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Tuesday, January 23, 2024
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Walmart is pursuing higher profits powered by storage robots and mechanical claws

April 12, 2023: Initially, this warehouse seems like many; forklifts unload pallets from the dozens of tractor-trailers’ canned soup, soda and cleaning supplies whiz by on conveyor belts. Store-bound merchandise is sorted by department and store aisle before stacked high like an elaborate game of Tetris.

The difference? Instead of people, tasks are powered by giant automated claws and rolling robots. The driver’s seats on the forklifts are done.

At an investor event last week, the big-box retailer previewed how it plans to use automation to more quickly and cost-effectively manage inventory, stock shelves and keep up with online orders. The firm took investors on a tour of a nearly 1.4 million-square-foot facility in Brooksville, Florida, the first automated distribution centre for packaged foods and different shelf-stable household items.

Walmart plans to add that similar automation from Symbiotic, a warehouse technology firm that Walmart took a majority stake in the previous year, to all of its 42 areas distribution centres. By the end of January, the company said roughly a third of stores would be distributed from the automated facilities. However, it still needs to share a timetable for doing so.

Walmart’s automation is part of a broader plan to drive higher profits. CEO Doug McMillon stated in the coming years, the retailer’s revenue will grow about 4% every year, a slower growth rate than almost 8% it saw in the previous three Covid pandemic-fueled years, but still faster than the growth of 3.1% and 3.6% the retailer has got in the three years before the pandemic.

McMillon further stated that he expects profits to grow quicker than sales over the coming five years as Walmart adds automation and increases its higher-margin businesses such as advertising, last-mile delivery and fulfilment services.

He said Walmart had given customers ways to shop online and get those purchases faster. It offers more general merchandise, including exclusive brands in categories such as apparel. And more sellers have come to its third-party marketplace, too.

“We’re in a phase that is less regarding scaling store pickup and delivery, e-commerce, and e-commerce FC square footage and more regarding execution and working margin improvement,” he said.

In three years, Walmart expects that about two-thirds of its stores will provide by automation, and about 55% of fulfilment centre volume will move through automated facilities. That unit cost nearly could increase by about 20%.

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