Technology as a 'margin pressure reliever'

Technology is able to improve productivity of retailers in various sections within their operations, according to McKinsey. The options are numerous: shelf-stacking robots, back office/workflow process automation, delivery via drones and so on.

Improving productivity

Jessica Moulton and Louise Herring, both retail analysts for McKinsey, state that there is a downward price spiral in the European food retail sector, especially in the UK. High fixed costs and price pressure from discount retail formats are impacting the profitability of the more service-oriented chains.

One of the ways to reverse this downward spiral is the so-called ‘supersuiting’ of employees. This means improving their productivity, basically through technology.  Herring: “There are a whole range of technologies available. It’s not just in those immediately obvious places. For example, automation and robotics is a powerful lever to pull both in the back office as well as in stores. If I start with the back office as an example, robotic process automation, which is where code is used to run repetitive, rule-driven work, has been a big trend in financial services.”

Shelfstacking robots

Apparently, there are also possibilities for head-office and retail functions. McKinsey states that 30 to 60 per cent time savings on applicable tasks are feasible. “So when you combine that with advanced analytics and the rise in technologies there, that actually gives employees the supersuit that we refer to, and a chance to really focus on what matters”, Moulton says.

“There are a number of retail-specific functions at head-office level that could be transformed by this as well. Obviously, a lot of category-management organisations are dealing with repetitive, time-consuming processes. If they could automate a higher percentage of those, they could spend a greater percentage of their time on things that would add value to the business and their customers.”

At store level, there are numerous technologies becoming available as well. For example, shelf-stacking robots and store-cleaning robots, the types of technologies trialed through Amazon Go. Herring: “The returns are all available there, but retailers are in the process of thinking through how to plug those into their IT infrastructures and their road maps. And really, to work out, do they want to be leaders or followers in that game?”