained hands to process them.
“Online fulfilment was short on labour and long on orders,” Jones says. Some staff were redeployed to physical stores, which were already understaffed, further compounding the problem.
Highly automated operations were far more insulated. Others would have needed to double their warehouse workforce to cope.
The customer remembers
For the have-nots, the consequences don’t end when the sales banners come down. Jones says many retailers entered the new year having disappointed customers with late deliveries and missed commitments.
Among businesses working to adopt automation, delivery times during Black Friday were roughly double those of automated competitors.
“If your standard delivery is two or three days, and an order placed on Friday doesn’t even get actioned until Monday, customers can be waiting seven or eight days,” he says. “Against a three-day expectation, that’s a major fail.”
During peak periods, shoppers often buy from multiple retailers and compare experiences. “If they have a great experience with one and a terrible one with another, that’s remembered,” Jones says. “They’re far less likely to go back.”
The cost of standing still
Warehouse automation is not cheap. Depending on scale, investments can range from a few million dollars to nine figures, with returns often modelled over a decade.
“That’s a big ask,” Jones acknowledges. “Most businesses are comfortable forecasting three years, reasonably confident at five. Beyond that, you’re into crystal-ball territory. You might even have a different CEO or CFO.”
But the alternative carries its own risk. “You can’t get a ticket to the game without those tools anymore,” he says. “The operational advantage means you can actually deliver an acceptable customer experience. And when customers are having a good experience, it amplifies everything else.”
Increasingly, retailers are finding ways to reduce the capital burden. Automation is starting to be treated as an operating expense rather than a balance-sheet item.
“Five years ago, that was almost impossible,” Jones says. Today, some developers are embedding automation-ready infrastructure into warehouse builds and factoring it into rental rates. Technology providers are offering lease models or recovering costs via regular payments or revenue-linked arrangements.
“It’s still emerging, not common,” he cautions. “There’s a lot of due diligence involved because this equipment is often bespoke. It’s hard to downsize and even harder to relocate.”
Smaller players, sharper tools
What’s changing fastest is the accessibility of automation at the smaller end of the market. As global players have refined robotic systems over many years, the underlying components have become commoditised.
“There are no longer macro-level patents locking this stuff up,” Jones says. “If you have the logic and software capability, you can assemble it.”
That shift has fuelled the rise of boutique automation providers and Australian-designed systems suited to retailers processing as few as 10,000 orders a year.
Consider a fashion brand with 40 stores, a quarter of its sales online and revenue well under $100 million. A decade ago, warehouse robotics would have been unthinkable. Now, Jones says, it’s increasingly viable – and increasingly necessary.
“Opex-based automation for smaller solutions is already common,” he says. “We’re talking hundreds of thousands of dollars, not tens of millions.”
The competitive implications are significant. Large retailers that haven’t modernised won’t just be competing with traditional peers. They’ll be up against smaller, more agile operators delivering faster, more reliable service.
“That feeds straight back into events like Black Friday,” Jones says. “The more automation you have, the more headroom you build into the business year-round. You can absorb peaks without doubling your workforce for a few weeks and hoping it holds together.”
