16 Oct 2019 3 min read

Robot stores: the automation of warehouses

By Aude Martin

Technology is changing how we shop and is also poised to reshape employment in the retail sector.


When was the last time you had to struggle home from the shops with bulky items? We still buy items in person, but they tend to fit in a carrier bag; we rarely have to push onto the bus carrying large boxes or try to force new furniture into the car.

One of the reasons for this shift is of course the rise of online shopping. It is faster, we can avoid crowds in fitting rooms and long queues, and we have a much wider range of options available from our smartphone than from our high street.

This is a global phenomenon. The size of the ecommerce market grew by 18.2% worldwide in 2018, according to Transport Intelligence, having expanded by 19.6% between 2016 and 2017.

Moreover, despite all this growth, we don’t believe that ecommerce has reached its full potential. For an example of the kind of innovation that could keep spurring more shopping to move online, WeChat in China recently introduced a service called ‘chat commerce’, enabling customers to buy products simply by sending a text message to an artificial intelligence (AI) system.

Ever-greater demand for ecommerce must be met by ever-better order fulfilment, however. Once customers have tasted same-day delivery, they come to expect it and will spurn retailers who cannot operate reliably at high speed. Investment in smarter warehouses and packaging and delivery systems will need to rise.

One solution lies in the greater use of AI, robots, and automation. The adoption of robotics allowed Amazon to increase its delivery capacity massively and thereby enhance its Prime service. The group’s $775 million acquisition in 2012 of Kiva Systems, now called Amazon Robotics, might have been one of Amazon’s best deals so far.

The opportunity for technology and robotics to revolutionise logistics nevertheless remains largely untapped. Processes are still managed manually in around 80% of logistics sites. Even in the advanced US market, as recently as 2016 only 10% of warehouses were using automated warehousing equipment. In financial terms, the global warehouse robotics market was valued at $2.6 billion in 2017 with a potential compound annual growth rate of 13.3% until 2026.

Automation for the people

Automation can facilitate faster packaging (and therefore more deliveries and also make warehouses more efficient storage spaces by permitting narrower aisles or even removing them altogether.

Several types of robots can be deployed in automated warehouses. The most common are the transport robots, which move materials around the warehouse using wires, magnetic strips, and sensors; their purpose is to repeat high-volume tasks consistently.

Then there are automated picking robots, which can manipulate and grasp items. Amazon has been using picking robots since 2012 in order to increase its fulfilment pace, although these robots in general are still limited in terms of the size, shape, and weight of packages they can handle. We also note that a single robot can cost between $30,000 and $100,000, becoming more expensive if customisations are requested.

Some may worry that as robots become more affordable and capable, they are taking people’s jobs. We should not forget, though, that robots are also creating higher-value employment in servicing and supporting them.

Furthermore, it is the most repetitive tasks – and often the most physically demanding and risky – that are the best suited to being fully automated. By taking on these tasks, robots can create a safer working environment and help human employees perform more valuable and creative roles.

In fact, a study by the German Confederation of Logistics found a substantial appetite for more employees in the industry, with a skills shortage particularly apparent in IT and in warehousing.

Ecommerce, in short, is making life more convenient and comfortable for employees as well as consumers.

In future articles, we will focus on some of the companies at the heart of these trends and on the challenges of transporting goods from warehouses to customers’ front doors.

Aude Martin

ETF Investment Specialist

Aude joined L&G ETF in July 2019 as a cross-asset ETF Investment Specialist. Prior to that, Aude worked as a delta one trader at Goldman Sachs and within the structured-products sales teams at HSBC and Credit Agricole CIB. As an investment specialist, she contributes towards the design of investment strategies and actively supports the ETF distribution and marketing efforts. She graduated from EDHEC Business School in 2016 with an MSc in Financial Markets.

Aude Martin