A Brief History Of Retail Automation Through The Ages13 min readReading Time: 10 minutes
Retailers and service providers are excited about a new opportunity in retail: Intelligent automation. From inventory robots at Walmart stores to checkout-free stores, automation in retail is a great way to improve operational efficiency and reduce errors in an industry that is traditionally fraught with them.
When it comes to improvements in retail, we have great experiences, interactions, and discounts on one side, and improved efficiency on the other. Players like Amazon have already set the benchmark rather high for what an efficient retail operation looks like, and it is now up to other retailers big and small to start following suit.
We think there’s no better time than now to understand how retail automation started and why, and how it has evolved over time to become the perfect tool for customer engagement today.
But First, What Is Retail Automation?
In an article on the future of retail automation, Retail Minded founder Nicole Reyhle says, with a touch of inevitability, “It will be on the backs of the millennial generation that the increase in retail automation will ride.” Indeed, self-checkout counters and their popularity is a function of a demographic that is used to using and manipulating gadgets to perform everyday tasks. If the Stone Age man used his opposable thumb to build tools, hunt and eat, we get our daily bread by using the same evolutionary jackpot to order stuff on our smartphones.
Automation, as a function, is driven by the need to improve efficiency and reduce costs. Retail automation, then, is the process of using innovation in tools, technology, and processes in retail to ensure a more efficient operation that leads to a better experience for the customer at a lesser cost to the retailer.
It is interesting to think of banks as a retail avenue since they are involved in the process of exchanging and processing money. A Foreign Exchange transaction, for example, is essentially the process of ‘selling’ money. The Automatic Teller Machine or ATM is the first automation in this space that truly changed how people interact with their money. Just like that, long queues at the teller’s counter were replaced with ATMs at every nook, and this, in turn, led to people using and transacting with their money with greater ease.
In a way, it is fair to say that the invention of ATMs in the 1970s and their ubiquitous nature has contributed significantly to thriving retail, timed perfectly with the globalization of retail brands around the same time.=
It Had To Start Somewhere
The story of retail automation is the story of all retail.
In the industrial era, the focus moved for the first time from manpower to the use of machinery to improve production and distribution. From then on, every technological innovation has found application in one way or another in retail, be it at the backend in the form of supply chain management, or on the frontlines as easier browsing and checkout options.
Today, retail can be automated every step of the way and software products have ensured that automation isn’t just the domain of the big players. Small and growing retailers are also able to find ways to serve their customers better using automation solutions that reduce errors, cater to specific needs and sell in a manner that all customers find useful.
It is interesting to note that once innovation in retail automation began at the turn of the last century, the sheer pace at which it continues to grow and evolve is almost psychedelic in nature. Let us take a look at the pace of innovation in retail automation over time.
Turn Of The Century To The 1970s
It may seem trivial now but we didn’t always have large shopping malls and access to every store in every location. Mom-and-pop stores were usually the norm for a very long time, and there was always a friendly neighborhood store to buy everything that you needed to.
Interestingly, while malls themselves were considered an innovation back then, there was another hunk of a machine that precipitated their development. We are referring, of course, to the elevator. It wouldn’t be a stretch to say that the elevator was the first example of retail automation because it changed the way in which people could interact with stores. Many stores could now be present in the same location and customers could move about with far greater ease.
Another reason why malls were so successful was that they were so comfortable to hang around in on a hot day! Air conditioning has been around for long enough for it to be natural today, but the introduction of air conditioners that could cool a space based on the number of people occupying it was a novelty. And this novelty allowed malls to become bigger than ever and start turning into spaces where people would gladly spend their entire day off, and hopefully, a good chunk of their money.
So, that’s how the story of retail automation begins- with elevators and air conditioners. At that point in time, no one could have possibly predicted that in less than two decades, malls would face a new threat- the sheer convenience of shopping right from our own couch.
The Golden 90s Of Retail Automation
The nineties were an interesting time in retail, as much as they were a curious time in advertising. A 90s commercial for Taco Bell shows Jeff Bezos considering adding a new handheld item to the Amazon catalog- the Chicken Quesadilla. Setting aside the fact that Mr. Bezos is virtually unrecognizable as the clean-headed hunk we now know as a retail genius, could he have foreseen just the kind of impact Amazon would have on automation?
Amazon came into the picture in 1994 as a delivery service for a very small catalog of products. By 2000, that vision crystallized into what the brand’s logo sums up today- they sell everything from A to Z. In the rapid progression of the brand, we certainly need to give due credit to their strategy, but also to the automation of payments that made such innovation possible.
Online payments are a form of automation since a payment gateway does the job of collecting money and processing a transaction. Today, even bills are generated automatically. Imagine if a few million orders a day had to be processed manually, the payments collected and change tendered by hand. Such a business may never have survived.
Online shopping can be considered the biggest retail automation innovation of the nineties and early millennium. The internet reached far and wide into people’s homes and supported by secure payment systems, replaced teleshopping as the go-to means to shop and will and in the convenience of our own home.
From The Millennium To Now
Some companies were quick enough to grasp the idea that given a choice, most retailers would choose to automate several aspects of their business and improve their overall efficiencies. By 2000, Enterprise Resource Planning systems, or ERPs, had moved beyond the basic functions such as accounting to being able to connect all aspects of a business, retail included.
For the first time, retailers could do more with their business because their customer end of things was connected to the inventory end. Over time, ERPs have had competition in the form of SaaS products that are hosted on cloud servers and offered on a subscription model.
This period has also seen a rise in the development of APIs and integrations that help a standard software product do even more. For example, the SaaS offering might be an inventory management system, but it can integrate with other software products for different retail functions using APIs, thus giving the retailer a whole gamut of functions without needing to invest in several different software products.
Up until now, retail automation has followed the algorithmic model, which means that automation follows the most likely logical path. While it does work in most cases, it does not take into account real-life anomalies that can cause the model to fail. Some powerful systems have been able to solve this problem but only by iterating through data more often.
Intelligent Retail Automation- Evolving Into The Future
Much as machines were the biggest innovation of the industrial era, Artificial Intelligence is the big breakthrough of the knowledge era. Today, we have access to more data than any retailer in our collective history. Plus, we have systems that can use real-life models to make sense of this data.
In a way, the future of retail automation is going to bring it closer to the human decision-making process than ever before, while also crunching through all of the past data to make fewer errors.
Experiments are being conducted to develop stores that can repair their own store software when troubles arise. For example, if a checkout system were to malfunction, the system can fix the malfunction in a matter of a few minutes and keep the counter active. There would then be no need to raise a complaint with the service provider and wait for them to respond.
Amazon Go is an example of taking self-checkouts to the next level. A checkout counter is usually everyone’s least favorite space in the store and we now know that it is possible to do away with billing and checking out entirely.
Is it possible to automate retail completely? At its current pace, we dare say it is. While highly controversial, using cameras, sensors, and heatmapping within stores and on online shopping websites is touted as the next big thing in retail to help retailers learn what products customers spend the most time on.
However, for this to become a reality, we need to be able to address privacy concerns and if observing a customer on a camera may just amount to stalking. But then again, we do accept cookies on a website without really thinking too much about it, so will people be willing to sacrifice their privacy for even better convenience and intuitive shopping experience? The answers are polarizing as they are revelatory.
Advocates argue that it is only spying when the individual is in focus and that heatmaps usually study data from several people at a time to understand the general trend. That said, some detractors also say that not many customers even know that their movements in a store are being tracked, so they have no means to give or withdraw consent.
Retail Automation Is Everywhere
As the new normal in a customer’s shopping experience, it isn’t always easy to spot automation until we go looking for it.
Today, automation is in how we interact with brands. From helping out as a personal stylist to answering service queries, many retail brands use chatbots as a way to help customers navigate the buying journey. Plus, there is a reason to believe that chatbots increase conversions by being more readily available to provide information.
Burberry uses chatbots for passive interactions with customers, keeping them updated on the latest offers and holiday campaigns. H&M’s retail chatbot just needs to be told what you’re looking for, such as an evening dress or an outdoor-use jacket. It immediately gives product recommendations along with a link to buy them.
Retail automation also plays a huge role in the backend of retail operations. Systems can help forecast demand, order from different vendors when stocks run low, and auto-tagging and cataloging products once they arrive at a store location, automation can help immensely with inventory management.
In marketing, too, we have automation in the form of chatbot interactions and automated email campaigns. Today’s intelligent automation solutions also help increase the chances of conversion through personalized shoppable videos and by suggesting products based on past browsing history, plus offering the most likely deals that might convert a customer.
In other words, today’s automation can help convert customers in ways that seem most intuitive to them- a discount coupon here, the perfect dress there.
Even last-mile delivery is not far behind with Amazon promising to use drones more extensively to deliver products. That is a product drop in the truest sense of the word, we would say! Plus, it also helps that drones can deliver products at all times of day, thus helping brands fulfill more orders in a shorter span of time.
Challenges In Retail Automation
With something as all-pervasive as automation in retail, there are bound to be some challenges. For one, retailers need to be geared up to train their staff on a large scale to use some of these systems successful. For larger brands with multiple outlets, it is necessary to roll out these changes at the same time so that no employee is confused, and no customer dissatisfied.
Today, most machine learning algorithms are still vetted by actual people for accuracy, which might seem to defeat the point of automation. However, it is important to remember that this isn’t a challenge in itself and that even in automated systems, human intervention is almost a necessity.
For example, the parameters for an automated marketing campaign are still set by the brand’s marketing managers.
Also, in a store context, the purpose of automation is to give employees the time and the tools they need to sell even better. It is a Swiss Army knife that is aimed at helping store staff show customers product options, and even order from other stores when this location doesn’t stock what they’re after.
As for fully automated stores, would customers wade through traffic and find parking spaces only to have a more tactile experience of an e-commerce store? That is highly debatable, since for many customers a store is a chance to experience the brand, so much so that even Digitally Native Vertical Brands are finding ways to open up offline stores. Store staff and good store staff at that are an essential component of the offline retail experience.
Where Does All Of This Lead To?
Retail automation solutions will only continue to grow and pervade every aspect of retail. Much like omnichannel retail whose main aim is to be intuitive for customers, retail automation is a way to make business more intuitive for the people running them. Not all brands may choose to use all forms of automation, so the question really isn’t about a fully automated store or shopping experience.
The real use of retail automation is in seamlessly supporting businesses to improve their efficiency by doing more in a shorter period of time, while also giving brand employees a chance to bring their own unique capabilities to the table. It is likely that sometime in the future, we will see pick up robots working side-by-side with their human counterparts. But well before then, we’ll see people actively using automation as a way to provide their customers with an even better experience than before.