Walmart and Automation: Investing in the Future

Retail automation is attracting significant interest throughout the industry from investors and brands alike. A recent report from Reuters stated that global retail giant Walmart is aiming to increase its use of automation significantly, reaching 65 percent of its retail stores by 2026.

The combined price tags of retail automation investments are significant, if not staggering. Yet the industry’s biggest players, with Walmart leading the way, are embracing the technology faster than ever. Walmart plans to spend more than $15 billion in capital expenditures this year (though we don’t know how much of this figure goes toward automation).

Today’s post tells you why that’s happening, the good and bad of automating portions of retail operations, and what industry watchers are predicting about the future of automation in retail.

Why Are Stores Investing in Automation?

As e-commerce volume continues to climb for traditional brick-and-mortar brands, the last generation of fulfillment solutions and systems can’t keep up. Automation is an integral part of next-gen fulfillment, which we’re currently seeing from Walmart.

But why automation, exactly? We can look at the “why” from all sorts of angles, but two reasons consistently rise to the top: capacity and cost savings.

Capacity: automation increases a brand’s capacity to fulfill orders, especially online orders fulfilled from distribution centers. Machines don’t get tired or stop for lunch, and they can hold and lift as much weight as needed without the risk of injury.

Cost savings: though initial capital expenditures and R&D expenses must be absorbed, the long-term costs of an automated warehouse could save as much as 20% compared to the status quo. Walmart says it’s aiming to move more than 50% of its fulfillment center packages via automated facilities rather than physical labor by 2026.

Doing more with less is the name of the game in operations. Automation is one powerful way to accomplish this in the warehouse and e-commerce fulfillment contexts.

Pros & Cons of Automating Retail Operations

As with any new approach or technology, retail automation brings pros and cons.

Pros

• Increased efficiency

• Reduced costs

• More consumer choice (e.g., human-assisted or self-checkout)

Cons

• Devices, systems, and software can break down or fail

• Overreliance can collapse a system when failures occur

• At the store level, customer backlash or resistance to a lost level of customer service

At this point, it’s also worth mentioning that automation in retail is broader than just distribution center order fulfillment. We’re also seeing various automation technologies show up at the store level. We alluded to some of these in the pros and cons above, and we’ll discuss some of them in the following section, too.

How Could Automation Affect the Future of Retail?

In addition to what we’ve discussed regarding retail warehouses and distribution centers, automation and AI are already showing up in several in-store contexts—with more applications coming in the future.

Here’s a quick list:

• Automated floor-cleaning robots are becoming commonplace

• Partially automated self-checkout systems

• Semi-automated backroom unloading

Other existing technologies not as widely adopted include electronic shelf-edge labels and shelf-scanning robots, according to research by McKinsey.

Once a novelty, Amazon’s fully automated Amazon Go stores are poised to go mainstream: before COVID, the megaretailer unveiled plans to open 3,000 of these stores globally. The pandemic, recession, and contractions in the tech sector have significantly slowed that progress, but the company remains publicly positive about the format’s viability and future expansion.

In contexts where high-touch interactions aren’t needed (or even helpful), a fully automated “walk-out” format like Amazon’s could be the future. As automation technologies mature and evolve, and as consumers grow more accepting of them, we expect to see a continued shift in the future of retail.