Will a ‘skyscraper’ store change how groceries are delivered in cities?

Discussion
Rendering: Urbx Market
Apr 01, 2021
Matthew Stern

Grocery stores that manage their back-end operations with busy hives of robots have gone from speculative fiction to reality. One recent entry into the space has made headlines with its plans to build up instead of out.

A startup called Urbx has announced plans to launch a robotic grocer that is 150 feet tall (nearly as tall as an average water tower) and only 1,800 square feet around, according to Grocery Dive.

As planned, the pick and pack duties carried out on the upper floors of the building will be managed by automated robots, which will carry orders down to an area to be collected by delivery people. The startup promises one-hour delivery. At ground floor, Urbx markets will feature a small storefront where customers can order products and have them procured and delivered within five minutes by a robot.

Urbx’s vertical grocery store is hardly the only vision of an automated grocery concept to hit the scene recently.

The automated micro-fulfillment center, Fabric, formerly CommonSense Robotics, features hundreds of robots in a warehouse one-tenth the size of a football field, according to a Marketplace report. Robots navigate shelves stacked with bins to automatically pick and pack orders. As with Urbx’s space efficient layout, the Fabric warehouse is designed to fit into an urban landscape. The startup touts a five-minute time period from when a customer places an order to when the order is ready to be delivered.

While these robot hives are smaller and suited for fulfilling online orders in high-density urban areas, some big name grocers are using robotic fulfillment at a much larger scale.

In the U.S., Kroger has been making big moves in this space. The chain announced in 2019 that it would be partnering with Ocado to build 20 robot hive warehouses in Central Florida and the Mid-Atlantic.

Earlier this month, Kroger opened the first of the facilities in Ohio, according to the Dayton Daily News. The warehouse is able to assemble a 50-item order in six minutes. Manual picking of an order of that size takes an average of 30 to 45 minutes.

DISCUSSION QUESTIONS: Do you see a vertically-oriented, automated grocer like Urbx and other automated facilities being able to make good when it comes to fast picking, packing and delivery? Do you consider some of these solutions having greater advantages compared to the others?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"For areas where real estate is expensive, this vertically-oriented MFC concept is a stellar option."
"Although positive financial results may not be the focus here, it is something one wonders about for this to truly take hold beyond initial applications."
"This is a neat concept and makes me think of the disruptive innovation thread on RetailWire yesterday."

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19 Comments on "Will a ‘skyscraper’ store change how groceries are delivered in cities?"


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David Naumann
BrainTrust

This is a very clever twist on the micro-fulfillment center (MFC) concept. MFCs have been a hot trend recently with many grocers currently testing or considering the concept. For areas where real estate is expensive, this vertically-oriented MFC concept is a stellar option.

Christine Russo
BrainTrust

You got it David. This is an evolution of the use of commercial real estate.

Rick Watson
BrainTrust

Micro-fulfillment is definitely the future in tight areas and cities.

It does not mean exclusively, however. Target is not currently using micro-fulfillment but has been very successful with small-format stores in urban areas.

Walmart has started experimenting with micro-fulfillment as well.

Let’s not get carried away, however. Automation is not the “end all,” and micro-fulfillment has trouble with cold-chain (expensive), heavy/bulky or irregular items, so it is not yet suitable for all applications.

Experimentation is still needed by most players at this stage in order to get to the cost/financial profile needed to justify the investment.

Neil Saunders
BrainTrust

This is a very interesting development. By reducing the ground footprint of the store, the rent is presumably a lot lower – which is especially important in urban markets where property is expensive. The automation aspects are also aligned with the necessity of improving efficiency and reducing labor costs. However it will be very interesting to see how the financials of this stack up, especially in terms of return on investment.

Suresh Chaganti
BrainTrust

I don’t think it will stack up financially. And that’s probably not even a consideration. The idea likely is – a great concept, great execution in terms of capturing market share, tech capabilities, disrupt enough to become attractive for acquisition, exit. If profitability is one of the considerations, others will not be done – at least in the short to medium term.

Suresh Chaganti
BrainTrust

At some point, the laws of physics will take over and simple time and distance logic will dictate that the last mile can only be compressed so much. The disruption caused by these startups is real.

They set up unrealistic expectations for the customers. With the VC money, they invest in capabilities to deliver in one hour, but do not pass the costs to the customers. In turn, it will put pressure on bigger companies. Most of these startups will be bought over. But the irrevocable disruption has been set in motion. Of course, that is part of innovative destruction. But the problem is that mid-market/regional grocers will be crushed over time. It’s a bit unfortunate to watch in slow motion.

Michael Terpkosh
BrainTrust

Vertical solutions for urban areas are an excellent idea. Smaller building footprint, less land costs and less transportation costs delivering product to the consumer. In a “back to the future” thought, way back in time when there were small, local wholesalers, many of them were multi-story buildings shuttling product up and down between floors to pick orders for local, urban independent grocers. The old West Coast Grocery Building still stands today in downtown Tacoma, Washington. The multi-story building is now part of the University of Washington Tacoma campus.

Bob Amster
BrainTrust

Genius. This is yet another example of three or four trends that will stick and that we have discussed here. This system can pick all the online orders to satisfy BOPIS and BOPAC customers accurately, and with significant reduction in labor. How can it go wrong?

Christine Russo
BrainTrust

Make good? Yes, YES, YES! Grocery, with its thin margins and analog brick-and-mortar experience, is surprisingly leading with respect to innovation, micro-fulfillment, nano-fulfillment, local fulfillment and faster and faster delivery times. There are more and more options and it’s not just talk – adoption is real. In January 2020 Walmart announced Alphabot which is a 20,000 square foot automated warehouse that uses humans and a fleet of robots to put together customers’ grocery orders as fast as possible. Once the robots collect all the products, humans pack up the groceries and take them to the client’s car. Additionally, I’ve personally interviewed the founder of Attabotics, whose robots crawl around a space in 3-D – modeled after an ant colony. And there are many more automated tech providers in this space. The change is real and happening and will lead to massive ripple changes throughout the entire fulfillment industry.

Ricardo Belmar
BrainTrust

The Urbx approach is a fascinating use case for commercial real estate (re)development in cities where office leases may be declining in a post-pandemic world. A great implementation of the micro-fulfillment center concept adapted to dense urban environments. If the promise of such speedy delivery holds true, I could see this model being adopted by many grocery brands. Extend this further and offer it as a service to local urban independent grocers and you might have a very interesting competitive environment in our cities!

Outside of densely populated areas, I’m not sure this is really any different than other micro-fulfillment approaches or, for example, ship-from-store approaches like Target uses today. It’s another option and if cost-effective could have a big impact on how grocery stores turn online ordering into something profitable for their business.

Gene Detroyer
BrainTrust

It seems like it was eons ago (15 years) when my company was determining which third-party logistics operators to use. We watched warehouses that were totally automated. It wasn’t micro-fulfillment, but it was unit fulfillment to go to stores. I am actually surprised that the technology hasn’t evolved further today. About four years ago, I consulted a Finnish start-up that was doing exactly what was described.

The process of warehouse picking is, in fact, an automated process. It is just done in most instances by people rather than machines. Therefore it is just a matter of time for these warehouse automating options to become 100 percent imbedded in the business of distribution.

Raj B. Shroff
BrainTrust

This is a neat concept and makes me think of the disruptive innovation thread on RetailWire yesterday. Many of these innovations make we wonder what the end game is, what is the upper limit of “convenience”? At some point, we will have groceries a few minutes after our smart home notifies the “grocer.” Maybe we need more innovations that help us manage and enjoy all the time that’s been freed up.

Venky Ramesh
BrainTrust

I was speaking to Lincoln Cavaleri, CEO of Urbx a couple of days back – right now they are an MFC provider with an ambition to enter the grocery business with Urbx Marketplace. They are different from their competitors in four ways as per him: 1. Ability to scale vertically (he said others end at 15/25 feet, while they start there and can go up to 150 feet) 2. Speed of pick (they can pick a 50 item $240 worth order in 136 seconds, while others take five minutes) 3. Cost (much higher sales per square foot for each dollar of real estate cost), 4. Their ability to temperature control each bin (others have different towers/zones for dry/refer/frozen).

I think the Urbx model is a great option for areas around the world where the real estate cost is very high. In five years’ time, I see a lot of M&A happening in the space resulting in two or three players providing multiple models of MFCs or MFC-based store formats.

DeAnn Campbell
Guest

Amazon has been testing urban highrise fulfillment centers for several years. It’s really the only thing that makes sense in lowering the cost of last-mile delivery in dense cities, and a great way to rebuild over some of the excess office space we will have post-COVID-19.

Lee Peterson
BrainTrust

Go to Korea, they’ve been doing vertical grocery for decades, sometimes with the upper floors being more like a department store. They’re forced to do that because of the terrain, but for dense cities anywhere it totally makes sense. And the automated part is a bonus. Reports indicate a 65 percent savings on the cost of fulfillment by automating — but automation is more about having the wherewithal to execute in the first place, which, for traditional or small grocers here in the U.S., is tough one. So look for the big guys to make it happen ASAP.

Scott Norris
Guest

Great point — the labor savings is significant regardless of the land situation. So in rural areas, just build horizontally, since rents are cheap and construction costs are lower, but implement the automation anyway.

Ananda Chakravarty
BrainTrust

Yes, we should be seeing more of these becoming available and they will provide an advantage in pick and pack, especially in urban settings. There are additional logistics issues to contend with and a faster pick and pack might translate into longer deliveries to the SC/DC and jammed up traffic issues to deliver goods for stocking.

Even outside the vertical solutions, robotics will simplify and amplify the retail delivery capabilities in urban and suburban settings. For retailers, automation is becoming a “thing.” Will be interesting to see how special conditions such as perishables, custom products, luxury, or fast fashion goods are handled.

Brian Numainville
BrainTrust

In urban areas and with items that are able to be reliably handled with this approach, this makes a great deal of sense. And no doubt even outside of urban areas the learnings from this will morph into new applications in other settings. Although positive financial results may not be the focus here, it is something one wonders about for this to truly take hold beyond initial applications.

Ken Morris
BrainTrust

We have been working in the MFC space for some time and I think there is no better way to make money in online grocery than the automated/robotic MFC. The high density solutions are perfect for urban areas. There are complexities of ambient, chilled and frozen product that need to be supported and some vendors handle these better than others.

One big decision for a retailer is to deploy this technology in a hub and spoke model or simply an in-store add-on to a dark or semi-dark store. This technology is affordable, reliable (many with no single point of failure) and fast. We will never go back to the old way of food shopping and this is a way for grocers to make money and not just break even.

wpDiscuz
Braintrust
"For areas where real estate is expensive, this vertically-oriented MFC concept is a stellar option."
"Although positive financial results may not be the focus here, it is something one wonders about for this to truly take hold beyond initial applications."
"This is a neat concept and makes me think of the disruptive innovation thread on RetailWire yesterday."

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