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Auto focus: Retail’s fast future

Savvier consumers, dynamic buying paths and increasingly sophisticated supply chains are significantly impacting the retail landscape across the globe. These forces, in addition to the old culprits economic headwinds and regulatory changes, are all conspiring to make life as a retailer rather complex.

In its appraisal of how the Australian consumer sector fared in financial year 2019, investment bank UBS said retail results were mixed, with the discretionary sector performing better than expected, while food and beverage ‘disappointed’.

The silver lining? Of retailers under UBS’ analysis, online drove over 31 per cent of total sales growth in FY19. However, that’s not to say the online retailing space is completely positive. UBS reports that the rising mix of online shopping is consistent with higher cost of doing business growth, and that while improving, the consensus is that online is margin dilutive.

Thus the aim of the online game has turned into procuring margin gains at all levels of operations.

“Technology innovation has become the key to competitive differentiation,” noted Brian Burke, research vice president at Gartner, in a recent report on emerging technology trends with transformational impact.

“The pace of change in technology continues to accelerate as breakthrough technologies are continually challenging even the most innovative business and technology decision makers to keep up,” he said.

Enter auto

Technological advancements across retail supply chains, within a relatively short amount of time, have transformed operations for many companies. Automation of tasks across the supply chain is no longer a science fiction pipedream, the technology is refined and employed by major retailers across the globe, including Down Under.

“Automation has changed the economics of the supply chain and provided much more attractive return on investments for customers to improve their supply chains,” says Pas Tomasiello, senior director of integrated systems at logistics automation provider Dematic.

“The technology increases efficiencies and productivity, reduces the reliance on labour, and helps manage increasingly demanding consumer expectations and emerging megatrends that are affecting supply chains.”

Such megatrends include labour shortages, OHS legislation, productivity, ergonomics, efficiency and accuracy – in a constantly changing field made easier to address through the advancements in automation technology.

Due diligence around the health and safety of employees within expanding and busy supply chain environments – is also a rising concern. Due to the lofty expectations demanded by increasingly fickle consumers in today’s trading environment, warehouses can be dangerous places to be.

Automation technology has helped provide safer work environments, with less manual, dangerous tasks carried out by workers, helping to reduce the number of workplace injuries.

Keeping pace

The changes that e-commerce is driving through retail and general consumer behaviour are filtering through into all retail, says Tomasiello.

“Consumers are becoming far more demanding. Online marketplaces provide an almost limitless warehouse, where a consumer can access any product, from anywhere, at any time.

“People want to be able to choose from a greater variety of products, which we call SKU proliferation, and have more options at the cheapest possible price point.”

According to the Australia Post 2019 e-commerce report, over 73 per cent of households are buying online, while next-day deliveries have grown 31.7 per year-on-year, and over 62 per cent of these are fashion-related.

General online marketplace remains the most visited category, receiving 58.3 per cent of traffic to the top 100 shopping sites in Australia.

And the increasing reality is that automation is the only way retail supply chains can meet customer expectations. That is, without creating what Tomasiello refers to as “ant farms – large warehouses with lots of people performing manual tasks in what becomes a congested and hazardous environment. Additionally, that congestion is often the primary constraint to further growth.”

Whereas a decade ago, the terms automation and flexibility were seen asmutually exclusive, the tech has since caught up.

Now, retailers are looking to incorporate flexibility, scalability and modularity into the design of their distribution and logistics operations.

“Historically automation was seen as rigid and inflexible, but that has changed,” adds Tomasiello. “The last five years have seen significant change in the design of products, solutions, technology and automation, to be able to be a lot more flexible, scalable and modular.”

Provenance and packaging

Not only has SKU proliferation increased availability and scope of products, but increased consumers’ desire to know about the traceability of products, placing higher demands on retailers and supply chains to be able to provide such information. Particularly those in the food industry and pharmaceutical industry where consumers place great importance on provenance. Meanwhile, packaging and its impact on the environment has also become a key area of awareness by consumers.

“The availability of information has shifted the powerbase to the consumer,” says Tomasiello. “The consumer now has access to all the information in the world in the palm of their hand, and that drives competition, pricing parity, availability and simply even knowing delivery windows.

“Retailers can’t hide…because consumers are smarter than they’ve ever been, know more than they ever did, can compare prices, specifications delivery windows at the click of a button or swipe of a screen. It’s all about the availability of information.”

This article was written by Inside Retail in collaboration with Dematic.

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