x
READY TO BECOME A MEMBER?
Stay up to date on the digital shelf.
x
THANK YOU!
READY TO BECOME A MEMBER?
THANK YOU!
Transcript
Peter:
So, John, thank you so much for joining us on the podcast. I can tell you with the utmost confidence, Rob and I have been so excited to talk to you about robots. I can't even contain it.
Rob:
Robots!
Peter:
It's always, whenever we talk about the podcast and we would email about it, robots were always in capital letters with multiple exclamation points. So, and one of the reasons that we wanted to talk to you, of course, and it came out actually in an article that I saw from July 23rd in the financial times, Jonathan Eley and Ryan McMorrow, the headline was why supermarkets are struggling to profit from the online grocery boom. The chief executive at J Sainsburys, Simon Roberts said COVID-19 was moving sales out of our most profitable convenience channel and driving a huge step up in online grocery participation, our least profitable channel. And I think, you know, just having talked to you before and reading your site, of course, it looks like a lot of that has to do with the picking of groceries. And so tell us a bit just about your background, about Alphabot, which I'm super excited to hear about and alert innovation. Tell me a little bit about the sort of industry that you meet, the problem that you're trying to solve. We'd love to hear about it.
John:
I'll tell you a little bit about my background first, which is largely the company's background and history. I'm an inventor and inventors look for problems to solve. And in the mid nineties, I became very interested in supermarket retailing as an opportunity for innovation. I saw that this was a very large scale business, a very complex, all the processes that go on in a supermarket are very complicated operating at high volume, low margins, and basically very much the way they operated for the past hundred years, not a whole lot of penetration by technology advances and operating model through technology. And so I started thinking, how could you innovate in supermarket retailing? How could you reinvent the supermarket? And I started imagining a supermarket where machines picked all the packaged goods that customers pick in the center store, but customers still have the opportunity for selecting their own fresh products, in the current model, it's in the perimeter of the store. And I got really fascinated in that as an opportunity to both create a, first of all, create a superior customer experience and also improve the operating profitability for the retailers. So I started studying automation and very quickly realized that there was no possible way to do that with current technology. And that got me interested in the automation business or the automation technology as a means to innovate supermarkets. And I started focusing on mobile robotics in the early 21st century. So around 2001, I started thinking that grades and conveyors could never do it. And, uh, but mobile robots could. And this was just before the first one dimensional shuttle came on. So in 2002, Kanab came out with their shuttle. And I looked at that and said, okay, little linear robots still got lists. We've got conveyors still too complex to automate a supermarket. I kept pushing. So in 2005, I invented the first two internal shuttles and I got an investment from C&S wholesale grocers to develop that technology for picking cases to supply distribution centers. And we developed that technology still in existence, still the state of the art in a case picking to replenish distribution centers. Um, so my interest in that company, uh, went back to work on, on automating the supermarket and concluded that the, even the two D shuttle would not be sufficient in capability to automate a supermarket and automate the center store. This is a really hard problem to solve in. So I started working on eight 3d shovel where the robot could move vertically. And, um, I started, I partnered with, uh, uh, bill FOSS night in 2014 and 2015. We invented alphabet as largely as it exists today. Uh, got an animation, uh, showing that concept in January and had my first meeting with Walmart in February and Walmart to my knowledge is the first retailer that actually, uh, to, to realize that the only way to be profitable in online grocery is to automate fulfillment at store level. Walmart was looking to automate fulfillment of online orders at customer level, and we met and, and they really responded to our concept animation for alphabet, and we partnered to develop alphabet and bring it to market so that we could automate automate store online fulfillment of online orders at store level. That concept is now come to be called micro fulfillment at the time that term term didn't exist. I think that terminology came, uh, became used in around 2018 or 2017. But that's the idea is to build a small automation system that can be installed adjacent to a store attached to a store inside the store, uh, that can automate. And it's also often used for small automation systems that are separate or freestanding. So that would be a dark store or a large, larger scale customer fulfillment center. Those are very different models in our view. So we believe that retailers absolutely have to automate the fulfillment at store level in order to be profitable online. And that was the original premise of our project with Walmart.
Rob:
You know what's so Interesting about this is I think I remember I forget the exact date, but didn't Piggly wiggly and maybe a hundred years ago, sometime around 1920, give or take, invent the group,
John:
Yes Clarence Saunders, uh, invented the first self-service store. And he called the Piggly wiggly for reasons nobody really ever came to know. That was the first successful self-service there had been other attempts, but, but they failed because of theft and, uh, Sounders innovation was to use the turnstile. That was the first indoor use of a turnstile. So you use the turnstile to control entry into control exit, and that's how he prevented shoplifting and made that format buyable. And then that changed retail because it was a much lower cost model, more profitable for the retailer, but also it was a better customer experience. Customers liked interacting with products and seeing prices and having all that information. And if a very similar thing is happening now that we're actually doing the reverse where it's back to the future, what we're doing is that was a change from court service. And what we're doing is automating park service. So we now have, instead of hearts going and fetching the orders for customers, we now have the robots fetching the orders for customers. So it's back to the future with automated clerk service, but what's interesting about Clarence Saunders. He was the first, as far as I know, the first inventor to start thinking about automating the supermarket, because he came to realize that his self service model created this huge bottleneck at checkout that he hated. And so he wanted to get rid of the checkout. So he started thinking he was the first you go back in the early patents is his original thought on, what do you call it? Key? Dussel's the key to it all was, was the first attempt at an automated supermarket. So it's a, it's a very interesting, uh, history of self service, automated service. And now, so sometimes I think I'm channeling Clarence Saunders, but that's the idea is to eliminate the need for customers to have to walk around the aisles, give them a much more convenient and information rich customer experience when they're doing their shopping and let the robots do the heart, do the menial task of actually picking the order. So, anyways, so that was my vision. I partnered with Walmart to bring the alphabot to market, and now we have alphabet operating inside a super center in Salem, New Hampshire and we're planning additional road rollouts for them.
Rob:
So one thing that's so interesting thing about that back to the future mode, where people for the last, maybe 20 years now have been talking about in some way, shape or form the death of the center aisle in grocery stores, um, due to the rise of e-commerce and, you know, in 2005, it seemed like a pipe dream, a hundred years away. And now of course, in the COVID world, it seems like it might be right on top of us where they can do a more effective work with that center aisle, um, especially if they can automate it. There's an interesting impact that Saunders original self-service checkout invention had, which was the rise of the in store marketing, where all of a sudden you've got the end caps and we've got a tremendous amount of money being spent on package design. And so the, the, the second order effects of what you're talking about at the center aisles go away and you've got robots doing the picking could be significant.
John:
Well, what would be significant? And you're exactly right. That what happened was, uh, uh, now instead of the clerks being in between the customer and the product, the product was direct access to the customer. And so packaging became very important. And this w this coincided with the rise of consumer packaged goods. So all of this happened concurrently, um, and, uh, it changed the way retail works to change the way product marketing worked. And, and I think there will be secondary effects that, um, uh, customers will, will now be shopping. They're doing it now. It's important to understand when we talk about micro fulfillment centers today, we're not talking about that automated center story. That is a future that is a future that we will evolve to. So today we're talking about putting very small automation systems into, into the store to automate just the online, to automate fulfillment of online orders. And this operates in parallel with a center store that has a self service store. Um, but in the future, yes, if there is no self service center store and all packaged goods get sold, electronically, get ordered electronically. Now the marketing of those products can change now how the, the, the consumer packaged goods manufacturers, uh, communicate with their customers and, and do the marketing to support those sales, uh, I think will change significantly and how it could change packaging. You could change, uh, how, uh, the packaging, the, there could be two different forms of packaging, the image electronics that people see on the screen. And then the physical packaging doesn't need to be nearly as fancy, as costly as, as bright and vivid, they could save money on packaging because the product's already been sold, but it just needs to have brand recognition. So when they're using it in the home, they recognize what they see, they recognize the product, but it could have a lot of changes in our products, come to market, how supermarkets operate. It will, it will be a transformation. If we achieve this vision of Nova story, this will be a transformation to reap it retail every bit as, um, um, uh, complete as trans as transformative as the self service model was to core service.
Peter:
Hey, John, can you talk a little bit back to the alphabot example in Salem New Hampshire, are you able to share with us, you know, kind of what you're learning in that installation and is it truly transforming how this all works? And is it, is it driving what you were expecting?
John:
If you can't pay people to do it, then you have to do it with machines. And we believe that the only way to do that successfully for retailers that have stores is to do it at the store. Because if you create a separate, separate facility, like a dark store or a customer fulfillment center, if you separate, if you have a centralized fulfillment model for online grocery, then what you're offering, what they're offering is their customers a competing supply chain. So you're saying to the customer, either you can come in to pick your own order, or you can order electronically, and we'll pick it in this other facility. And the more customers that have your customers that you have going to select online, then there'll be a drop in store revenues, right? From the standpoint of the store. This looks exactly like your competitors taking their business away because in effect it is, but it's the competitive supply chain for the same retailer. And eventually in some stores are very highly leveraged that you have a lot of fixed costs and low variable costs. So every 1% drop in sales is probably a multiple percent drop in operating profits. So it won't take many, much shifting of, of, of their business to go online before the stores are not making money. And that cannibalization problem, I think, is fatal for any retailer that has stores. That is embracing online because, and it's now much more pronounced with COVID because the acceleration is going faster. So the financial times are simply stating what's happening is the shift online is reducing profits because retailers are having to pay people to do with customers, which they normally do for free. And it's going to drive the need for automation much more quickly because they can't sustain that model because customers now are going to accelerate their adoption of online grocery. That's going to accelerate the move to automation by retailers in order to achieve a price. So
Rob:
You can also, you can defray the costs other ways. So Instacart, for example, I believe was profitable in Q2 and they're profitable on the back of a performance based marketing platform that they're running. So they, you know, the picking costs might be a lot, but they're making more money on the advertising as an attempt to make up for it. So if you're, for example, a Publix Publix doesn't operate their own click and collect program. They use Instacart for that. Yeah.
John:
But somebody pays those pickers to pick the groceries that's coming out of somebody's profit. That's probably some of that is coming out of publishing profit. And those marketing dollars are not going to Instacart without a cost to Publix. They would normally be going to Publix. And so, uh, Instacart can be profitable. Publix is a different question of whether they can sustain that model.
Rob:
Yeah. That's a really interesting point. It's like, if you, if your customers are on Instacart, then the trade marketing dollars, which are a key part of how the grocers, that's what actually, I mean, purchase have almost no margin to begin with. So it's like if they lose any of those marketing dollars to an online portal, that's pretty damning for them.
John:
Well not to mention the disintermediation to the customer, the customers now consider that they're buying from Instacart in Publix is simply the back end. So your customer loyalty, your ability to influence the customer is mitigated. Uh, we think that that's a very dangerous road for retailers to go.
Rob:
Yeah, well, I, I tend to agree with you. I mean, so I want to get to the economics of this because to your point, the whole point of micro fulfillment centers is you've got to reduce the picking cost as much as possible. You've got to get them as close to zero as pie.
John:
Yeah.
Rob:
And I want to just tell a quick story about an Amazon fulfillment center that I visited. And then, and that's, it's germane to a question about your technology, um, and, and how differentiated it is from a cost management perspective. So I went to one of the newer Amazon fulfillment centers in New Jersey. And as part of the tour, uh, you see the robot cage where you've got the, you know, the old, the, they used to be Kiva robots, but the Amazon robots with the stacks on top of them, that they carry around in the stacks. And, uh, I asked the tour guide, Hey, Amazon always iterates on everything. You must, they must be iterating on fulfillment center design. They're putting up dozens of fulfillment centers all the time. What's the biggest change between this generation of fulfillments that are in the last generation of fulfillment centers? And the answer they gave me is that the robots were like inches thinner, like three inches, thinner, four inches thinner. I forget the exact amount, but they just made the robots thinner. And by making the robots dinner, it meant that every stack in the warehouse could be three or four inches taller, which gives the warehouse more storage density, which makes the whole fulfillment center more, significantly more profitable for him to manage or less, less costly to get up more inventory per square foot. And, you know, the essential difference as far as I understand it, I'm not, I'm not a micro fulfillment center technology leader here.But in terms of what you guys have built is you've taken your robots 3d. So Amazon is still doing a two D game largely with the robots. The robots are moving around the floor and they're lifting up stacks. And so they get a limited third dimension on the stacks, right. Whereas what you guys have built, the robots themselves can move in three dimensions. And I would imagine that that gives a lot more storage density and storage, and that's where you get the cost savings from.
Rob:
You're exactly right. And, and the, uh, the central [inaudible] in my view, the central limitation in the Kiva tech, the, what they bought with Kiva that architecture is a very inefficient use of vertical space. So they only use about six or seven feet of vertical space for product storage. Uh, and then they have the robots moving. So, in order to get high density storage, they have to actually build multiple floors in the building and the improvement in vertical space that you're talking about allowed them to build more floors, to get more density in the floor. And so, but that's a very expensive way to achieve, uh, storage density. We simply go to the steel rack. So our cost of storage is not much more than their cost of storage in a little pod. Uh, but we can go floor to ceiling and let the robots, uh, climb, uh, and access the products directly. But the key differentiation, if you look at shuttle technology, the way shuttle technology works is a linear shuttle. One dimensional shuttle is they have a little robot that's dedicated to each picking line. So every level of storage in an aisle has a robot in it that simply moves in a line and does the transfers in and out of storage and hands off to a lift. And the lift moves vertically and hands off to conveyors. And the carriers are taken to the workstation and the mechanisms that workstation presented to the picker, and then the conveyor, it goes back, right? So what we've done is we've gone to, not to a two D shuttle, but to a three D shuttle where they, the robot does all of the work of the linear robot plus the work of the list because the robot can turn into a lift plus the work of the conveyor, because you can move on a floor and go to the worst station, plus the work, the work of the workstation, because the robot directly prints, it presents to the picker that does the transfer, and he goes back. So what we've done is we've concentrated all of the work of all of them, those mechanisms in a one D one dimensional shuttle system into one robot. And on top of that, what this robot can do, we're working in the lab right now, we'll be testing it, uh, early next year the ability to do is to deliver the product directly to the customer and revolt on you. Then that's a beautiful thing. Robots don't go on strike. They don't show up late for work. They sometimes get sick. They sometimes, you know, have issues that need to be repaired. Uh, but yeah, a technician can do that. We don't need medical personnel to do that. And so, um, so the, you get this high reliability, high availability, but the ability of our robot to do all of those things, uh, is critically important for making the system small and going in supermarkets, for example, compared to the shuttles, when you build aisles, you have to build throughput, right? If you will store you to have lifts and shuttles, to be able to access that storage. When you go inside a store that these, these machines, these systems have been designed to go into warehouses that have tall ceilings and lots of forest space. When you go into a store that has short ceilings and not a lot of short floor space, you have to build multiple Isles to hold a toast that you need to hold. And so when you build those aisles, you build through quick capacity through good capacity, then you're wasting it. And so one of the things that our architecture does is that it lets the storage capacity and the throughput capacity can be sized separately. We can build a storage structure that will last us enough to store whatever we're going to be picking five to seven years from now. And then, but only put the robots in that we need to service the immediate demand. So our capital investment can grow over time as the demand grows over time. Whereas the shuttle systems today have to put all of that investment in today. That's going to be needed five years from now. And so that's a critical difference in our system versus theirs.
Rob:
So far, we've been talking a lot about grocery so far, and, um, what you, what we're talking about here in terms of the versatility of the system and its ability to go vertical, um, and the ability to play multiple roles. I, I just am wondering if you're a manufacturer and you're trying to develop a picking and packing and shipping of each S capability for your own direct to consumer strategy. And most, most of the largest manufacturers that have a large enough assortment where this might be interesting, or just honestly just don't have that greater capability around this today would be a micro fulfillment center and a reasonable technology investment. Like you're a fortune 1000 manufacturer you want to go D to C, is this something that they could take advantage of?
John:
Absolutely. I mean, we were having conversations with some of those manufacturers today that want to be on the leading edge of dealing with. So they're interested in both for their own use internally and how it can affect their distribution operations. And also they're interested in it and the impact that it could have in how they, uh, uh, deliver products to the retailers in the future as well. Because if you're not putting products on the shelf, if they're being picked out of totes, it could have a very significant impact on how they design the products or the size of the products, how they package the products, uh, for that distribution.
Peter:
Can you tell us a little bit John, about what those impacts might be, um, you know, before we get to the Nova store example, which I think we were talking about earlier could really change things, but in order for it to work well in this model of the alphabet,
John:
I think they're effectively the same. It's the same thing because in a supermarket it has a lot to do with replenishment. How you replenish the store, the inventory that you are selling, using to fulfill orders, right? Um, the current model of replenishment replenishing stores is by case. And that, that is an essential part of the economics of the store when you have a very large assortment, because the key to mass retail is to have a large assortment. So you can appeal to a broad range of, uh, personal tastes and preferences and food. Uh, but you can't afford to replenish all of those, uh, inventory locations very frequently because it's very expensive. And so a few of the products or the high velocity products that sell a lot of products and those turn over very quickly, but then, the longer tail of the assortment in store gets turned over much less frequently. And therefore it needs less labor for replenishing the shelf. So that's why they were punished by case for most of the slower moving products, a case can be several weeks, sometimes several months worth of supply, because they don't want to have to touch that pick face that inventory location very often to keep their labor costs down. The problem is that you need lots of space. So when we go to automation, we want to make things compact. And the way you can do that is by having a smaller replenishment quantity and replenishing more quickly, more often, but that requires a cost. And what happens with automation is that we can eventually automate that process so that the cost of replenishing more frequently in order to prove improve density, the skew density in the store becomes much more affordable. And so what I believe will be happening is that over time, and certainly in these early micro fulfillment centers, we'll be storing products and very small compartments within tokes. We'll have multi-speed toasts. I talked about our high density model. That's at the core of it is that we can fit as many as eight different products in one tote location, and then pick out a vet and then replenish by less in case we can replenish by each. And that will have an impact if it drives upstream that, uh, manufacturer's sizing their products to fit into specific sizes of compartments within these tokes. And to be able to replenish these automated picking systems where economically in, in the right quantity, in a package, this design for a, you know, right now the cases are designed to fit on pallets cause that's how they shipped it. So in the future, uh, stores will be replenished by totes and, and with subtotal, uh, with totes that can hold multiple skews. And so slower moving skews will be, uh, I think will be packaged into smaller quantities that can replace these pickings systems and less in smaller quantities than as currently done by case
Rob:
One implication of the higher density storage model, which is pretty interesting to think about, has to do with the rate of planigram reset that the most grocers have. I mean, so they're not, they're not really actively tweaking their assortment on the fly. I mean, they're doing it a couple of times a year, right. A few times a year. And then, the model that you're talking about gives the ability to actually mess with assortment almost in real time as you go. And I mean, I, you know, all the contractual details aside and whatever right. But, but you know, it gives them at least an ability to mess with the assortment a lot more often than they currently do. And it also gives them the ability to more cheaply test out new product lines and just, you know, take small quantities, see if they sell, take new quality to see if they sell some of those, some of those tests and learn, um, and assortment expansion, uh, things that Amazon has done so well in eCommerce and has struggled with, with Amazon fresh and other, you know, there are other attempts at grocery, you know, you, I mean, this density model actually gives grocers a chance to succeed at those things.
John:
Well, I think so. And, and it gives an opportunity, you know, once we get to the ability to automate the complete center store and we can take all that space, we can actually increase the assortment that is offered to customers, and it can be much more dynamic. And, and, and, uh, so as you're suggesting retailers can add products, uh, uh, replace products in the assortment because it's effectively, uh, all let you get to a level of automation where there's not a lot of, uh, human handling involved. So the, the cost of doing these things can be very low and your, your communication to the customer is all electronic now anyway, so you can add and delete products, uh, not by having to remove them and replace them on the shelf, but by updating your website and then, uh, uh, changing your distribution of where, uh, stores, uh, uh, products get replenished into the pick system. So
Rob:
Absolutely profound change and operation for manufacturers. And I just think I was speaking with the go puff team. We, we, we we've talked to Dan Folkman over there a few times and go puff is competing, competing with convenience, and one of their advantages over like a CVS or a Walgreens or Duane Reed or whatever is that because they've got a warehouse in the middle of the city, like a Boston or a Philly, they can have every hog and dyes flavor in the warehouse and you go to a CVS and CVS has limited space. So they could only have a few hogging dyes flavors. And that assortment is, is a pretty killer advantage from them in that model. Um, but then the flip side of that is from a manufacturer's perspective, if you're managing much more dynamic, uh, orders, rather than bulk orders that are done upfront with POS and all that sort of stuff, two orders that are based on, you know, more dynamic self rating and maybe performance advertising campaigns and stuff like that, that you're doing that the demand forecasting side becomes a lot more complicated. So there's like a great for consumer, but, you know, operationally challenging for a manufacturer element that this future makes, you know, brings to the table to be, yup. John, go ahead. Well,
John:
It'll be interesting. All of these things are evolutions, right? So, um, you, once you start automating, uh, you will start IN unlocking additional innovations that will drive additional innovations beyond that. So it becomes a, a, um, a geometric expansion of innovation. I mean, that's, that's what technology does. One technology goes on another bowls on another, uh, in terms of capability and, uh, and improvement.
Rob:
Yeah. There's tipping points though. There's like, um, the dose makes the poison, like, you know, there, there was a smartphone before the iPhone, it was the Blackberry and I had it and it was great. And people used to call them crack berries, because you are so addicted to them, they'd pull them out of your pocket and all that sort of stuff. But then, there was just, just enough new in the, in, in the interface and the iPhone, combining the music and the phone in your pocket, where all of a sudden the world changes. It just feels like there's these tipping points where you're, yeah, you're building on the shoulders of technical giants, but you just get to a, uh, a moment where all of a sudden it becomes cheap enough or possible enough.
John:
Well, absolutely. And, and that, uh, I feel a lot of what's going on now in retail is enabled by automation and robots. And if you do this, you know, 10, 15, well, 20 years ago when I was working on it, uh, it was, it didn't exist. You couldn't be doing it. So it's been all of the evolution in autonomous robots and micro, you know, shrinking electronics and improving software and improving radio communication. All of these things, all of these advances that have been made are enabling, you know, the latest generation of robots to be able to do this. So,
Peter:
John, when you're talking to retailers about, well, I'm putting this in capital expenditures that are tough under any circumstances. And it seems like it would be a big one. Do you have a sense of, of what the return is on this investment and, when does it start to pay itself off?
John:
Uh, well, uh, that's a very complicated answer. The, the, the, the answer is, yes, it is capital investment and, and it's not trivial when you're talking about, you know, putting automation systems into the store. Um, a lot of the, the estimated return on investment, though, it depends on a lot of what, uh, what you assume about the future, right? So if you assume that the demand for online is going to keep growing, then you sort of have to be, if you want to play in that game, you have to be in the eCommerce business, you'd have to sell a lot. And if you're having to sell online, you can't, you cannot be profitable by picking by paying people to. And so if you, if you measure your return on investment by the labor savings, that will look fairly, uh, look, you, you will get a good return on investment in, and with a payoff of a payback of two to three to four years, depending on what you assume for growth rate. But if you assume that if you want to be competitive in the business, and if you don't sell online, you can't compete with the likes of Amazon and Walmart and any pure plays that are out there. If that's what you assume, then the, then the return on investment is the preservation of your business. So how do you value that? So you know, talking about return on investment, there's looking at it at a very small level. I'm going to put an investment in a store. What do I save in labor? What, what, what, uh, additional sales capacity can I get from that system? And will I be profitable and making that business, uh, that's a, you know, we will show a very positive rate of return on that, but then there's also the question of how do I save my enterprise? How do I preserve the value of my company by being able to compete online? What, what is the, what is the return on that investment? What is that aspect of return on investment? And so, you know, it depends on how you look at ROI.
Peter:
That's what I think is so interesting about the Nova store idea is because you're not only transforming the backend, if you will, of it, but that opens up the opportunity to create a new shopping experience. Absolutely. And one that increasingly it would seem to me leans toward the, the, um, the combining of the digital experience, even more integrated into the in store experience. And so that to me is probably where retailers can get even more excited about the expenditure, because it changes their relationship with the consumer.
John:
Absolutely. That's absolutely true. And I believe that's going to start happening with MFCs as well. What will happen with MFCs I believe is that now in the near term, it's going to be driven by pandemic fear of going into grocery stores so that there is an artificial repellent to a lot of customers to act from even going in and selecting their own fresh. They just want the retailer to do everything, but what, once we have a vaccine which will hopefully be in the not too distant future. And once we have enough people immunized that you can, we can resume a reasonably normal lifestyle pre COVID lifestyle. Um, my belief is that, that there is an experiential aspect to food, retailing of shopping in the fresh market, uh, of retailers giving a, an experience, a strong customer experience around food and the fresh market, taking your orders on, you know, in the, in the, in the, in the center store, to me is not a very satisfying experience, not experiential retail, that's being an unpaid warehouse worker. And when robots can do that, customers will now have the choice of whether they want to go into the store or not. My belief is many of them will want to go into the store because it's enjoyable. They want to pick their own fresh foods. They're interacting with the food, thinking about what they're going to cook and so forth. And they enjoy seeing people, it's a social aspect. So I think that will start happening with the NFC model where they'll start ordering their package goods online, and they'll go to the store to pick their own fresh and collect their packaged goods with the, with the order that you know, that they, with the freshwater, that they won't be necessarily able to order in real time. So I placed an order now, and it's ready for me in five minutes. We may not have that ability at this point, but over time, our robots will get that fast and get that good. And at some point there won't be enough customers walking up and down the center of the storehouse to make that space worth keeping. And you might as well just automate all the fulfillment for packaged goods and take that center sports center space over and, and, and have a large assortment. So at some point, the demand for the, the, uh, ordering online will reach a point where you cannot do it in a small system and have all this unused space in the center store. It'll shift the, the real estate decision to say, let's just automate the center store and be done with it.
Rob:
Well, or you repurpose it. Right? So the, um, my, one of my favorite grocery articles the last few years, uh, was long reads.com was the man who's going to save the grocery store. And there's a few, there's a few interesting trends about the center aisle, which are all happening all at the same time. One is the trend towards ordering automation versus packing, which you guys right at the center of another actually has to do with the fresh products in the grocery store, which is, there's a bunch of grocery stores that are experimenting with growing products on prep. They're doing it on the roof and they're just making it so it's like pick the order, right? And you could have, you could expand what the fresh sections are. Others, you know, famously, you've got Eataly and companies like that that are doing way more experiential retail with wine tastings and cooking classes,
John:
Right so where there's a very large center store, or we don't need anywhere near that much space. We could have even larger assortment and compress it into a much smaller area of square footage. And then that frees up that, uh, that real estate for, you know, uh, dining or, or expanded fresh offering or cooking classes or whatever the retailer chooses to do to attract customers to the store. For me, the importance is that the store has real value to customers, especially in food that will make not all customers. There will be a lot of customers that will say, you know, I just want to see everything online and pick it up, or have it delivered. Whichever is more convenient to me. Uh, I don't, I don't get that much out of going in the store and picking my fresh, but there are a lot of other people, you know, currently more than half of the customers by research still prefer to pick their own fresh. And I think that that's going to return a very significant post COVID. And from the retailer standpoint, those are going to be your best customers, right? You're going to be able to stimulate additional purchases. It's the lowest cost to serve is to have them come into the store and do their own selection. You're going to have the highest loyalty cause they, they, they come to your store cause they like being in your store. And it's an opportunity for it to have live people, you know, your store associates now engaging those customers and adding value to the shopping trip. So there's all kinds of reasons why customers buy, retailers will still want to pull customers to the store and why customers will still want to come to the store. Just you can't force them to come to the store. And, and there will be many that choose not to, and you have to be able to support those that don't.
Peter:
Yeah, John, I mean, I do think that this is an exciting potential future for grocery and a changing relationship with the consumer and at the same time helping with margins, it's just a, it's a really exciting sector that you're in. I do have to ask you before, before we go. Yeah. Have you developed any fondness for your robot overlords? I mean, do you, have you named any
John:
Well overlords? The answer is no, they are machines and, and that's all they are. It's, you know, it's, it's, it's almost a love, hate relationship, right? Because it, because when they go wrong and you say you stupid machine, what are you doing as if it was their fault, their fault. Right, exactly.
Peter:
It's my old lost in space. I still,
John:
So to me, to me, they're a means to an end so that, you know, I didn't get into robotics because I was fascinated by robotics. It happened to be that I did find robotics very interesting, but what drew me into robotics was the vision of automating a supermarket that's that. That was why I started investing in robotics. So I could invent robots that could meet the challenges of automating a center store, which are really daunting. You've got to be extremely fast and how fast you pick the orders because the customers are sitting there waiting. It has to be always reliable. It has to be low in cost. So it can be deployed across many, many locations and they always have to work. Right. You can't tell the customer, sorry, we can't give you your food today because the robot broke. So it's a very challenging problem. And it's a fascinating area to be working in both technologically. I mean, just the problems that you have to solve in the team, the team to work on very intellectually challenging problems sometimes, you know, a lot more than you'd like. Um, and, but, uh, but, uh, but it's also a very fascinating area of business and you're touching so many lives and the opportunity to transform, you know, how people shop and give people back. So, so many people, so much time, uh, that they currently spend, uh, historically spent shopping for groceries. It's, it's a very exciting time, uh, to be in this industry. It's a very exciting industry to be in at this time.
Peter:
Well, John, it's a, it's a fascinating story. You know, the passion of an entrepreneur to solve problems like this. It's, it's always exciting. And, and I can't wait to see how this unfolds and we'd love to have you back when you, when you've got the full Walmart story that you can share or where the Nova store is starting to come online with. We'd love to talk to you more
John:
Anytime, happy to share.
