Despite major spending on inventory management systems, retailers in a recent survey admitted that inaccurate inventories are to blame for more lost revenue than theft, and almost all admit to some kind of inventory problem. Furthermore, almost three out of four surveyed said inventory accuracy would improve as a result of introducing automation or in-store robots.
The survey, sponsored by robotics and data service provider Bossa Nova, was conducted in December 2018 by Wakefield Research among 100 corporate retail professionals at companies with more than $500 million in annual revenue (excluding clothing and department stores).
Key findings of the survey included:
- 87% said inaccurate inventories are to blame for more lost revenue than theft (13%).
- 73% said inaccurate inventory forecasting is a constant issue, which means retailers end up with too much or too little supply to meet demand;
- 67% said analyzing inventory on store shelves is not an effective use of employees’ time;
- 92% said their stores spend more time identifying inventory issues than they do implementing solutions;
- 81% said they feel their stores are only keeping pace or actually falling behind technologically, despite the availability of new technologies;
- 76% said the introduction of robots in stores would improve employee productivity;
- 74% said inventory accuracy would improve as a result, while increased profits would be another direct result of introducing in-store robots.
- 70%, however, said automating the monitoring of in-store shelves is not worth the investment, compared with 30% of those who think the upfront investment would pay off in the long term.
- 47% said retailers would benefit most from the introduction of automation, with 30% thinking suppliers would benefit most, while 23% said shoppers would come out ahead.
“Inventory accuracy is a never-ending challenge for retailers,” said Martin Hitch, Bossa Nova co-founder and chief business officer. “We’ve been working in this space for six years, so we’re intimate with a lot of the issues that retail faces, but it’s always great to have that backed up by the retailers themselves.”
Hitch spoke further with Robotics Business Review about the survey results, and its implications on the retail landscape and robotics deployment issues.
Are retailers admitting defeat?
Q: With a staggering 99% of those surveyed admitting that they have some kind of inventory problem, do you think they’re admitting defeat in their previous inventory tracking processes?
Hitch: Supply chains are incredibly difficult to run, and particularly when you get to the very end of a supply chain in a brick-and-mortar store, where you’ve introduced so many touch points from so many different people – it’s inevitable that there will be some errors built into any of your tracking.
In the past, we could get away with that because the only option for customers was to go to the store – what the store had is what you could buy. With Amazon and other online stores, with hundreds of millions of products available – customers now have multiple alternative places where they can get the same product. So now, accepting that an inventory is inaccurate and that there’s a potential substitution that might occur is no longer good enough, because people have got more choices.
With the omnichannel journey, they’ve even got more choices on how they buy things online – they can buy online and pick up in the store, buy online and have it delivered, buy online and have it delivered where they could fit it into the rest of their day – like an Amazon locker. I don’t think it’s about admitting defeat, I think it’s more about admitting reality – the dynamics of the shopping environment today are putting focus on having to address that and fix it, because that’s the only way I can start delivering the experience that today’s shopper wants.
Q: Do you think retailers didn’t realize the inventory problems they might have after building omnichannel purchasing options for customers?
Hitch: I think they’re always admitting that they’ve had an inventory problem, but that part of it was in the evolution of omnichannel – when these big brick-and-mortar retailers started selling online, they ran two independent businesses – they ran a brick-and-mortar business and they ran an online business, and often the inventory wasn’t the same, or it was a subset of one or the other. With the multiple touch points that today’s consumer expects, the retailers have merged these two businesses, to the point where they’re now saying, “Hey, everything needs to be available.”
Part of the problem was the old “garbage in, garbage out” issue – if my raw data was poor, then the experience I’m delivering is equally poor. What retailers did in the past was figured out workarounds – we’ve worked with some retailers who’ve built in buffer stock into reality because they don’t trust reality. For example, if my store says I’ve got three items in stock, maybe I’ll treat that as completely out of stock, because the likelihood of me finding three items in today’s store is no guarantee, so rather than disappoint the customer, I don’t take the order in the first place, even though I may have some product in the store. Those workarounds result in lost sales, and it’s now about getting the inventory accurate, and you don’t need the workaround, and you’ve improved the experience.
What holds back faster robot deployment?
Q: With this understanding of the problems, you would think that retailers would be basically banging down your door to get some of these robots in the stores, or at least implementing some kind of automation. When you talk with retailers, what concerns are they having in terms of implementing robots or automation?
Hitch: I think there are a number of elements – first is that historically, automation in retail feels like a capital-intensive game. When you’re a retailer that operates on 3% or less net profit margin, any capital intensive change like that goes through an incredible evaluation and measured decision-making process. There is a significant enrollment required across the business when you’re deploying fleets of robots.
There are social concerns as well – for example, what are customers going to think about a robot roaming around the store while they shop? Do retailers run the risk of losing customers? We worked with a number of big retailers in the U.S. – one of them very publically, which is Walmart – and the customers are the people who within two weeks – four weeks max – have accepted that the machine is moving around them. They usually have an interaction that shows it’s completely safe, because it’s designed to stop when it sees them, it’s designed to move around them, it blends into the background. It’s designed to blend into the background – we’re not trying to be a great big flashy device that draws attention – we’re a bit more of an industrial-looking device that that doesn’t look very interesting to actually try and interact with, because the job we’re doing is monitoring the inventory on the shelf.
These retailers have got hundred-plus-year-old brands with a customer loyalty base that they are very, very careful of not upsetting – it’s a very logical way to approach it. That’s why you see single stores run for a long time before they go into multiple stores. We operated within a Walmart store for two years before any public announcement, and it was in rural Pennsylvania, and the first 12 months was about understanding how the robot needed to operate around people.
The retailers we work with are the biggest retailers in the country, or on the planet – by definition they are also the most conservative retailers on the planet, so before they go public, they want to make sure they have enough data to validate any public statements.
Q: Other companies have introduced products where inventory scanning is done through aerial drones – what are your thoughts on these types of approaches? Do you think retailers might take a step back at looking at robots if they see that an aerial drone could be deployed less expensively?
Hitch: There is a place for drones to capture data – I think there are a few realities of where that makes more sense. But I haven’t met a retailer yet who is comfortable about having drones flying through a store above people’s heads while they’re shopping. There’s a liability there that I don’t think anybody will get comfortable with. These retailers are already huge targets for lawsuits, and you really are opening yourself up to huge risks.
I think another significant blocker to drones flying around the store capturing data on the shelf – especially when it has to fly down to knee-height in order to capture data on the bottom shelf. These things are flying down to knee-high and racing up and down shelves, you can’t do that while customers are in the store.
You also need to be aware of the power constraints of drones – we haven’t yet solved long battery life with great payload. You need to mobilize a very high resolution camera, which requires processing that needs to be done by the onboard power, which is also flying the drone. I think you end up with a very short operating lifespan because of the nature of the technology.
However, in niche areas – think smaller stores, that also close at night. If I was a big pharmacy chain like Walgreen’s or CVS, that’s the direction I would be going.
Q: Was there any other survey results that were surprising to you?
Hitch: I was disappointed in one of the answers – less than a quarter of these retailers thought the shopper would benefit from implementing automation. When you work with a retailer as big as Walmart, everything we do is thinking about the end consumer – how do you improve that shopping experience. The thing that surprised me is that less than a quarter felt that shoppers would come out ahead.
If we’re able to capture the data – everybody wins – but if the focus is on the customer and how they make sure the product is on the shelf when the customer comes in – the customer is the ultimate beneficiary. It really surprised me that we’ve got retailers that didn’t think through that supply chain and get to that as a conclusion.
In our experience, when you follow it through with the customer journey, that’s the ROI. These retailers live and die by the people that go and shop there, but they weren’t thinking it through. That’s a strong position for more education of retailers –we’ve got the data that can validate the ROI – so it’s a great place to be in for a company like Bossa Nova.