Tiny Storefronts, Robotic Warehouses, and Autonomous Delivery: The New Retail Supply Chain

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The retail industry is notoriously cutthroat, particularly in the age of Amazon and on-demand delivery services. In the grocery space, which is known for having extremely thin margins, this competition is made all the more steep, particularly in the digital age where customers expect fast, seamless service. This level of competition has contributed to a new area of focus for retailers: the supply chain. By focusing on last-mile delivery through micro-fulfillment centers, autonomous last-mile delivery (such as drones), and digital supply chain optimization, retailers are hoping to leverage the supply-chain to increase margins and beat out the competition.

In response to this competition, numerous startups have emerged to add cutting edge digitization to last-mile delivery. NewtonX surveyed 125 executives at startups and tech giants that are using technology to create innovative paths to faster and more efficient supply chains. The data and insights in this article are informed by the results of the NewtonX retail last-mile delivery survey.

The Biggest Players In Next-Gen Last-Mile Delivery:

Retailers including Walmart, Albertsons, and Stop and Shop have all recently partnered with or invested in last-mile delivery providers. One of the areas that has garnered the most attention over the past two years is micro-fulfillment centers. These centers are basically very small warehouses that exist in densely populated urban areas, and autonomously (through robotics) fulfill orders that are placed online.

One of the most promising startups in the area is CommonSense Robotics, an Israeli startup that has raised $26M in funding to help online grocery retailers make fulfilment and delivery faster and more efficient. The company offers an on-demand supply-chain to enable one hour delivery via micro-fulfillment centers in urban areas — at a profitable margin. Similarly, Takeoff Technologies, which has raised over $51M, uses micro-fulfillment centers to enable online supermarket shopping. In 2018, the company opened a fully automated supermarket in partnership with Sedano’s Supermarkets. The “hyperlocal fulfillment center” reduces the size and cost of grocery stores by turning them into what are essentially mini warehouses, where customers pick up their groceries after ordering them online.

These warehouses lower costs by cutting down the distance to customers without the investment of a traditional storefront. Retailers who depend on online delivery will receive massive cost-savings from this approach.

Other companies are taking different approaches. As we wrote last year, Amazon has secured numerous last-mile delivery solution patents for drone delivery in dense urban areas. While its drone delivery service did not receive FAA approval last May, Amazon has attempted to improve last mile delivery through an autonomous delivery service called Scout, that it rolled out in Washington, as well as through contracting with small businesses and delivery partners.

Still other brands are combining micro-fulfillment centers with small-format stores, or focusing on repairing the freight aspect of the supply chain. Last month, Flexport, freight-forwarding startup, and Nuro, a startup that’s building autonomous delivery vehicles, both raised close to $1B rounds led by SoftBank. Different startups and tech giants are attacking different stages of the supply chain, but one thing is consistent: the need to digitize and streamline every point of the supply chain, particularly last-mile delivery.

Why Revolutionizing The Supply Chain Is the Hottest Competitive Differentiator For Retailers

Online retail sales accounted for just 9% of total retail sales in 2017. This percentage is expected to jump to 21% by 2023, while online grocery sales are expected to jump from 2% in 2018 to 20% by 2025. The accompanying growing demand for delivery services will make having a fast and low-cost supply chain and last-mile delivery solution paramount to success.

Even if drones and autonomous delivery vehicles become ubiquitous, solutions such as micro-fulfillment centers will still be a critical component of last-mile delivery, as will other solutions such as digitized international shipping (the solution that Flexport is working to solve). The retail supply chain is only just beginning to be disrupted: over the next five years, we will see an explosion of investment in refrigerated last mile logistics, virtual delivery networks that consist of e-retailers partnering with local delivery services, and of course, robotic warehouses and autonomous delivery.

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About Author

Germain Chastel is the CEO and Founder of NewtonX.

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