Dive Brief:

• Albertsons is the latest grocer to turn to automation to help its stores fulfill online orders. The Boise, Idaho-based company will build a 10,000-square-foot micro-fulfillment center (MFC) inside an undisclosed existing store early next year.
• The MFC, which will be built by Takeoff Technologies at a cost of $3 million, according to The Wall Street Journal, will use a series of artificial intelligence-powered conveyors and totes to ferry items to employees for final order assembly.  
• In a keynote speech at Groceryshop, Narayan Iyengar, senior vice president of digital and e-commerce at Albertsons, said the pilot promises to speed up fulfillment while also driving down costs. “The goal is to be able to get orders to our customers at prices that are competitive with the store price,” he said.

Dive Insight:

It’s still in the very early innings for automated grocery fulfillment. Kroger just agreed to terms with Ocado, finalizing a deal the two parties struck this spring, while other fulfillment providers are starting to emerge.

But retailers are showing interest as they look to gain an edge amid increasing industry pressures.

“If the labor shortage is indicative of the future, it’s probably the only way you’re going to be able to get work accomplished is pick up those repeatable tasks that don’t add value to the customer but have to be done," Dave Steck, vice president of IT infrastructure and app development with Schnuck Markets, told Grocery Dive.  

Yesterday, Schnucks announced it would put robots in 15 stores that can audit shelves and check for out-of-stock products. The move followed a six-week long pilot last summer with Simbe Robotics, which manufactures the aisle-roaming Tally bot.

Automating online fulfillment, meanwhile, promises to make delivery faster and less expensive by using conveyors, robots and other machinery inside warehouses optimized for picking and packing orders, instead of human employees loading orders inside stores optimized for merchandising. In addition to Kroger’s deal with Ocado, which will include orders for three automated warehouses by the end of this year and 20 during the next three years, Walmart and Stop & Shop have announced plans to build automated facilities, while Florida grocer Sedano’s opened the country’s first micro-fulfillment facility with Takeoff earlier this month.

Ocado, the world’s leading e-grocer, and its network of automated fulfillment centers are profitable in England, providing a favorable case study. But the technology is still unproven in the much less population-dense U.S. market. Automation thrives on high volumes, and at this point it’s unclear whether consumer demand will come through. It’s also unclear if automated facilities will deliver enough cost savings to justify their hefty price tag.

Still, there are reasons to believe the technology could shepherd grocers into the next phase of e-commerce. According to figures presented by Ocado president Luke Jensen, 61% of consumers say they would shop online if it was "a more compelling proposition." Lower prices are a core promise of automation.

Groceryshop attendees also said robotic fulfillment seems promising. Simeon Guttman, executive director with Morgan Stanley, said he was impressed by the micro-fulfilment model, in particular the one from CommonSense Robotics, which recently revealed to Grocery Dive it will partner with five leading grocery chains over the next two years.

“They’re a small digital company that seems to be on the cusp of something that’s about to happen,” Guttman said during a question-and-answer session Monday.

Whatever model ends up taking hold, one thing is clear: As online demand grows, grocers will need to evolve beyond the manual-pick model that currently dominates e-commerce fulfillment.

“For grocery delivery to be at scale and reach its full potential, collectively we need to find a way to get groceries to customers' homes delivered more or less at store prices with a nominal fee, and make money off it,” said Iyengar. “That’s the hard part.”