Retail isn’t Dead. It’s Just Moved into a Warehouse.

With the exponential rise in online sales over the past few years, and an expected additional increase of 54% by 2020 according to Forrester, retailers as a category are hurting. A June 2017 article in the L.A. Times predicted that up to 25% of U.S. malls will close in the next five years.

It is not that people are buying less, it’s that Amazon (mostly) and others are selling more product directly from a warehouse. The game changer that is making this possible is speed. Today’s consumers value speed to such a degree that many are willing to pay in advance for it: take Amazon Prime as an example, where $99 a year buys you a year’s worth of free two-day shipping upgrades on purchases.

So, how is this speed achieved? The answer lies not just in the faster shipping, but equally in the rapid processing mechanisms. Sellers are increasingly investing in more sophisticated warehouses located closer to customers to increase the speed of delivery.

How much faster? In larger cities, online retail giants are rolling out one to two hour delivery windows on a variety of products. Waiting two days for a delivery is so 2016.

Like a lot of other industries, online retailers are expanding their use of technological capital. Automated warehouses are becoming increasingly de rigueur, as features like robotic palletization, automated pickers, software improvements and faster conveyor systems all help to reduce the time it takes to deliver goods and add to the bottom line by cutting labor to the bare minimum required. This explains the processing aspect, but moving shipments to their destinations also needs to be considered, and it certainly has been with the advent of automated driving systems.

Driverless cars have been all over the news in the last couple years, and the possibilities they could bring to commuters everywhere are endless. But, the most significant impact will be for commercial trucking.

Not only would human error (which accounts for 90% of crashes according to the National Highway Traffic Safety Administration) be cut out of the picture, but the economic benefits would also be huge due to a few simple factors: 1) Labor cost almost disappears, 2) driverless trucks don’t need rest unlike their human counterparts, so range is extended from the current distance that can be covered in a 10 hour shift to nearly 24/7/365. 3) This means that companies could operate their trucks around the clock, multiplying their productivity and allowing a reduction in the number of distribution centers (DC’s) required. 4) Operating costs can be reduced by locating the DC’s on inexpensive land outside of town and companies will be able to further reduce costs by hauling the same amount with less trucks. And finally, 5) driverless trucks can daisy-chain in a convoy spaced 2 meters apart each and follow in the draft of the vehicle ahead not unlike the peloton in a professional bike race, which results in 40% lower fuel consumption.

These many benefits of this would of course help companies, and ultimately lower costs will trickle down to the consumer in the form of lower product prices and shipping charges. Until Amazon takes over the world anyway.

Generally, this technology would not completely remove the human truck driver from existence: secondary distribution areas, like local delivery, would still likely be conducted by humans as the savings from automating this part of delivery is simply not large enough to warrant the capital investments (yet). Overall, the automation of the warehouse and proliferation of driverless trucks is not too far off in the future.

Increasingly most products that you purchase will be picked, sorted, and delivered without ever being touched by a human hand. And neither you, nor the product, will have ever ever visited a retail store in the process.