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When Robots take over Retail

Nirit Cohen looks at the staggering changes that the retail industry is undergoing.

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The writing is already on the wall. Notice what is happening in the world of shopping, retail, stores, even malls. Let’s take cashiers as an example. Once upon a time, cashiers had to remember various product codes in order to identify the product at checkout. Then along came the scanner and the cashiers’ role transformed into a single gesture, the one that scans the product bar code. At some point someone realized that to do just that, one doesn’t need a dedicated cashier. Instead, we could ask the customers to scan the products at checkout. And thus, the self-checkout machines were introduced. Though some cashier roles were lost, a new role emerged, that of the agents who help us at those checkouts and make sure we actually pay before we leave the store. But technology doesn’t slow down even for a minute and the same goes for people’s ability to ask questions about what is and explore what could be. So, it was just a matter of time for someone to question why we even need to checkout when we leave the store? A few months ago, Amazon opened a concept store in Seattle where you can do exactly what you were taught not to do: take a product from the shelf, put it in your bag and walk out. How? Because once Amazon has identified you, it already knows who you are, knows where you live, knows how you pay. So in this store you just need to identify yourself when you walk in and the rest is done with the help of cameras and sensors, tracking everything you put in your (physical) shopping basket. And the bill? It was already charged to your account when you walked out. That was a concept store. But Amazon, in case you missed this piece of news, recently acquired Whole Food Market, a sure sign things are about to change even more. Today’s column examines the changes taking place in retail and their implications for work and careers.

If you look closely, you will be able to notice an unusually high number of reports in the US in the past few months, discussing the disintegration of the physical retail sector. The data in the United States, “land of shopping and malls”, is staggering. In 2017, year to date, there have already been more bankruptcies in this sector compared to the data from all of 2016. Employment data in steadily declining, department stores alone reduced more than 100,000 jobs in six months (!) and they now employ one-third the number of employees they had in 2001. For a comparison, that is 18 times the loss of jobs in the coal mining industry over the same period. In April this year, the New York Times published a photo article about what it termed the zombie malls and next to them the huge warehouses and fulfillment centers of the giant online retailers, loaded with equipment and staff, as well as robots. No, we are not in the middle of a deep recession and the US GDP has been growing now for 8 years in a row, the public continues to spend money shopping and unemployment is below 5%. And yet even in New York City itself employment in retail has been steadily declining for three consecutive years. These trends are now being referred to as the so-called Amazon economy. And only this week, for the first time, the Amazon economy in the US created the same number of jobs in warehouses and transportation as those created in the entire retail sector.

A new study examines what will happen to the retail industry when it fully utilized simply even those technologies already available today. According to the World Economic Forum there is a risk for 30-50% of the workforce in retail. In the United States alone that means a risk for 7.5 million jobs lost to automation. We often hear about job losses in manufacturing and the impact of factory closures on regions and populations. That’s why it is so important to understand that for 15 years there have been more people employed in retail than in manufacturing, specifically, about 10% of the American labor market works in retail.

There are several reasons for changes in this industry. First of all, online shopping has grown significantly over the past five years and now accounts for more than 8% of the US trade, with Amazon accounting for 43% of that figure. The transition to online shopping provided consumers with lower prices and a greater transparency, creating pressure on retailers’ bottom line. At the same time, it creates downward pressure on wages in the industry, where many of the employees earn minimum wage. It is therefore not surprising that there is a high tendency to introduce technologies and automation, in order to increase the convenience of purchasing and the scope of business, while also lowering wage costs.

Retail giant Walmart recently replaced workers with automation and introduced various types of technology into the stores. The introduction of Cash360 solutions into almost all of the 4700 stores replaced back office accountants. Cash360 is an end-to-end cash solution which includes a Smart Safe for depositing and/or withdrawing cash, collecting the cash and depositing it, while also maintaining the store’s accounts as it compares the deposits with the sales’ records. At Walmart, the introduction of this system replaced thousands of employees, but only about 500 of them lost their jobs while the rest were transferred from back office roles to customer facing positions. Walmart says they rely on employees to maintain the human touch with customers and it believes roles that greet and serve customers will continue to exist, thought they too might change with technological developments. Stores today already have stations with electronic scanners to provide information about products alongside human workers, who are expected to circulate to answer those questions the stations cannot handle and humanize the shopping experience. But Walmart does not stop here. It recently filed a patent application for facial recognition technology that will be able to recognize the buyer and use biometric information to identify how they are feeling about their shopping experience. The intent is for the system to point out challenging areas where the customer’s shopping experience is negative and use the information to improve the manner in which these areas provide technological or human response. Taken together, it is not surprising that Walmart now has 15% fewer employees per square meter of store than it did a decade ago.

This ongoing tension between brick and mortar stores and the online shopping venues will only intensify as technology removes more and more barriers from online shopping. Today we still consider the shopping experience a sensory experience, one which includes the ability to touch, share, try on, consult. While in the actual stores we see this being reflected in the transition of human roles from logistics and answering simple questions to customer service and experience on the floor, it is also beginning to show up in online shopping, where one can already see signs of the attempt to replicate the shopping experience of the physical world. An HBR column from July examines the world of retail without stores and how new technologies are generating the “StoreHouse”, a hybrid model that merges the physical benefits of a real-world store with the convenience of home. Amazon has launched its Prime Wardrobe service, turning the bedroom into a fitting room by allowing the customer to order several items, including the same item in different sizes, keep them for a few days with free shipping and returns. Rent the Runway allows women to borrow a garment for several days including a free extra size, to ensure it fits. And this doesn’t stop at clothing. It is also possible to see developments in the ability to “try on” additional products, even furniture and makeup, using the technologies like augmented reality. IKEA is collaborating with Apple to use augmented reality to show us items from the store inside our home. And Sephora’s app Virtual Artist enables customers to upload their image and see what they would look like with different makeup colors before buying online.

The writing is already on the wall. The further we move into a world that gathers information and learns to process it, the more our experiences and expectations will change. Instead of going shopping, shopping will come to us when we need it, maybe even before we know we need it. And as with any world of work emerging as a result of such significant changes, there will also be implications for roles that will disappear, gaps that will grow, and new opportunities that will be created for those who know how to seek them out. Have Fun!

 Published in Globes Israel Business Arena