Amazon, Whole Foods, and the New World of Automated Retailing

Business Management News July 3, 2017 Business, Leadership, U.S Imagine this scene from the future: You walk into a store and are greeted by name, by a computer with facial recognition that directs you to the items you need. You peruse a small area — no chance of getting lost or wasting time searching for things — because the store stocks only sample items. You wave your phone in front of anything you want to buy, then walk out. In the back, robots retrieve your items from a warehouse and deliver them to your home via driverless car or drone.

Amazon’s $13.4 billion purchase of Whole Foods, announced Friday, could speed that vision along. Amazon has already made shopping for almost everything involve spending less time waiting, doing work or interacting with people, and now it could do the same for groceries. It’s already trying with a store in Seattle, Amazon Go, that has no salespeople or checkout lines.

And for those locations that don’t have space for a large brick and mortar store, automated retailing systems can sell you everything from a cupcake to a Ferrari.

Companies such as Alps Innovations develop customized vending machines that can be fine-tuned to sell almost anything. These systems are so advanced, they are no longer called “vending machines,” but rather “automated retailing systems.”

The machines are connected via Wi-Fi so that owners and operators can see real-time sales reports from anywhere in the world. Other features allow operators to change prices and manage inventory through a simple-to-navigate online portal. Machines can also be configured to accept credit cards or cashless payment systems, and can send text messages to customers with promotional messages and receipts. Clever graphics, custom designs, audio and video attract attention and build brand awareness.

These systems are now being used by companies like Pharmabox, which sells over 100 of the most heavily purchased items typically found at a drug store, through a custom automated retailing system that can be placed almost anywhere, such as airports, college campuses, shopping malls, and hotels.

Entrepreneurs are flocking to the new world of automated retailing because it allows them to start a business quickly and easily, with just a small investment and a good idea of what products to sell.

According to market research, the automated retailing sector is projected to be worth $275 billion by 2020.

This evolution to automation won’t come without casualties. Roughly 6 million to 7.5 million retail jobs likely will be automated out of existence in the coming years, leaving a large portion of the retail workforce at risk of becoming ‘stranded workers,’ according to the 56-page report by investment advisory firm Cornerstone Capital Group.

Retail cashiers, 73% of whom are women, will suffer the most job losses, the study found.

The losses will also disproportionately affect the working poor, since most hourly retail workers live below the poverty line.

About 16 million people, or one in 10 American workers, are employed in the retail industry.

That means the rise of automation will not only impact retail workers, but will also have broad implications for the economy as a whole, according to Jon Lukomnik, the executive director of the Investor Responsibility Research Center Institute, which commissioned the study.

“This in-depth examination of retail automation gives investors insights as they consider investment risks and opportunities,” Lukomnik said in a news release. “While the findings are important to investors, they should sound the alarm for economists and political leaders. The shrinking of retail jobs in many ways threatens to mirror the decline in manufacturing in the US. Moreover, in this case, workers at risk are already disproportionately working poor, so any disruption may cause strains in the social safety net and stresses on local tax revenues.”

Retail workers are already facing an uncertain future with stores closing at rates not seen since the recession.

Retailers have announced more than 3,400 store closures so far this year, and Credit Suisse analysts expect that number to grow to more than 8,600 before the end of the year. For comparison, 6,163 stores shut down in 2008 — the worst year for closures on record.

The retail industry typically pays low wages but employs people in every age bracket, as well as those who are low-skilled and need flexible scheduling options.

When these workers lose their jobs, they can have a hard time finding other employment.

These facts make it clear the America needs to invest in job training so that some of the displaced retail workers can transition to factory jobs, making the automated systems that replaced them.

While the current administration seems unlikely to invest in any jobs program – especially one that would primarily benefit the working poor – it would create long term benefits to the economy to have these workers successfully transition to the new retail economy, rather than have them living on government aid programs.

This takes long-term thinking and vision… traits that are sorely missed in today’s administration and congress.