With technological advancement and evolving consumer behaviours, there has been a growing trend of brands incorporating automated processes in physical stores across the globe. Retail Innovation Hub's 2022 research showed that brands embracing self-checkout technology in the global market grew by 11% last year.
The trend is even more prominent in Asia. In Tokyo, Japan, FamilyMart is reportedly looking to have 1,000 unmanned stores in Japan by 2024. In Singapore, the Pick&Go chain has opened three AI-powered unmanned grocery stores, including one called My Village at the National University of Singapore in 2021.
Zooming into Hong Kong, HKTV's subsidiary brand Shoalter Automation is unveiling its first fully automated retail store and system in Manchester, United Kingdom in mid-2023. It is a large scale fully automated storage and retailing system in an offline shop, which can take orders, and replenish stock when required without human intervention.
Commenting on the trend, HKTV told MARKETING-INTERACTIVE that brands treat automated stores as a cost-saving tool and a cost-effective strategy to improve business development. “Automated stores can operate 24/7, providing customers with the convenience of shopping at any time. Convenience is also enjoyed directly by businesses as automated stores could help predict replenishment stocks, analyse shopping trends and optimise inventory management processes,” HKTV added.
With all customer journeys and checkouts recorded, the process of data collection is simplified and is a lot easier for brands to analyse, according to HKTV. “Once the systems and hardware are in place, it's also a lot easier for businesses to scale up and open up new stores, reaching new markets compared to traditional businesses,” the company added.
Agreeing with HKTV was Tim Durgan, VP of Strategy & Insights, APAC, omnichannel agency Assembly, who said brands naturally will benefit from lower overhead costs after sales and cashier jobs are eliminated but there is also more value in the ability to collect consumer data through online checkout via a brand owned app.
If a company goes as far as making the entire shopfront digital, there’s also the ability to optimise your product priorities to put different items in focus at different times of the day.
Innovation and optimised inventory management are also the reasons why brands are moving towards unmanned retail, said Tracy Fu, CEO, China at VMLY&R Commerce. “Brands can try out new products, technologies and services in unmanned retail and gain more insights and experience through experimentation to improve their market competitiveness,” she added.
She also added that unmanned retail usually adopts an intelligent inventory management system that can update and forecast the sales volume of goods in a timely manner. “This can effectively reduce inventory backlog and waste, and ensure the freshness and quality of goods,” she said.
Enhancing shopping experiences is also key
On the consumer front, the increase in demand for more convenient and efficient shopping experiences is also key. A study titled “Consumer Preferences Towards Unmanned Store Experiences” by Axis Communications found that Hong Kong consumers’ intention to shop at physical stores in the new normal post-pandemic era has dropped by 14% compared to the pre-pandemic era. Almost half of the respondents (47%) indicated that they are more likely to visit unmanned stores – physical stores with few to no staff.
Kevin Kan, chief experience officer, Break Out Consulting Asia, said one of the biggest challenges retail owners have had during the pandemic is staffing, so it is easier to operate automated retail stores while enhancing the customer experience.
“As a person who is time crunched, being able to shop when I want is something that would make me loyal to a brand who had all night shopping. After the global pandemic, I’d love to be able to go to the store at a time when it is less crowded, and I can shop at my leisure. It’s just so convenient!” he said.
Agreeing with Kan was Darren Chuckry, founder at experiential agency HK Initiative, who said these self-service or automated systems provide instant and detailed product information, allowing customers to easily access reviews, usage instructions, and related products, further enhancing their shopping experience and enabling them to make informed purchasing decisions.
“Furthermore, these automated systems enable brands to connect with a younger, digital-savvy generation, who are accustomed to technology-driven experiences, making it essential for retailers to adapt and innovate to stay relevant in today's rapidly changing retail landscape,” he added.
Will traditional retailers fizzle out?
While automated stores offer many benefits to brands and consumers, they may not be suitable for all retail formats or customer preferences, according to HKTV.
Some shoppers may still prefer the personal touch of a human cashier; traditional stores have staff that could assist customers with questions and provide assistance in choosing products.
Certain products or services may require the expertise of a trained employee, according to HKTV. “For example, the sales of age-restricted products such as alcohol and cigarettes,” it added. Meanwhile, it added that security of the stores is also a crucial concern, as unmanned stores are more vulnerable and likely to encounter theft and fraud as there are no staff to monitor customer behaviours.
Agreeing with HKTV was Carmen Wu, head of Havas Market, Havas Media HK, who said the expected investment benefits of unmanned stores do not appear to be convincing regarding operational efficiencies and value chain benefits due to system errors and payment issues.
“Additionally, traditional retail sectors such as luxury goods, watches, and jewellery brands need to maintain a personalised touch and offer expert advice. As such, unmanned stores are more likely to become prevalent in supermarkets or convenience stores, where speed and efficiency are the primary priorities,” she added.
Despite the rise in the adoption of self-service systems in the retail industry, it is unlikely to completely replace traditional stores that rely on manpower, according to HK Initiative’s Chuckry. “Instead, the future of retail lies in striking a balance between technology and human touch, where automation enhances customer experiences and complements in-person interactions, creating a harmonious blend of efficiency and personalised service that today's consumers desire,” he added.
Meanwhile, VMLY&R Commerce’s Fu, said in the new world of retail business, the front end is “people + goods + place”, while the back end is AI, big data, cloud computing. “The back-end are basic layers such as AI, big data, cloud computing," she added.
For a long time to come, it will not completely replace the traditional model, but coexist with it to evolve.
On the other hand, Break Out Consulting Asia’s Kan said as the cost of technology starts coming down, he can see unmanned automated stores slowly replacing traditional retail stores. “What you are eliminating is the constant need to retrain staff when there is turnover of personnel. To me, that is the real cost saving. You have simply moved variable costs (staffing, training, benefits) to fixed costs (infrastructure) of operations," he added.
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