Overlooked amid the buzz over driverless robo-taxis, the world's largest bricks-and-mortar retailer plans to launch a fleet of "goods-moving robo-vans,” according to a recent story in Bloomberg. Walmart Inc.’s (WMT) self-driving vehicles are slated to speed up delivery times and slash shipping costs in half for the giant $330 billion value company, just as Amazon.com Inc. (AMZN) is also rushing to exploit the technology.
Walmart rose to the top of the retail space through its logistical strategy, in which it has long excelled in the art of quickly and efficiently transporting goods from farms and factories into the hands of consumers. Now, however, as the company struggles to turn a profit on online sales, the next major frontier in the retail space, robo-vans have become key to extending its logistics prowess.
The primary issue keeping margins low on e-retail sales for the traditional brick-and-mortar retailers are the high costs associated with shipping. Walmart is working with a Silicon Valley startup to develop vans intended to move goods on fixed routes from warehouse to warehouse or to a smaller pickup point, not all the way to consumers.
“This middle mile is the most expensive part of the whole supply chain; it’s a huge pain point,” said Gatik CEO Gautam Narang, whose firm is moving to automate Walmart’s “hub and spoke” warehouse system, to Bloomberg. “This fills a big gap in the market," he added.
Robo-Vans Driving on the Fast Track to Prosperity
While the “middle mile” driverless van initiative may be less exciting to the average person compared to the idea of robot doorstep delivery or full-fledged autonomous taxi fleets that pick you up at the touch of a button on your smartphone, it could be just what the world’s largest retailer needs to compete in the new era of e-commerce. The market for middle miles could climb to $1 trillion, per analysts cited by Bloomberg.
“This area has the least number of obstacles and the most certain return on invested capital in the near term,” according to Gartner Inc analyst Mike Ramsey. “If you’re looking to start a business where you can actually generate revenue, this has fewer barriers than the taxi market.”
Shortage of Truckers
Much of the need in the e-commerce space for innovative solutions to delivery service can be attributed to a shortage of employees in the trucking industry. While the boom in e-commerce has shown no signs of slowed momentum, the trucking industry has been unable to keep up with the demand. The industry is currently in need of more than 60,000 long haul positions, per the American Trucking Associations.
Simple supply demand dynamics have driven the wages for these high-risk trucking positions through the roof. Employees often face the risk of major wrecks and often must sacrifice their personal lives for extended periods of solo time on the road.
Unlike traditional drivers, subject to human error and who are often more difficult to manage, these lower-cost robo-vans would be designed to follow the same routes again and again. Plus, since many of these routes are already driven by human drivers, there wouldn’t be the need to build more infrastructure.
Ford Motor Co. (F) is one of many companies testing business-to-business (B2B) delivery, as opposed to business-to-consumer (B2C), or last minute delivery. The automaker calls these repeatable routes “milk runs,” comparing them to the days of household milk delivery.
“Anything on driverless delivery that is a milk run is a good application for autonomy,” said Sherif Marakby, CEO of Ford’s self-driving vehicles segment. “B2C is a complex implementation for autonomy that will come with time, but B2B just makes it easier because you get volume and you can be more predictable.”
While Walmart has doubled down on robo-vans to compete in the new age of retail, Amazon and other rivals surely aren't sitting back doing nothing. Some analysts expect Amazon’s grocery delivery business, AmazonFresh, to generate over $40 billion in sales volume in 10 years thanks to automation and specifically robot vans, according to CNBC.