Does technology drive retail, or does retail drive technology?
In my opinion, it works both ways, depending on the situation. At times retail pushes technology innovation to meet the changing needs of the market; at other times new, emerging technologies force retailers to adapt or die.
An example of the former is UK-based Ocado. Its fulfilment centres are almost entirely run by robots. Established in 2000, Ocado has grown to what it claims to be “the world’s largest dedicated online grocery retailer”.
Its model is fairly straightforward -customers place orders for groceries via the company’s website. These are then packed and dispatched by packers.
Ocado partnered with Waitrose, the UK’s biggest supermarket chain, the branches of which served as the fulfilment centres for Ocado orders.
In late 2009, Ocado released its first mobile app named “Ocado on the go”, which allowed customers to purchase using their phones. Ocado also released an Apple Watch App, which it said was the first grocery store watch app in the world.
Despite serving a niche market, Ocado was a success, and by 2015 was delivering 150000 orders a week.
The next year, its new, fully automated fulfilment centre became operational in Andover, Hampshire. The centre is not just impressive in scale, it is also a masterpiece of modern technology.
The huge 22000 square metre facility uses1100 robots working in grid formation to pack shopping carts. The robots, all controlled by an artificial intelligence “hive mind” computer, are synchronised with each other so they do not collide, despite zipping around at four metres a second. The software controlling the robots is similar to an air traffic-controller system.
Looking at the robots at work, one is reminded of a beehive.
The battery-powered robots are not just synchronised, they also talk to each other using 4G technology. If one needs to temporarily stop work for a recharge, another will take over from where it left off.
But the real miracle is how these robots collaborate. Instead of a single robot running all over the warehouse to pick up individual items for an order, which could take hours in a warehouse nearly the size of four football fields, they work in teams.
If there is an order with, say, 50 items, the central computer communicates this to robots all over the warehouse, and each robot will pick up an item that is closest to it and drop it off at a central shopping cart.
Once goods are packed into a shopping cart, the cart is then sent to a checkout system that scans each item and calculates the total, which is then sent to the customer via the app. As soon as the customer makes payment, the goods are shipped via Ocado’s massive fleet of low-emission delivery vehicles.
Working together in this way, the robots are able to process 65000 orders a week.
Ocado is at the forefront of automated warehouses, to the extent that it now sells its technology to other retailers around the world.
Ocado has developed some of the most remarkable technologies in the world, and is disrupting the retail industry in a big way across a number of countries.
Will this model work in South Africa, though?
I think it could work, but in a niche of middle-to-high-income customers in the major cities. It will be some time before the model can go mainstream.
This does not mean there is no room for innovation in the South African retail landscape. South Africa has unique challenges, and in those are opportunities for innovation.
For example, the food sector works on small margins, and shops compete by putting out regular special offers that are usually published in daily or weekly newspapers. People are attracted to the shops by these “catch lines” and usually end up buying other, more profitable lines.
There are some challenges with this approach. Newspaper adverts are expensive, static, and go out only at specific times. Additionally, the items advertised are based on calculated guesses, not on actual customer preferences.
Now imagine if a shop could put out an offer directly to a customer’s smart phone at any time it wanted. Not only that, but the offer would be personalised to the customer’s needs, based on previous buying history, rather than being a generic advert.
With technology like this, retailers could perhaps put out campaigns such as a “next hour” offer during the quieter times of the week, where an offer is valid only for that hour. An offer like that would cost the shop next to nothing, but would instantly bring in hundreds of feet.
Technology like this will no doubt boost any retailer’s sales figures in a relatively short time. The best part is, this tech is easily available; big data and artificial intelligence are the main drivers, and are now cheap and accessible enough that even smaller businesses can afford them.
The future of retail in South Africa is to provide better value for customers, and technology is an excellent enabler for this. Those retailers that innovate and embrace technology to become more human-centric, are the ones that will succeed.
