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Retail’s incremental, digital automation offers gain with no pain

Retailers should take the express checkout and automate fast and big if they want to survive current pressures.

It’s true that squeezed margins, combined with more demanding customers, makes automation compelling for hard-pressed retailers. But there’s an alternative to the “Big Bang” approach. Incremental automation via smartphone-powered computer vision and augmented reality is a low-cost and fast way to digitally transform, improving customer service and lowering costs.

De-risk retail automation
A recent study from McKinsey reports that typical grocery and hypermarket retailers face 100 to 150 basis points of margin pressure, with clothing and department stores having it twice as tough. The consultant recommends “a comprehensive automation program can significantly offset these headwinds” and points to digital disruptor Amazon Go and grocery giant Kroger as exemplars.

No one would dispute the wow factor of both these retail endeavors. Kroger Edge (Enhanced Display for Grocery Environment) harnesses the cloud and Internet of Things to deliver dynamic pricing of fresh produce, and visually interacts with customers in a carbon-efficient way. But the approach requires an investment of millions of dollars in infrastructure and technology such as that made by Amazon into Amazon Go. Amazon also had the luxury of a green-field site, an advantage not available to retail incumbents.

Join an incremental revolution
Smartphones enabled by computer vision that scan barcodes, verify prices and expiry dates via optical character recognition (OCR), recognize products via image recognition, and use augmented reality (AR) overlays are an effective alternative. It’s an incremental approach that is already automating activities along the entire supply chain by upskilling, instead of replacing, retail workers. And it de-risks investment by removing the giant do-or-die leap.

Retailers don’t have to rip out store infrastructure and disrupt operations by installing cameras, weighing scales, electronic shelves, in-aisle robots and other sensory paraphernalia in stores. Instead, they can supply staff with everyday smartphones and apps to interact with barcodes on products to access real-time information such as stock levels, delivery dates and price-verification from the retail ERP system or other data source. Staff who are digitally equipped in this way can do rapid stock takes, optimize shelves, advise customers - and numerous other tasks.

Introducing digital transformation one mobile scan at a time brings myriad opportunities to re-engineer processes and increase efficiency across the supply chain. Inventory management and stock picking become easy and quick when workers can search the content of shelves, trucks or warehouses and find flagged items or read product updates with one scan.

Escape budget cycle constraints
Using affordable smartphones to digitally augment retail activities and upskill staff overcomes a key bottleneck that the McKinsey report highlights: “Retailers struggle to break free from the soft tyranny of budget cycles and the replication of last year’s capital spending.” The consulting firm cites internal inertia as a key reason for not investing in technology including self-checkouts and shelf-scanning robots.

But the advance of mobile technology and software-based solutions circumvents the need for upgrade by huge capex outlay, with the opportunity to switch to opex-funded software solutions. Leveraging existing barcodes and substituting pricey, dedicated scanning hardware with smartphone solutions, generates dramatic cost savings in traditional hardware, maintenance and support costs. With the cost savings reinvested to roll-out affordable, software-based solutions and mobile devices to all staff, retailers see significant efficiency benefits and consequent opportunities for process re-engineering.

For retailers choosing incremental automation, the gains are no less dramatic than opting for a “Big Bang” update of operations – and a good deal less risky. Fewer resources need to be allocated to achieve benefits of lowered costs, enhanced customer experience, and more besides, as Coop Passabene discovered. The Swiss retailer enables customers to self-checkout from smartphones, and the digital relationship has strengthened loyalty as shoppers can receive personalized offers directly to their phone.

McKinsey makes the vital point that the automation opportunity in retail is bigger than store operations alone. More broadly, it notes, automated smart robots can store, retrieve and unload product from pallets, and transport those products, all while calculating optimal routes through a warehouse. Human warehouse workers using smartphones enabled by scanning and AI could do these activities, but with a speed and accuracy that shows on the bottom line.

Teaming computer vision technology and AR software on smartphones lets retailers experience the proof points of automation, and incrementally re-engineer other processes across the supply chain. Whether checking prices in real-time, stock picking or clienteling, retailers can participate in McKinsey’s vision, but at a fraction of the price – and with no disruption at all.

Christian Floerkemeier is co-founder and CTO, Scandit.
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