Evolve or perish could be the motto of modern retail. Technology is transforming the landscape and forcing retailers to adapt. From inventory management to customer relationship management, automation of retail business processes is becoming indispensable to the industry. According to a McKinsey report, almost half of retail operations can be automated.
In this article, we will review the main tools for retail automation, controversial aspects, future forecasts, and the main challenges for retailers.
Key Takeaways
Automation frees staff, cuts costs & improves shopper experiences.
Automates replenishment & planograms.
Uses robots for routine tasks.
AI refines forecasts & pricing.
Cuts checkout lines with smart POS.
Supports scale without equal headcount.
The benefits of automation in retail
The benefits of retail automation can be viewed from different perspectives:
Increased operational efficiency
Processes that once required a lot of manual work can now be performed faster and more accurately with the help of technology.
Cost reduction
The same manual processes that cost a lot of time also cost a lot of money in terms of paying the employees to perform them.
Improving customer experience
Technology can't get tired and can work around the clock, allowing retailers to serve customers at any time. Additional benefits include personalized marketing and personalized shopping experience.
Data-driven decision making
AI algorithms can process large amounts of data and identify patterns much more efficiently than humans or even simple ERP systems can. Specialized retail automation software for inventory management or shelf space management, for example, analyzes data and, based on it, timely signals problems that an employee might only notice later or never at all.
Business development
Automation is an investment in progress because even with substantial initial costs, modern retail automation solutions return on investment over time, and then bring only increased profits by reducing costs and boosting sales.
Key technologies for retail automation
The winds of change in the global retail automation market are expected to bring significant transformations to the industry, increasing operational efficiency, enhancing customer experience, and optimizing overall operations.
#1 Artificial intelligence and machine learning
AI is becoming the basis for a variety of intelligent retail automation software that can perform tasks with greater efficiency. AI and ML algorithms help to analyze large amounts of data and train systems to understand customer behavior, prevent theft, detect fraud or human error, analyze the fullness and efficiency of shelf space, forecast demand, and manage the supply chain. Artificial intelligence and machine learning help retailers analyze customer data and deliver personalized shopping experiences.
#2 Robotic process automation in retail
Robots help retailers optimize logistics processes and improve customer service. Today, there are three main areas of the retail sector where robotics are used:
- Retail warehouse automation. Companies like Amazon use robots to automate the sorting and storage of goods in warehouses. Robots perform tasks that used to require heavy human labor, and they do so more efficiently. Technology allows for faster order processing, reduces labor costs, and creates a safer warehouse environment.
- Autonomous delivery. Some companies are using drones and low-speed robots to deliver goods, which can significantly reduce delivery time and cut costs. For example, the digital retail industry giant Amazon has more than 200,000 drones that help deliver more than 350 million different products in a continuous supply chain.
- Robots in retail stores. Retailers are using mobile robots to facilitate the work of staff and improve customer service. Robots are being deployed in retail settings to assist with tasks such as restocking shelves, guiding customers to products, and even providing information.
#3 Automated planogram creation
Modern systems allow retailers to fully automate store layout management: from the process of creating a store layout based on sales data, customer flow, product margins and other factors, to implementing the layout in the store, evaluating its effectiveness and making changes.
Thanks to LEAFIO AI, Plum Market has been able to develop a standardized approach to managing planograms across the network. All planograms are digitized and stored in one place, allowing the team to easily optimize and control them. As a result, the new 14,000 SKU store was ready to open in just 4.5 days instead of the 14 days that it had previously taken.
#4 Automated checkout and cashierless stores
Self-checkouts (SCOs) allow customers to scan items, select payment, and complete purchases without having to wait in line at the cashier. This helps reduce waiting times and improves customer satisfaction. .
#5 Internet of Things (IoT) for inventory management
The Internet of Things (IoT) is a concept that involves connecting a variety of devices that can exchange data and interact with each other wirelessly. In terms of inventory management, such systems, for example, help to track storage conditions and the quantity of goods in a warehouse or store in real time. All this is done through a network of sensors and detectors.
The latest IoT Analytics report shows that the number of global IoT connections grew by 18% in 2022 to 14.3 billion active IoT endpoints.
#6 Automated data analytics
Retailers are leveraging data analytics to make informed decisions about inventory management, pricing, and merchandising. Predictive analytics can help identify trends, forecast demand, and optimize product assortments. Additionally, data is used to design delivery routes and optimize store layouts.
#7 Smart shelves and interactive displays
Smart shelves equipped with RFID technology and interactive displays are being used to enhance the in-store experience. These technologies can provide real-time product information, pricing, and promotions to shoppers.
#8 Virtual reality (VR) and augmented reality (AR)
Retailers are using VR and AR to enhance the shopping experience, allowing customers to visualize products in their own homes or try them virtually before making a purchase.
Challenges of business process automation in retail
Despite its many benefits, retail automation also faces several challenges:
Reduction or relocation of jobs
Retail automation can lead to a reduction in the number of jobs for people who used to perform routine tasks (for example, in warehouses or cash registers). The solution to this problem is to retrain employees to perform other tasks, such as maintenance of automated systems.
Data security
Collecting and storing large amounts of customer data can be an object of interest to cybercriminals. That is why retailers must ensure the maximum level of protection, guaranteeing customer satisfaction and privacy.
Difficulty in integrating automated systems
Ensuring the correct operation of different systems can be a complex task that requires effort and resources. That's why it's worth seeking the help of specialized software developers who can ensure a quick and comfortable process of implementing the necessary automation tools. For example, the integration of the Shelf Efficiency merchandising solution takes place in several standardized steps, including data exchange, staff training, connecting the assortment to the system, setting up analytics, and generally adapting the system to the company's business needs.
Cost of implementation
Automation technology requires investments in hardware, software, and infrastructure. For small and medium-sized enterprises, this can be a significant financial challenge. In such cases, it is better not to invest in the development of their own technologies but to use ready-made innovative solutions and cooperate with the retail business automation companies that provide them.
Average calculations show that the ROI from the integration of the LEAFIO system is 100% in the first year of implementation, and it increases several times over the following 2–3 years.
Helpful tips for a successful retail business automation
The task of business automation can get much more complicated if the retailer is not prepared for possible challenges and problems. For example, it might look like new accurate forecasts for supply optimization will immediately help improve key business indicators, but in reality, even the most accurate forecasts will not move the business forward if the rest of the supply chain processes are not working properly.
To avoid disappointment in the implementation of innovations, we recommend that you look over the following tips before developing your own strategy:
- Identify key business objectives. It is important to analyze existing problems and identify possible points of growth, optimization, and improvement.
- Set project KPIs. Regular tracking and analysis of project indicators will allow you to assess the impact of the new tool and make data-driven decisions for further optimization.
- Create a forecast of the impact of the implementation on employees and business processes in the company. It is worth focusing on managing these changes: communicating with employees, developing comprehensive training, and using other methods for smooth adaptation.
- Assess the need for scalability and adaptability. It is important to incorporate the features of new technologies into the company's long-term plans in advance, taking into account the further development of the product and the frequency of updates.
Implementing the four key aspects of retail automation
According to McKinsey, current automation technologies can reduce the labor hours needed to run a typical grocery store by 55–65%. If all elements of retail automation solutions can communicate seamlessly with each other, the benefits can be game-changing for the business. For instance, 30–40% of an in-store employee's workload can be automated (McKinsey), including tasks like managing merchandising, which takes up 20% of their time, a task that technology has been able to handle for quite some time.
#1 Automation solutions for inventory management
The effectiveness of inventory management solutions heavily depends on the accuracy and timeliness of the data they process. Intelligent automation in retail requires seamless integration with other business systems, such as ERP, POS, and supply chain management software. Integration with retail automation allows for frequent updates and comprehensive visibility across all channels. Automated management helps prevent overstocking and understocking, ensuring that inventory levels are optimized.
Understanding the priorities can aid in selecting the vendor for the retail automation software and streamline the negotiation process. Different retail sub-industries have unique inventory management needs based on their products, sales patterns, and customer demands. For example, the fashion retail industry needs a system that accommodates many sizes and variants of the same item, and grocery retail businesses must be alert about expiration dates.
Additionally, having an intuitive user interface in an automated inventory management solution directly impacts how effectively staff at all levels can interact with the system. Both the warehouse staff and the management should be able to understand the full capacity of the implemented software and take advantage of its benefits. However, these are complex systems, and training is necessary even for the most user-friendly interfaces.
Just as it's paramount to ensure data quality at the input stage, delivering quality data to the BI and demand forecasting module can yield significant benefits. Simply said, if garbage goes in then it's garbage that comes out. Poor-quality input data results in poor-quality output, negatively impacting business decisions and operations.
Good quality data and well-integrated retail automation systems are needed to fully benefit from incorporating functionality such as demand forecasting. It relies on historical sales data and analytical tools to predict customer demand for products in the future. The accuracy of these forecasts heavily depends on the quality of the data input into the forecasting models.
#2 Merchandising automation solutions
When the inventory gets to the stores in the optimal quantity, the next step is to put it on the shelves in a sales-maximizing way.
As with the previous aspect, input data is vital to the results that advanced software will deliver. Beyond the sales data, advanced merchandising tools factor in everything from the purchase history to responses to marketing campaigns, customer service interactions, online shopping and browsing behaviors. This allows the algorithms to plan out promotional campaigns, optimal shelf layouts, and pricing strategies.
Adaptability and scalability of the software should be among the first things considered by any retail business when choosing a merchandising software vendor. The system should be capable of adapting to new market trends. For instance, if a new fashion trend suddenly increases the demand for a specific product, the system should be able to adjust inventory and merchandising strategies quickly. Some analytical models aren't designed for swift responses: their adjustment span often exceeds the average duration of a trend.
LEAFIO Shelf Efficiency can quickly detect and indicate the need for adjustments. This enables agents in the retail industry to maximize sales by adapting planograms both locally and across all stores.
According to our data, the LEAFIO AI merchandising solution can save up to 50% of hours normally spent on creating planograms and lead to an 8% increase in sales per foot.
#3 Automation solutions for CRM and retail personalization
Automating solutions in CRM allows the use of vast amounts of customer data that are collected and processed to deliver highly targeted and personalized marketing campaigns, product recommendations, and customer service interactions. Automated CRM systems use this data to create detailed customer profiles, which include preferences, purchase history, and interactions with the brand.
To get the most out of it, first, understand which elements of the customer experience can be personalized within the existing infrastructure. For example, a traditional offline-only retailer may have never needed a CRM system, and personalization does not fit their business model. In contrast, a large e-commerce platform typically has an extensive digital infrastructure, which stores and processes data of thousands of customer accounts which enables sophisticated personalization by analyzing browsing behavior, purchase history, and customer preferences.
Furthermore, automated marketing and loyalty management solutions enable businesses to deliver targeted, personalized communications and offers to customers based on their purchasing history and preferences. This personalized approach makes customers feel valued and understood, which enhances their satisfaction and brand engagement.
Ultimately, personalization is only another way to save consumers' time and make their shopping more convenient. While it remains more accessible to digital businesses, investing in automated CRM and personalization will have an impact on offline stores as well.
According to Statista, the market for hyper-personalization is projected to grow by almost 400% in the next ten years, highlighting the booming demand.
Nearly 80% of people use a mobile app to shop in-store (Emarketer). They check product specifics, compare costs, or determine if they can use benefits from their loyalty programs, among other activities. Integrating digital and offline elements substantially improves the overall experience and fosters brand loyalty.
4. Business intelligence automation solutions
Integrating Retail business intelligence tools brings numerous advantages and can significantly enhance decision-making and operational efficiency. The last node is the system of retail automation that presents a complete picture of the organization. It highlights the strongest and the weakest points and allows retailers to troubleshoot various retail business processes effectively. Here are our tips for implementing a BI module:
Define objectives
Clearly define the objectives you aim to achieve with BI tools. These might include improving sales, enhancing customer satisfaction, or optimizing inventory management. Ensure every department can articulate its requirements when selecting the solution. Customize the BI dashboards and reports to cater to the unique needs of different departments, such as sales and marketing.
Data, data, data
Make sure the sales data, customer data, inventory systems, and supply chain management tools can seamlessly integrate with the BI module. Having unified data can give a comprehensive view of business operations. Clean and high-quality data is essential to dependable analytics.
Train employees
Provide comprehensive training to employees on how to use the BI tools effectively. Empowering staff with the skills to interpret data correctly ensures better decision-making across the organization.
Monitor and evaluate
Continuously monitor the performance of the BI tools and evaluate their impact on business objectives. Regularly update the system and refine processes based on feedback and evolving business needs.
The human factor in conceptualizing the future of retail automation
According to a PwC study, CEOs from 105 countries think that investment in technology is a top priority: almost ¾ of companies are focused on automation, skills development, and deployment of advanced technologies, including AI.
3 out of the 5 most automated jobs in the US are in retail. According to McKinsey, automation will have an impact on the positions with the lowest skill levels and the highest employee turnover:
The issue of human resources is a contentious one when it comes to implementing innovative systems in retail. As automation often leads to job reductions and changes in employee roles, it can raise concerns and dissatisfaction in society. However, technology opens as many opportunities for human involvement as it closes.
One of the key roles for retail workers remains customer service. While many routine operations can be automated, consumers still seek personalized attention and advice, making the customer experience a crucial factor in retail success. Creative marketing, which continues to demand unique ideas and strategies, also remains vital and requires human input.
Additionally, the potential for upskilling and retraining staff through technology is worth noting. Instead of being tied to routine tasks, employees can focus on developing new skills and acquiring knowledge that aligns with the demands of a rapidly evolving market.
Let's summarize
Retail automation is currently driving transformation. New technologies are dictating the rules of the game, providing more and more new opportunities for retailers. These processes will only accelerate in the future. Automation will become a key element of business competitiveness, so retailers should keep their finger on the pulse, look for the best ways and tools to gradually involve their networks in changes.
It is important to approach the issue of automation in retail industry comprehensively and responsibly, to formulate a clear strategy considering possible challenges, trends, needs and objectives of the business – this will help to carry out the transformation as efficiently as possible and turn your ambitions into a success.
Have a question?
Have inquiries about retail automation or optimization? Talk to our expert for solutions!
Helen Kom
Inventory Optimization Product Director
