Bots and automation: Keys to riding retail’s ‘perfect storm’

2016 was a glowing year for retail as the rise in disposable income among consumers led to increased spending online and in-store. However, at the start of 2017, when retailers were looking beyond sales figures into operational details pertaining to factors such as profitability, financial margins and innovation, the future looked decidedly bleak. January, for example, saw northern department store chain Fenwick close 11 branches as a direct result of the competition faced online. Clinton Cards threatened to close a quarter of its stores in February, followed by Debenhams, who announced that they might be forced to close ten stores across the UK in April. Most recently Mothercare has announced that it will be closing numerous stores across the country in a bid to become a ‘’digitally led business’’.

Nevertheless, the steady rise of bots could turn the tables for retailers. No-not the 45,000-strong Amazon army of robots being used in their fulfilment centres. I mean automation bots, which are being used across the physical retail space to boost efficiency in the workplace.

Let me explain.

What are bots and how are they used?

Bots are artificially intelligent pieces of automation software designed by programmers to perform basic tasks or provide speedy answers to pre-programmed questions. For example, the ‘‘event invite’’ in our online calendars is actually an automation bot at work. The bot takes the place of a PA, automatically sending an email to all those included in the invitation, so you don’t have to. Accepting the invite triggers a notification that is then automatically sent back to the host, and prior to the date, all participants are sent online reminders. This is all the work of the bot. Google’s search engine is an example of how bots can be used on a very large scale; here the ‘‘spiders’’ as they’re described, crawl the web independently to speed up the search for results-producing information at a much faster rate than any human could achieve.

‘’Chatbots’’ are a type of bot being integrated into a variety of business sectors to manage communications between internal teams and departments. Human resources can liaise much more easily over subjects such as holiday requests, health care providers, and expense report forms by using them. 

Alternatively, consumer-facing chatbots offer a simplified level of customer service that can help organise location and return policies, or suggest products and services.

The banking industry has introduced Slack-based bots, which are used for financial transactions such as PayPal, while Capital One’s Alexa Skill for the Echo is a bot designed to let customers manage account information and check balances, pay credit card, auto, and home loans bills.

Bots are also becoming popular with social media channels, including messenger apps like Facebook. Fans can opt in to automatically receive tour dates or links to the new exclusive tracks of their favourite DJs, through the use of bots. Even British Vogue is using bots on Facebook to deliver the latest updates on industry news, tips, and scoops on fashion shows and designers!

Bots in action, automating retail workflows

In the retail sector, bots have the specific role of automating repetitive back office tasks to ensure a quicker workflow overall, free from human error.  

Automation bots have the power to generate more revenue for retail organisations by lowering operation costs through increased efficiency in areas such as order processing, fulfilment, shipping, and stock control.

Through a retail management platform that supports automation, the software engineering is already completed for you.

Designing the bot is very simple.  One simply creates a ‘‘New Rule’’, then applies a ‘‘Condition’’ through the drop down menu, which can pertain to the details of the order i.e. whether it is being shipped to a city or state, contains a SKU, currency or payment status. Various conditions can be assigned to one rule. We then set the action to take when the condition(s) is met, such as fulfilling the order, updating the status of the order, updating the warehouse inventory or invoicing the order.

Within this automated back office environment, the retailer can achieve a lot more by using fewer resources. This means businesses have the money and time to prioritise strategic front office priorities pertaining to marketing, product development and personalised customer service, by reducing the costs associated with manual invoicing, inventory management, order updates, and fulfilment.

The human touch and artificial intelligence come together

There are always exceptions to the rule, and bots cannot manage everything. It is easy to see why bots have a growing presence across many verticals, however this is not eliminating the need for human interaction within the retail industry entirely.

Forbes reports that approximately 90 per cent of customer service calls to retailers include questions that can easily be answered by a chatbot, such as, “Where’s my item?” Yet what about the other 10 per cent? In retail, managing by exception is a key component to its design. Rules therefore enable us to adjust the conditions applying to the bots we’re using. This helps us to handle more complex cases, such as if a customer who is a repeat returner of goods is ordering an item, or if it is being shipped to a difficult location. This case requires a more holistic approach and the action could be set to require human review before being released for shipment.

Plus, every single order may not meet the specific criteria set by the rules created, and staff will need to tend to those orders individually. But the beauty of bot automation is that it’s an intelligent system continually expanding. As those orders come in containing unexpected conditions, rules can be created to meet those new conditions, ever-simplifying the automation process of back office operations in the retail space.

Retail is facing a ‘perfect storm’ of cost pressures

According to a new report out by Deloitte, “A Brave New World: the Retail Profitability Challenge,” 2016 U.K. retail sales rose by 3.3 per cent in value terms, which is more than double the rate in 2015. Although this is impressive growth, the likelihood of continued growth in both top and bottom line profitability amongst retailers is waning.

The report also revealed that the amount of discounted items over the 2016 Christmas season hit record levels, and their analysis showed profitability declining with three-year average margins falling by two percentage points between 2010-11 and 2014-15. “Strong growth in sales has not lead to a commensurate increase in profitability. Margins have remained under pressure as prices have fallen for most of the last five years.”

The increased cost are emerging in direct consequence to an influx of competitors entering the market with different business models and cost structures, in addition to increases in property and staffing costs, all of which are causing what Deloitte calls “a perfect storm that retailers are having to assimilate into their cost model.”

To retain their competitive edge, many retailers have attempted to satisfy all of the customer’s needs at once, supported by investments that are no longer sustainable in a time of dropping margins.

Continual changes in consumer shopping behaviour are impacting the success of physical stores in the UK, that are currently experiencing growth of just 1.1 per cent compared to online sales which have increased by 19.2 per cent. Many retailers were not aptly prepared for the costs associated with moving from a strictly brick and mortar model to an online platform; a transition which is necessary to keep them in the competitive market, but which has led to an unexpected decline in profitability.

How bots and automation can lead to thriving in retail

The Deloitte report provided three key recommendations for evolving the current retail model to one of profitability and sustainability:

1.          Focus on quality customer engagement and understanding every step of the buying journey to optimise the shopping experience.
2.          Stop trying to be all things to all people by becoming specialised and the premier go-to retailer for a specific niche.
3.          Focus on driving innovation, which will lead to greater returns and profitability

Bots are key to point 3. As I have explained, the retail space can benefit immensely from this technology as it helps to reduce expenditure and overheads incurred by outdated systems. By automating the ordering, fulfilment, inventory, accounting and numerous other manual, time and cost-consuming processes, retailers can devote more attention to their workforce, enabling- by association- points 1 and 2. Today’s economy is becoming increasingly ‘’purpose driven’’ thanks to the introduction of Millennials to the workforce; as such, it is important that retailers prove that there is opportunity to grow with the business, as a member of staff, which can be demonstrated by investing more time in this area of the business. With certain reduced through the automated system, more money can be invested in innovative practices that will enable an “immersive and differentiated experience” for customers.

Ultimately, if retailers are willing to embrace the presence of bots in the workplace, they can not only survive the storm, but thrive for years to come.

Derek O’Carroll, Chief Executive Officer, Brightpearl
Image Credit: Praphan Jampala / Shutterstock