The past few years in warehouse automation and robotics has seen double-digit growth thanks to low unemployment and growing consumer demand for faster and cheaper delivery options. However, a new report suggests that a blip in the form of a revenue slowdown may come as soon as next year.
London-based market intelligence firm Interact Analysis, in its “The Future of Warehouse Automation 2019” report, said a temporary dip in revenue could occur between 2020 and 2021. Growing trade tensions between the U.S. and China, coupled with slowing demand in Europe, shows that “the global economy is looking increasingly vulnerable and many businesses are delaying capital expenditure,” the company said in a statement.
Interact said the dip would affect larger scale warehouse automation and systems integrator companies more than robotics companies that sell smaller autonomous mobile robot systems, although many of these integrators do include mobile robots as part of their offerings. In fact, a revenue dip for these larger companies could provide some selling opportunities for smaller robotics companies that can deploy their systems quicker than larger-scale companies.
“We still expect the robotics revenues to keep growing strongly,” said Ash Sharma, research director at Interact Analysis. “In fact, it could even have some upside for some of the robotics companies because what we’re seeing is that when you think about warehouse automation projects, they tend to be tens of millions of dollar in investments.”
Sharma added that with the state of the economy and the trade war and other fears, that “there has been a delay in the first half of this year in new order intake. This could mean that companies could look at other solutions, including things like mobile robots, which are lower cost and help them with their challenges.”
Service contracts emphasized
The company said service, maintenance and aftermarket sales will become increasingly important for the warehouse automation system integrators, since they can be paid on a predictable and recurring basis. In addition, “while the typical margins for equipment sales tends to be between 3% to 5%, margins for service and maintenance can be as high as 15%, which has a positive impact on profitability.”
“While most system integrators will encourage their customers to take out service and maintenance contracts, the contract length and the level of service provided can vary significantly,” said Rueben Scriven, market research analyst at Interact Analysis. “The propensity for customers to take out service and maintenance contracts is typically linked to a number of key factors, including geography, the type of company and its business model.”
Interact’s report was created over a six-month research period, where it interviewed and surveyed more than 40 of the leading warehouse automation system integrators, suppliers, and end users, to build an understanding of the market and its growth potential. The report provides an assessment of the market including discussions on trends such as robotics, modular and flexible solution design, drone technology, and digitization.
Despite a possible revenue slowdown, the company said there is reason to be optimistic after 2021. “While order intake for large warehouse automation projects may be slowing in the short-term because of political and economic uncertainty, we forecast the market will return to double-digit growth rates by 2022, following the dip in revenue growth between 2020 and 2021,” the company said. “In the mid- to long-term, the logistical pressures which e-commerce puts on distribution networks and the growing consumer demand for faster and cheaper online delivery options will drive long-term and sustained growth in the warehouse automation market.”
For more details on the Interact Analysis report, click here.