“The predictions and insights provided in this article are based on current industry trends and expert opinions, but they are not guaranteed to be accurate or representative of the entire supermarket industry. The future of the industry is subject to various factors that may impact it, including technological advancements, economic conditions, consumer behavior, and government regulations. Therefore, readers should use their own discretion and judgment when considering the information presented in this article.”
90% of what you buy in a supermarket is completely predictable. As a result, automation will be easy to implement in the supermarket business. This article will give you the projected outline of how this will come about.
As Jeff Bezos wrote in a letter to shareholders:
“We didn’t ascend from our hunter-gatherer days by being satisfied.”
While Bezo’s Amazon drives innovation at its ever-more-automated grocery stores, it’s becoming clear that in the hyper-competitive supermarket industry, owners and managers are increasingly adopting automation to stay a step ahead of the competition – or to just try and keep up.
How will this continue to transform the supermarket industry?
The large players run the supermarket business. Walmart and Amazon – the number 1 and 2 measured by sales in the USA – accounted for $ 670 billion in sales in fiscal 2020-2021. That’s as much as the rest of the top 10 industry players combined. Or, for example, if you add up the sales of the bottom 30 of the top 50 players, you end up with $245 billion – just slightly more than Amazon’s $236 billion and far less than Walmart’s 434 billion. So, while there are estimated to be over 60,000 supermarkets and grocery stores in the U.S. it’s a highly concentrated industry measured by sales. Furthermore, there has been little growth in the number of stores/supermarkets with the quantity of locations remaining steady over the past 5 years (2018 – 2023).
Clearly the growth is coming from the largest players. It’s hardly a coincidence that both Amazon and Walmart have been pioneers in their industry – constantly innovating and disrupting. As consumers expectations are transformed by the innovative large players, the mid-sized and smaller stores have no choice but to automate to try and keep up and avoid losing clients to major players like Walmart and Amazon who are automating at an increasing pace.
Next, let’s look at some of the numbers.
How do these numbers compare with the world’s other major markets?
While American supermarkets are clearly well ahead of Canadian and Australian competitors, EU stores are slightly ahead in terms of efficient use of labor. Consider Mercadona, a Spanish supermarket retailer that has invested in automated distribution centers that serve 600 of it’s over 1,600 retail stores, having robotics work behind the scenes where the customers can’t see them, providing just-in-time distribution of quality produce through separate, climate-controlled sections of the automated distribution centers. This provides farm-to-table delivery in 24 hours – on a scale that even a large farmer’s market can only dream of.
Delivering customers farm-fresh produce in optimal condition means less spoilage and greater sales for Mercadona. Remember, in the supermarket business, how attractive your produce section looks is key to retaining customers and boosting sales. Labor costs are more manageable with less employees needed doing predictable physical work, and greater productivity from those employees who still work at their automated centers.
That’s just one aspect of how automation can radically transform the supermarket industry. Let’s consider how a supermarket works to see where more of the opportunities for automation may lie.
It’s unlikely that even Amazon’s latest food stores are truly fully automated, but they’re already getting close. To consider how automated supermarkets are in 2023 in America, it’s important to follow the money and ask what investment levels are present in the business.
No investment | Low investment | Moderate investment | High investment | Full automation |
Most tasks performed manually or with little automation | Automation limited to only a few areas or processes | Automation in wider range of areas & processes – more integrated into daily operations | Automation widely adopted & integrated into most areas & processes yielding significant improvements in productivity | Almost all tasks & processes automated with humans focused on maintenance and supervision of automated systems |
Most SME players | Larger Players | Amazon?? |
As the industry continues to consolidate, automation will increase as the merged companies try to squeeze profits out of their combined businesses. That means supermarkets will be increasingly moving to the right in the above table as increasing investment moves them inexorably towards full automation. Even smaller mom-and-pop grocery stores will have to make moderate investments in automation or sell the business and do something else.
To answer this question, a more granular focus on where the investment in automation might be most likely is needed. McKinsey have broken down the areas where – as they say – machines could replace humans and have done so by industry groups. Here’s what they say about automation in retail.
The most likely area of automation in the retail trade is predictable physical work – restocking shelves, cleaning the store, as well as lifting, moving, and sorting boxes and pallets in warehouses/distribution centers. One should also include cashing out customer purchases, although not every supermarket is going to immediately replace their cashiers. Additionally, increased automation also means safer working conditions for workers who will now monitor and maintain these systems rather than lift and stack things.
The least likely areas for automation are the managing of workers and stakeholder interaction. So, customer service of various kinds is unlikely to be replaced by machines. In fact, this is an area that will receive increased focus – and increased requirements and training for qualified staff – as automation in other areas frees up workers to advise customers rather than stock shelves.
However, data collection and data processing are the next most likely areas for automation and are essential for the kind of customer interactions that a successful supermarket needs to grow over the next decade. The store’s analytics capacity will increasingly determine how quickly a supermarket can respond to changing customer trends and to individual customer preferences and buying patterns and therefore offer them the right bargain at the right time.
This data processing is done through what are called supply chain control towers. These are cloud-based software platforms that use the collected data, working with AI, Machine Learning, and the Internet of Things (small CPUs built into consumer appliances and other products) to monitor and control and provide a 360° view of the entire supply chain. The better the data collection at any store, the better a job a control tower can do processing and providing actionable solutions to any problems that arise. And that means more efficient distribution of produce and other goods to individual stores.
Brick and mortar locations will still exist but with so much technology built into them that they’ll really be brick, mortar, and machines locations.
The above scenario is likely in the midterm, although the current economic model does not support it happening immediately given that unemployment would be very high.
With this in mind, a timeline for supermarkets to reach full automation has to start by looking at the predictions for the retail trade in general. The Yale-Oxford survey suggests that retail salespeople will have their jobs done by machines by 2031 – 8 years from 2023. However, McKinsey consultants suggest as we pointed out above, that automation will mean salespeople can focus entirely on customers. Who will turn out to be right?
One has to suspect that a global business consultancy like McKinsey is more attuned to the multitude of factors that owners of supermarket chains face compared to AI researchers that tend to operate in a more academic environment. Nonetheless, if AI does indeed reach High-Level Machine Intelligence even sooner than predicted, the business environment will have no choice but to adapt by automating at an even faster rate than anybody has predicted.
On this basis, we predict HLMI in the supermarket industry will be reached by mid-century – sometime between 2035 and 2045.
The question is: does HLMI mean no more humans working in the supermarket industry? We predict this to be wrong. The nature of the work will be radically transformed, and the quantity of workers will be greatly reduced. Nevertheless, along the supply chain of any supermarket you will still have humans occupying key posts.
Note: Food is national security, and we expect national conglomerates to take over and multinationals to have a more limited role.