Major U.S. grocery retailers are increasingly turning to smaller, robotic fulfillment facilities to help them pick grocery orders faster and better handle the growing volume of online food deliveries spurred by the coronavirus crisis, experts say.
Before the pandemic, grocers had been leaning toward investing in "microfulfillment centers." Experts say these facilities provide a scalable model for rapidly fulfilling thousands of grocery orders daily and are far more efficient than human workers who manually pick items in stores.
The uptick in online grocery demand sparked by the virus in recent weeks has accelerated efforts by companies such as Walmart Inc. and Albertsons Cos. Inc. to automate the process with these high-tech centers. The centers average about 10,000 square feet and are located in the rear of a store or in a stand-alone building where thousands of a company's most popular items are stored.
Amazon.com Inc., which has experienced pandemic-induced bottlenecks in its supply chain, declined to comment. However, experts say the Seattle-based retailer is also actively looking at ways to automate grocery fulfillment and stay competitive in the high-volume grocery industry where delivery slots remain limited.
"Everybody who is in the game is looking at how they can get more automation faster," Steve Hornyak, chief commercial officer with Fabric, a U.S.-Israeli company that builds microfulfillment centers, said in an interview. "We're expecting up to 1,000 microfulfillment centers in the U.S. over the next five years for grocery alone."
Takeoff Technologies builds microfulfillment centers whose automated process is about 10 times faster than manual picking fulfillment.
Technology varies by company, but these facilities are equipped with robotic equipment that completes the picking process as much as 10 times faster than manually filling orders. After a customer places an order, robots retrieve totes containing the appropriate products and route them to stations where a human picker can select and bag the items for shipping.
The items that retailers stock in these centers will vary by preference, but they often include a grocer's fastest-selling items like cereal, beauty products, detergent, cleaning supplies and condiments, as well as milk if a chilled section exists in the automated area.
Made-to-order items, bulky products, and fragile items like peaches are typically stored in the center's manual picking area. Other products not fulfilled in an automated center include deli items, which most retailers prefer to pick from the store floor.
Experts say the centers provide greater accuracy fulfilling orders in a one- or two-hour period and real-time information about whether an item is in stock. "If you don't have chocolate, we won't show it as an option," Hornyak said. "You have 100% accuracy on your orders, which increases customer satisfaction."
The push for faster fulfillment comes as online grocery sales gain momentum amid the COVID-19 pandemic. Fabric estimates that the share of U.S. grocery sales taking place online has reached 9% and will grow to 12% or higher by the end of 2020. Fabric noted that, prior to the pandemic, Deutsche Bank forecast that online sales as a percentage of total grocery sales would not reach 12% until 2025.
"The demand for e-commerce was growing at a pretty rapid clip pre-COVID, and that has accelerated twofold, threefold with it," Neil Stern, senior partner with retail consultancy McMillanDoolittle, said in an interview. "Most retailers are scrambling to meet that demand. Any kind of automated fulfillment increases your pick rate, so it makes you more efficient."
The dramatic surge in online orders has "reinforced" many grocers' desire to move faster to build microfulfillment facilities, said Curt Avallone, chief business officer for Takeoff Technologies Inc., a Massachusetts microfulfillment-center company whose customers include Koninklijke Ahold Delhaize NV, Albertsons and Australian grocer Woolworths Group Ltd.
"They are planning on moving forward with us on adding more microfulfillment centers for the next year and beyond," Avallone said in an interview, adding that his company has more than 100 deals under contract with undisclosed clients. "The big change is, they are calling us. For the first time, rather than me knocking on doors, I'm picking up the phone."
Albertsons did not respond to inquiries. But the Boise, Idaho-based company announced plans in late 2019 to purchase additional microfulfillment centers from Takeoff after working with the company on Albertsons' first center in South San Francisco in October of that year.
Takeoff also has 10 center sites under active construction for undisclosed clients. Seven of those are either in the design stage or acquiring permits, while four additional sites are in the planning stage for construction, Avallone said.
Takeoff's centers, which cost between $3 million and $4 million, can become operational within six months or less on the first deployment with a new client. "Future deployments with the same client tend to be much quicker and are closer to three months to go-live," Avallone said in an email. "We’re targeting even quicker deployments than that in our future implementations."
Many grocers have teamed with robotics companies in recent months to speed order picking.
Walmart did not respond to inquiries. However, in early 2020, the company unveiled plans to partner with Alert Innovation to use autonomous carts for retrieving ambient, refrigerated and frozen items ordered online. Staff members then assemble and deliver orders to customers.
The Kroger Co. has teamed up with online grocer Ocado Group PLC to build up to 20 automated warehouse sites, including locations in Georgia and Maryland. Kroger declined to comment on when those 20 sites would open.
Walmart is one of several grocers working to automate the order-picking process. Pictured here is Walmart's Alert Innovation's Alphabot robot.
Several more high-tech fulfillment centers are in the pipeline.
Hornyak, of Fabric, said his company in 2019 began building a 10,000-square-foot microfulfillment center for an undisclosed grocer in the U.S. Southeast for an early July launch. Fabric is also planning two more centers for other grocery brands that will be operational by the end of this year, he said.
Amazon declined to comment for this story. But Hornyak said the company is actively looking to automate grocery fulfillment at its grocery chain Whole Foods Market Inc. "Pretty much all top 100 grocers are looking at microfulfillment automation — every single one," he said.
James McCann, CEO of McCann Investments, an investor in Takeoff, believes that Amazon will also incorporate the centers into the company's new unnamed grocery store format.
"I think they are going to have a staging area in the back of the store where there is essentially a door that goes out to the pickup area," he said. "There's a lot of synergy having it next to the store."