Not all sectors of the economy will be damaged by the current Coronavirus pandemic. As in wartime, some industries will benefit. And we aren’t just talking about the manufacturers of anti-bacterial hand gel. The COVID-19 outbreak sweeping the globe is going to be a habit-changer. Certainly, from here on, as we grab our supermarket trolley, we will be more aware of the hygiene issues around mass inter-personal contact. But will we be going to supermarkets in such large numbers? It is clear that, in the short-term, eCommerce will see a big boost. This is evidenced by the recent news that Amazon plans to hire 100,000 extra workers in the US to manage eCommerce demand; while also significantly boosting pay across the US, the UK and the EU. But our prediction is that the Coronavirus will change consumer habits over the long-term also: that many people will turn to online shopping in the crisis, and then stick with it forever. This will have a major impact on the manufacturers of warehouse automation equipment.
Vast areas of the economy are suffering from a slow-down as the virus bites. Fear and uncertainty are holding back investment. Manufacturers of warehouse automation equipment have seen a significant reduction in order activity. Also, many automation equipment providers are having serious supply side issues, especially those that source components from China. In the short-term, the supply shock will be the main constraint on the market.
But we believe there is no reason for warehouse automation providers to panic.
The COVID-19 epidemic isn’t going to go away next week. The most optimistic forecasts claim that it will not be brought under control in the UK until the end of the year. Less encouraging predictions tell us that it will never be eradicated, and that it will become a yearly health event, like influenza, albeit with less drastic effects, as by then there may be a degree of ‘herd immunity’, and there will most likely be a vaccine. The next 3 – 6 months are going to see a huge increase in the numbers of people self-isolating, and people, even if not self-isolating, will venture out less as social and entertainment events are cancelled, restaurants, pubs, cafes, theatres and cinemas are closed, and a general fear of contracting the virus persists. This will also hit high-street and supermarket shopping. We predict that levels of e-commerce will be radically boosted over the coming months. People who would not normally shop online will turn to their computers and smartphones. There will be immediate challenges here. Delivery drivers and warehouse staff will not be immune to the virus, and this, together with the increase in demand, will drive warehouse automation. E-Commerce companies will have to do some long-term thinking about automation, to get over labour shortages and cope with rapid growth. Labour shortages may be particularly pronounced in the United Kingdom as the country also looks set to introduce a strict new immigration regime after it has left the European Union.
Long-term Behavioural Change
It is very likely that COVID-19 will have a permanent effect on shopping habits. A decade ago, it was thought that 40% of the UK grocery market would have moved online by 2025, but recently one industry body revised this figure down to 7.7% by 2024. But it looks like COVID-19 is going to achieve what online marketeers have so far failed to do. Early in March, the British grocery delivery firm Ocado’s website crashed several times under the strain of mass-orders. In the US, huge distributors like Amazon and Walmart are expected to be big winners in the surge in growth of the multi-billion-dollar online grocery business. E-Commerce sales in the states were already forecast major growth between 2019 and 2023 – with the older age groups, who have traditionally kept online shopping at arm’s length, being major players in this boom. With Coronavirus, this trend will only accelerate.
The Road Ahead
Retailers will have to rise to a range of challenges. Some will have to review their current online marketing and sales practices, to make them more efficient. They may need to offer new products, such as items usually purchased by the elderly, a growing demographic routinely ignored by online sellers. They also may need to develop more streamlined ways for younger people to order goods for their elderly relatives, and have them delivered to their doors. Grocery providers will additionally have to upgrade delivery systems, perhaps using electric last-mile delivery vehicles to reduce pollution. And introducing streamlined operations which will enable them to deliver more accurately within specific timeslots.
All this will have a significant effect on automation in warehouses and distribution centres. There is a lot of catch-up work to do here and there are two ways of looking at this. If the global macro-economic climate continues to deteriorate, warehouse automation vendors will need to bolster their aftermarket sales teams. The hypothesis is that if they can’t sell as many new systems, they should try to get their existing customers to purchase upgrades, additional parts or general service-related products. On the more optimistic side, with a lack of manpower in warehouses and a high demand for goods as well as a need for new warehouses, investment in new equipment could be considerable.
Whatever the scenario, the heavy lifting will have to be done by the suppliers of automated equipment, either in terms of servicing existing equipment, or in terms of development of new technology, and supplying it in sufficient numbers. It will be a massive challenge, but it’s one which the automation industry is ready for.