Grocers Enlist Robots to Chase E-Commerce
Venture firms have invested more than $1.2 billion in grocery technology this year, double the total for 2017
Simbe’s ‘Tally’ robot scans shelves to flag when items are out of stock in a Schnucks store. PHOTO: SIMBE ROBOTICS
By Heather Haddon Oct. 29, 2018 8:02 a.m. ET
Grocers are stocking their warehouses with robots and artificial intelligence to increase efficiency as competition for consumer spending on food picks up.
Robots are relatively new to the food industry, where customer interaction is common and many goods like fruit are fragile and perishable. Startups are vying to sell supermarkets an array of robots that perform different tasks. Venture-capital firms have invested more than $1.2 billion in grocery technology this year, according to PitchBook, a financial-market data provider, double the total for 2017.
Technology geared toward packing up online orders for collection also faces competition from companies working to deliver groceries direct to a customer’s home. Companies including Uber Technologies Inc.’s UberEats are considering delivering groceries as well as restaurant meals. Instacart Inc. and Shipt LLC already focus mainly on groceries.
Altogether, spending on technology by many of the biggest U.S. food retailers could accelerate the adoption of online ordering for groceries. Deutsche Bank expects online orders to represent roughly 10% of the $800 billion grocery market by 2023, up from 3% today.
“We have to find a model where we can deliver groceries to customers’ homes and do it in a more profitable way,” said Narayan Iyengar, senior vice president at Albertsons Cos., the second-biggest U.S. supermarket chain.
Albertsons said it has hired Takeoff Technologies Inc. to build a network of smaller warehouses where robots and artificial intelligence will help fill online orders. It is one of the deals expected to be announced by major retailers at the Groceryshop conference in Las Vegas this week.
Takeoff’s first grocery sorting system for online orders started operating this month at a Sedano’s Supermarket in Miami. Machines in the back of the Hispanic foods store retrieve items from towers of products and then workers pack up the goods. The system is faster and uses less space than people gathering online orders by hand from grocery store shelves, the companies said.
Takeoff competitor Israeli-based Commonsense Robotics said it is in talks to build similar small, delivery-focused warehouses with robots running on artificial intelligence for several U.S. supermarket chains next year. Commonsense pays several million dollars to build a warehouse, and then charges a fee per item for grocers to process orders, the company said. Each facility is expected to process at least 1,000 grocery orders a day for delivery, according to the company. An Israeli drugstore chain was the first to use Commonsense’s system earlier this month.
And startup Alert Innovation is building an automated system for packing online grocery orders at a Walmart Inc. store in New Hampshire. It is slated to begin running by next year.
Supermarkets have lagged behind other retailers in adopting new technology, investors and consultants said.
Dave Steck, an information-technology executive at Schnuck Markets Inc., was surprised by how outdated the fiber-optic cable was when he joined the St. Louis-based grocer in 2014.
“There hasn’t been a lot of reliance of technology in the field,” Mr. Steck said.
Schnucks overhauled its cable system, and earlier this year hired Simbe Robotics Inc. to install robots in its stores.
Simbe’s “Tally” devices scan shelves to flag when items are out of stock. SoftBank Robotics Group, a subsidiary of SoftBank Group Corp., struck a deal with Simbe earlier this year to sell and distribute the Tally robot to retailers in Japan, North America and Europe. Simbe and Schnucks wouldn’t say how much the robots cost.
Walmart is using another shelf-scanner system made by Bossa Nova Robotics Holding Corp. in 50 stores so far. The nation’s top food seller also is testing an autonomous floor-scrubber that will be in 360 stores by the end of January.
Kroger Co., the largest U.S. supermarket chain, has made a series of technology investments this year as it faces tougher competition from Walmart and Amazon.com Inc.’s online grocery offerings.
The company in May took a roughly $250 million stake in Ocado Group PLC, a British online grocer that will open 20 automated warehouses in the U.S. for Kroger.
Kroger also is testing a driverless grocery van with autonomous vehicle company Nuro Inc., and it entered the crowded meal-kit distribution market through a $700 million deal with startup Home Chef. The deals are expected to advance Kroger’s online prowess, but have hurt the company’s profits and weighed on recent earnings.
“These are big investments,” said Joe DiMondi, head of Consumer & Retail Mergers & Acquisitions at Deutsche Bank.
Takeoff said the 10,000-square-foot fulfillment systems it is building for Albertsons cost about $3 million each. Albertsons is installing Takeoff systems in two stores. It plans to buy more if the system succeeds in packing orders more efficiently.
“The overall math will be considerably cheaper for us,” said Mr. Iyengar, the Albertsons vice president.