Robotic Fulfillment Firm Fabric Is Demonstrating The Kind Of Technology That Should Make Amazon Executives Anxious.

By Joan Verdon

In A Parking Garage Beneath A Skyscraper In The Heart Of Tel Aviv, Robotic Fulfillment Firm Fabric Is Demonstrating The Kind Of Technology That Should Make Amazon Executives Anxious. While Amazon’s Logistics Strength Is Viewed As An Unbeatable Advantage, The Mini, Automated Fulfillment Centers Fabric And Other Tech Providers Are Installing In Walmart Stores and in U.S. supermarkets could be the Trojan horses that get past the e-commerce empire’s defenses.

In the 15,000 square foot Tel Aviv space, six employees, aided by dozens of robotics-powered totes scuttling from station to station, fill grocery orders for one of Israel’s largest supermarket chains. The site typically fills 300 orders a day, with each order averaging 50 items, and has the capacity to fill many more than that.

At the Tel Aviv site, Fabric is showing retailers that it can put a micro-fulfillment center almost anywhere – even in an underground parking garage – and make it work. Now, Walmart is preparing to use that technology to turn its stores into even more of a competitive advantage against Amazon. Amazon doesn’t just have to worry about Walmart. Leading U.S. supermarket operators also are moving quickly to add automated, in-store fulfillment centers. Other big-box retailers are expected to follow Walmart’s lead.

“This is a trend that is not going to go away,” said Randy Mercer, global product manager at 1WorldSync, a product content provider for ecommerce brands and retailers. The pandemic has caused retailers to turn their stores into mini-fulfillment centers, using manual picking. Now Walmart is taking the lead in adding technology, he said,

“I guarantee you the others are close behind – the Targets, the Krogers,” Mercer said. Retailers have begun automating their warehouses and distribution centers, so it is inevitable they are thinking about how to do the same thing in their stores, on a smaller scale, he said.

Fabric is one of three robotics firms that Walmart is partnering with to build automated fulfillment centers in its stores. Walmart, when it announced the deals in a blog post last month, said dozens of local fulfillment centers are in the works, with many more to come. John Furner, Walmart U.S. President and CEO, in Walmart’s earnings call Feb. 18, said the retailer expects to have over 100 local fulfillment centers in operation “within the next couple of years.”

In addition to Fabric, Walmart is also partnering with tech firms Dematic and Alert Innovation to build these fulfillment centers. Alert Innovation created the Alphabot automated picking system Walmart began testing at the end of 2019 at a supercenter in Salem, N.H. That trial site put Walmart ahead of competitors when the pandemic hit, and enabled it to fill online grocery orders in the Salem area, while other online grocery services had weeks-long backlogs.

Walmart and its three tech partners aren’t revealing how many centers each robotics firm will build, or where they will be located. But videos Walmart has released of the Alphabot system in Salem, and a virtual tour of the Fabric site in Tel Aviv show why rapid growth of in-store fulfillment centers should worry Amazon executives.

Fabric’s model uses two kinds of robots: rack robots that can fetch from among the thousands of products stacked in the fulfillment center, and floor, or tote, robots that can move freely around the center to deliver goods to employee-manned packing stations. At the Tel Aviv site, all of the grocery orders are perpared for delivery, and delivery drivers collect the completed orders. But the model could also be used for click and collect orders in store, or at curbside, or placed in vending machine-like storage lockers for customer pickup.

Steve Hornyak, Chief Commercial Officer at Fabric, declined to comment on the Walmart project, but talked about the potential Fabric is seeing for automated, in-store fulfillment to transform e-commerce. With manual picking, Hornyak said, grocery stores typically are limited to about 100 orders a day. Fabric robotics can increase that capacity by five to 10 times, up to 1,000 orders a day, in a space that can be as small as 10,000 square feet, carved out of existing store space.

Fabric recently activated a non-grocery, general merchandise micro-fulfillment center in Brooklyn, N.Y. that is currently being used by two brands, one health and beauty and one apparel. Fabric expects to have three to four brands using the center soon. The general merchandise centers give brands a way to place fulfillment near their customers, without having to use Amazon warehouses.

“If you want to maintain control of your brand and be as close to your customers as possible, then Fabric is an option to get your products there same day or next day,” without having to share customer information or data with Amazon or other marketplaces, Hornyak said. “A lot of brands are looking for that,” he said.

Fabric has fulfillment sites in the works in New York, Dallas, Washington D.C. and Los Angeles that it expects to be operational this year, as well as additional sites in Israel. Fabric, which previously was named CommonSense Robotics, will either sell the robots and the hardware and software to a retailer, or operate the center for the retailer for a fee, in a robots-as-a-service model. Grocers increasingly are leaning toward the robots-as-a-service model. Hornyak said. “That model gives them a constant known operating expense.”

Furner and Walmart, Inc. CEO Doug McMillon spent significant time during the fourth quarter earning call 10 days ago talking about automation and the new fulfillment centers. “If we find that it’s working really well and we can go faster, I’m going to be in the camp of wanting to go faster, because this looks like it’s going to be really great for our supply chain, great for customers, great for the company,” McMillon said.

An automated micro-fulfillment center set up in a Walmart store can be stocked with the most popular grocery items and general merchandise orders for online orders. The robots can quickly pick those items, and store employees can add anything else sold in the store to an order – a TV, a toaster, a sweatshirt – for pickup along with the groceries.

McMillon talked about how Walmart made a deliberate choice years ago to focus, in the U.S. market, on in-store pickup for online orders rather than delivery. That choice has paid off during the pandemic as Walmart’s investments helped it handle the surge in online orders. “In the U.S., we thought, based on how large the country is and how people like to drive their cars – they do drive-throughs for food and banks and everything else – that we had the opportunity to really focus on pickup for a few years, which was obviously economically advantageous for us.”

The store fulfillment centers being built by Fabric and other other tech providers give Walmart the ability to use existing store and partking lot space create drive-through pickup stations for online orders that can be filled same-hour, not just same day. And that has to make Amazon worried.

This news was originally published at Forbes.