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Why Micro Fulfillment Centres Are The Future of Retail

Why Micro Fulfillment Centres Are The Future of Retail

Innovation in the future supermarket will bring new opportunities for merchandising and impact on the 4Ps — price, product, place, and promotion.

The principal challenges of e-grocery segment that the micro fulfillment centers can solve are pick-up time and last-mile delivery — it takes around 60 minutes for picking-up an e-grocery order which makes the segment an unsuccessful burden for grocers.

Robotics companies can contribute in this journey as a retailer by providing robotics and automation solutions in these small-sized fulfillment centers to churn out order baskets for the e-grocery customer absorbing minimal space and manpower

How do you think the consumers will shop in 2035? Currently, there is a greater demand for lucidity and escalated personalisation from grocery shopping. This helps consumers to make illuminated decisions to support their dietary needs, values, occasional requirements and health goals. This rapid switch in consumer demand, combined with emerging technologies and trends, will lead to a ‘supermarket of the future’ (micro fulfillment) with an advanced omni-channel experience and efficient operating model.

Automation is one of the key elements of the Future Supermarkets. It reduces costs and manual work and helps in keeping a focused approach towards enhancing the overall shopping experience for the customers. Currently, the brick and mortar business delights customers experience through high-quality fresh produce, delicious food with an attractive gastro ambience and unforgettable, satiating social interaction. Smart merchandising solutions will make the retail shopping space more appealing to the customers, exponentially eliminating wastage simultaneously.

Innovation in the future supermarket will bring new opportunities for merchandising and impact on the 4Ps (price, product, place, and promotion). One way to accomplish this is by rendering end-to-end e-Grocery solutions, availing hyper-local automation to lower the cost-to-serve in online fulfillment. Keeping consumers’ demand on priority for Omni channel grocery, a transition from defensive posture on e-Grocery towards a profitable solution has become important to eliminate the losses of the present in the effective e-Grocery segment.

The principal challenges of e-grocery segment that the micro fulfillment centres can solve are pick-up time and last-mile delivery, it takes around 60 minutes for picking-up an e-Grocery order which makes the segment an unsuccessful burden for grocers. The micro-fulfillment centers shorten picking time to about six minutes. These micro-fulfillment centers can be installed in the existing supermarkets setups, enabling a hyper-local function, reducing the cost of last-mile delivery.

The robotics companies can contribute in this journey as a retailer by providing robotics and automation solutions in these small-sized fulfillment centers to churn out order baskets for the e-grocery customer absorbing minimal space and manpower. From in-store pick, dark stores, semi-automated fulfillment, micro fulfillment centers to full scale automated warehouses, the aim is to discover  a way to lower grocery fulfillment cost. Retailers will have to create flexibility in their solutions which will meet customers’ demand at a higher profit. Some aspects such as urban vs suburban, delivery vs pick-up, scheduled vs immediate can help to develop this flexibility in the hands of retailers.

These are some of the nuances with which the technology partners should look at the problem statement of micro fulfillment.

When it comes to any automation, ROI is a conversation worthy subject. From a grocery perspective, the cost to set up a supermarket today includes the cost of land, building, infrastructure and workforce which is around 60% of the cost of goods sold on a year on year basis. On the other hand, it is evaluated that the cost of building a micro fulfilment center would cost less than half of that for the same amount of sales for the retailer. This makes the concept a lot more viable, thereby reducing the serving cost. Moreover, if planned in a right way with your MFC specialist, as a retailer, it is estimated that the inventory turn around will be 3 times more than a typical retail store causing the required impact on ROI.

While the pricing of online grocery is the choice of retailer, the micro fulfilment centers are so cost-beneficial that they permit retailers to sell products via an online medium to their customers without any additional charges.

Hence, some advantages of Micro fulfilment center can be summarized as follows:

  • Reduced last-mile delivery costs: The cost of transporting and hence reduced delivery time due to migration of warehouses closer to the customer, decreasing the overhead costs.
  • Easy Deployment: The deployment time to implement micro fulfilment centers is a lot lesser due to pre-engineered approach for automation, making go-to-market strategy comparatively faster.
  • Re-use of existing store footprints: It reduces the need to set up new warehouses for growing online sales channels and instead use the existing supply chain assets.

It is evident that the future of retail is here, embraced primarily by automation. 

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.