Automation in retail: An executive overview - MARKETING Magazine Asia

Automation in retail: An executive overview

Retail is under pressure. Margins are stressed from all sides: higher costs to manage e-commerce supply chains, growing demands from suppliers to pass on raw-material cost inflation, higher investments to match new competition, and steadily rising labor costs.

At the same time, the customer’s expectations continue to surge as digital natives and disruptors alike raise the bar for personalized service—on the back of what, at times, is an advantaged cost structure.

As retailers struggle to adapt, and even to survive, they increasingly pursue automation to address margin strain and more demanding customer expectations.

Automation, however, is a new capability for all but digital natives, and the sophistication in approach varies accordingly.

According to McKinsey’s latest report, it’s time for retailers to get on to the wave of automation with a few key recommendations:

#1 Organizational structures and ways of working must be transformed

Retailers must also rethink their operating models across stores, distribution centers, and headquarters.

# 2 The redeployment of labor is a strategic opportunity missed by most

As they implement automation technology, they create a large bank of hours with a trained and trusted workforce.

# 3 Retailers must prepare for skilling and re-skilling at scale

On average, replacing an employee can cost 20 to 30 percent of an annual salary, re-skilling less than 10 percent.

# 4 Talent-acquisition strategies require an upgrade

By engaging gig workers and outsourcing tasks to partners (rather than hiring), retailers can also expand the way they define the acquisition of talent.

The future of work has arrived in retail.

Executives should prepare for the impact of automation and AI technologies across all core functions and proactively address the workforce implications.

The longer companies wait to respond, the higher the risk they will not be able to catch up.

Addressing automation and workforce transitions should be at the top of every retail management team’s agenda.

Source: McKinsey & Co

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