Speaking to investors and analysts on day two of its annual investors meeting this spring, executives reminded their audience that Walmart’s inventory sits within 10 miles of 90% of the U.S. population.

For decades the retail giant has staked its growth and profits on this vast brick-and-mortar network of what is now more than 5,300 locations, including 600 Sam’s Club warehouse stores. Despite the fact that it sees huge potential in e-commerce, and is targeting much of its investment to stoking online sales, that footprint remains crucial to its success.

To the extent that a brick-and-mortar fleet is an advantage, it’s not one available to Amazon, which has a much smaller footprint of much smaller locations, mostly Whole Foods. During the April meeting, which was broadcast via video conference, Walmart U.S. CEO John Furner called the company’s stores “the key nodes” in its omnichannel operation.

“That’s important because we know customers want speed,” he also said. “And we also know that the last mile costs more than the middle mile, and the middle mile is more costly than the first mile. So having 4,700 points of distribution shortens the last mile, lowers delivery time and it lowers costs.”

In the next five years, nearly 90% of Walmart’s capital expenditures will be in “high return areas like e-commerce, supply chain and store investments,” Chief Financial Officer John David Rainey said. Within three years, by the end of its fiscal year 2026, Walmart said it expects about 65% of its stores will have automation capabilities, 55% of its fulfillment center volume will move through automated facilities, and unit cost averages could fall by some 20%.

In 2023, Walmart has notified several states of layoffs at many of its e-commerce facilities, which as of early April topped 2,300. At the investors meeting, executives said they envision hiring more people in the long run, for better jobs at better pay for what will be a bigger, more profitable enterprise.

“Further scaling precisely these types of investments is what will allow us to realize a profit inflection in the next five years,” Rainey also said.

UBS analysts led by Michael Lasser also see it that way, saying that these “improved efficiencies should help it accelerate its flywheel.”

“Importantly, the tech being used can help the co. improve throughput, accuracy, & even reduce backroom labor demands over time,” Lasser wrote in an emailed note, noting that as much as half of robotically assembled pallets go directly to store floors, allowing human associates to work more efficiently on the store floor. 

Walmart had offered a tour of a fully automated facility in Brooksville, Florida, and Telsey Advisory Group analysts led by Joseph Feldman said they were “impressed by the high level of automation.”

Two robots handled an inbound shipment of some 3,400 packages; sensors and robots separated them before they moved to an automated grid. Meanwhile robots were able to build pallets of 130 cases, versus 75 for manually built ones, per Telsey’s note, which also described robots in storage and picking, and autonomous forklifts that loaded and unloaded.

For fiscal year 2024, Walmart expects net sales to rise 2.5% to 3.0%, Walmart U.S. comps to rise 2% to 2.5% (excluding fuel sales); Sam’s Club U.S. comps to rise 5% (excluding fuel); and capital expenditures to be flat to last year to “up slightly” year over year. Last year’s capital expenditures reached $16.9 billion.

“We view capital allocation is every dollar having to compete for the best return, and we view our capital expenditures through the lens of return on investment,” Rainey said. “The investments we've made over the last few years in things like store-level technologies and supply chain automation are yielding returns in excess of what we originally contemplated.”

The Save Mart Companies earlier this year launched an automated dark store in Mountain View, California, that provides same-day grocery delivery and pickup service using a fleet of robots supplied by startup Fulfil Solutions, the companies announced in a February press release.

The service, known as Lucky Now, began operations in 2022 and uses technology that can pick and pack items from all grocery categories, regardless of whether the goods need to be kept cold.

Fulfil, which is emerging from stealth, is taking on established companies in the micro-fulfillment space as grocers look for ways to handle online grocery orders more efficiently.

The artificial intelligence-driven robots operating in Save Mart’s new automated micro-fulfillment system use a combination of machine learning, computer vision and sensor fusion algorithms to track inventory, transport products and pack orders, according to the announcement.

Fulfil’s robots are intended to help grocers cut costs in their e-commerce operations and also offer benefits like reducing carbon emissions and preventing food waste, Mir Aamir, the company’s CEO and president, said in a statement.

The robots are designed to prevent product damage, keep down picking time and balance loads as they traverse the fulfillment center. In addition, Fulfil’s technology monitors each item’s position in the facility while keeping track of their products’ origin and when they are due to expire, the company said. The system can fulfill orders “within minutes” and packs groceries in bags for delivery to a waiting area where drivers retrieve them.

Save Mart’s disclosure that it is working with Fulfil on automated e-commerce fulfillment follows its decision in June 2022 to end a partnership with Starship Technologies to use robots from that company to deliver online orders to customers.

Fulfil made clear that it is striving to have a substantial impact on the micro-fulfillment industry, saying in the announcement that its tech “can be customized to meet the needs of grocery stores of any size anywhere in the world.” But as it looks to disrupt the grocery automation sector, the company will face competition from a range of companies, including Fabric, Takeoff Technologies, AutoStore and Ocado, that have been working with grocers on automation solutions for years.

In conjunction with its disclosure that it has built the automated fulfillment center for Save Mart, Fulfil said it had completed a $60 million Series B fundraising round. Venture capital firm Eclipse, which focuses on firms that “redefine physical industries,” led the round, with participation from investment companies Khosla Ventures and DCVC.

“Today’s online grocery business is built on manual, wasteful and expensive processes. Mir and the team at Fulfil have successfully developed a highly differentiated, full-stack solution to automate the $1 trillion grocery industry by automating all picking and packing,” Jay Knafel, early growth partner at Eclipse, said in a statement.

Sponsored content

By Avery Dennison

Linerless labels offer greater sustainability than the traditional labels used with weigh scale and other variable information (VI) print applications. Now, recent innovations have made them even easier and more reliable to use. Modern linerless labels are a step above the technology introduced over a decade ago.  

Today's linerless labels include state-of-the-art adhesives allowing greater application flexibility. Their advanced siliconizing technology makes them extremely easy to work with. Linerless labels are poised to help grocers improve sustainability, productivity and perhaps much more. 

Many grocers realize that the time has come to transition to linerless labels. Here’s why.   

Sustainable solutions can be visible or invisible to the consumer 

The grocery industry has made significant strides in responding to consumer demand for greater sustainability. We’ve seen major chains commit to net-zero emissions, reduce or eliminate single-use plastics, ban plastic grocery bags, find innovative ways to decrease food waste, promote recycling and composting and more.  

Many of these efforts combine innovative technology with thoughtful design. Some efforts, such as introducing new packaging made with less plastic, are very visible to consumers. Other efforts are often happening beyond consumers’ line of sight, but they nevertheless significantly impact sustainability. One such beyond-sight effort is the adoption of linerless labels. 

Eliminating label liners could have a significant effect on waste reduction 

A traditional label construction consists of at least three layers: a facestock, an adhesive and a protective release liner that is peeled off before application.  

Most grocery shoppers probably don’t think about those liners. But liners account for about a third of the material that goes into a traditional label construction and much of it ends up as waste. According to a 2017 study by Alexander Watson and Associates, only about one-third of the 273 kilotons of paper and 31 kilotons of plastic-film liner waste makes it into the recycling stream. The rest goes to landfills.  

As the grocery industry seeks more sustainable products, linerless labels can help them make an impact on waste reduction.  

Linerless labels have a variety of applications 

Linerless labels feature a silicon-based coating applied to the label facestock. This coating allows each adhesive layer to peel easily and cleanly off the underlying layer in a self-wound roll. The employee simply prints the label and can move directly and swiftly to place it on a package. There’s no hassle of removing and discarding a liner.  

The bottom line? No liner, and no liner waste. 

Introduced more than a decade ago, linerless labels have been adopted for applications in multiple industries. These include prime label applications where intricate die-cut shapes are not needed (such as sleeves for fresh foods and meats and postage stamps), VI print labeling where high-speed dispensing is not required, mobile printing, retail/weigh-scale labels and fast-food outlets. VI Linerless labels also offer varying lengths to fit longer nutritional facts or product information all in one label.  

North American linerless growth is expected to outpace that of the total label market in the coming years. The former is forecast to grow at a 15.4% CAGR from 2021 through 2024, and the latter at a 2.4% CAGR in that period. 

Within grocery, linerless labels are being used virtually anywhere direct thermal (DT) printing is commonplace: 

• Deli 

• Meat and seafood 

• Bakery 

• Hot foods  

• Weigh scale  

• Click and pick 

Grocers that have adopted linerless labels enjoy multiple benefits: 

• Sustainability — Linerless technology eliminates one-third of the material in a traditional label construction. This means grocers create less waste and discard less material that typically ends up in a landfill.  

•  Employee safety — Siliconized liner waste inadvertently dropped on hard-surface floors is a significant slip-and-fall risk. A little added moisture amplifies the danger. With linerless labels, there’s no liner waste on the floor. This helps enhance workplace safety for employees. 

• Productivity — Linerless technology offers up to 50% more labels per roll than a traditional product. This means grocery employees spend less time changing out rolls, increasing printer uptime. Additionally, many printers can now print variable lengths, meaning one label solution can fulfill a wide range of communication needs. 

More DT weigh scale/print manufacturers are updating their systems to be compatible with linerless label materials. This includes the development of special cutting devices that allow customers to produce their own labels for self-service applications. Many manufacturers expect the vast majority of their future equipment sales to be used for linerless applications. And with the current generation of linerless label products being easier than ever to use, there’s never been a better time for grocers to make the switch. 

An established technology made even better 

With robust image and background stability for barcode scanning and readability, Avery Dennison’s linerless label solutions for DT printers are already a proven option for deli, meat and seafood, bakery and hot foods applications. 

These label constructions are now available with the company’s industry leading emulsion semi-permanent and removable adhesive technology. The adhesives have been purpose built to deliver consistent adhesive and silicone coating no matter the application.   

When combined with Avery Dennison’s siliconizing technology, these adhesives reduce the “gumming up” of equipment that sometimes happens with other products. This further enhances employee productivity.  

A blank canvas for greater customer engagement 

What if sustainability, safety and productivity only scratched the surface of what linerless labels could mean to the grocery industry?  

According to a recent story in Grocery Dive, personalization and value messaging are among the most significant trends shaping the industry in 2023. The gist: with consumers concerned about continuing inflation, grocers have an opportunity to better communicate their efforts to hold down costs while adding value. They can also work to deliver personalized messaging based on specific shopper preferences.  

Linerless labels do more with less: Contact Avery Dennison to learn more 

Linerless labels have come a long way, with today’s technology offering even greater reliability and flexibility than ever before. And while linerless labels have some established applications, they’ll likely be utilized for countless more as grocers think of new ways to sustainably connect with and engage shoppers. 

Avery Dennison welcomes the opportunity to help you understand how your business can benefit from the transition to linerless labels. To learn more, contact your Avery Dennison representative, or visit label.averydennison.com/linerless.

Kroger has converted a store in Franklin, Tennessee, to self-checkout-only with plans to do the same at another store in the state, a spokesperson for the grocer said in a July email.  

The grocer planned to make its store in Hillsboro Village self-checkout-only later in 2023, said Lauren Bell, the spokesperson.

With the switch at the two stores, Kroger joined a list of retailers who have piloted self-checkout-only locations.  

Kroger says the change at the Franklin store, located at 2020 Mallory Lane, is aimed at enhancing the customer experience instead of as a cost-cutting labor measure, noting that the store’s customers “were primarily already using self-checkout.”

“The improvements at this store include the addition of new belted checkout lanes to accommodate customers with larger baskets,” Bell wrote in the email. 

Kroger associates are available to help customers scan and bag groceries, Bell said, noting that the change did not result in a reduction in labor and that the store is currently hiring new associates.

“Some titles have changed but we will continue to have staff at the front of the store,” Bell told News Channel 5 Nashville. Bell also told that outlet that the self-checkout-only model is just planned for these two locations. 

In 2021, Kroger started testing a self-checkout-only store in Dallas — the grocer’s first test of the concept, per Bizwomen. 

The grocer has also been testing other changes to its checkout experience. In mid-2022, Kroger started expanding high-tech self-scan checkout lanes, which resemble a full-service checkout lane but are self-service, to Cincinnati stores alongside the traditional checkout lanes, WCPO reported. In 2021, the grocer began testing KroGO branded smart carts by Caper at a Cincinnati store and also had a pilot with smart cart maker Veeve.

Other retailers, including Walmart and Dollar General, have also piloted self-checkout-only stores. 

These tests are coming at a time when health and safety concerns, along with an increased focus on frictionless and faster shopping experiences, have accelerated the adoption of self-service and checkout-free purchasing options in stores. Self-checkout stations can also give retailers the option to reduce staffing. 

At the end of 2022, self-checkout made up nearly half (48%) of all checkout registers, and that checkout method is now the dominant grocery checkout format, accounting for 55% of transactions in 2022, according to a VideoMining study released earlier this year.

A study from shopper intelligence firm Catalina in late 2022 found that the number of self-checkout lanes in the U.S. had increased by 10% during the previous five years and made up 38% of the checkout lanes in grocery chains stateside. That firm, though, noted that consumers who use both self-checkout stations and staffed checkout lanes consistently have the highest retention rates and best customer value — indicating grocers may want to take a hybrid approach to their front ends.

Spurred by the sustained increase in e-commerce business sparked by the pandemic, grocers are stepping up their interest in vertical storage systems, which allow workers to more efficiently assemble orders and can be less costly than other types of automated equipment.

The mechanized units, which stack totes loaded with goods on shelves in multistory towers that can be more than 40 feet tall, have long been used in industrial settings, where they are prized for their ability to store and rapidly retrieve parts while requiring a minimum of floor space.

Those qualities are now catching on with food retailers, which have until recently displayed relatively little interest in vertical storage systems even as they have invested in other forms of automation, said Max Gigli, CEO of Modula, an Italy-based vertical storage equipment manufacturer that works with grocers in Europe and been in contact with U.S. supermarket chains.

“The portfolio of customers that we have reached has changed a lot,” Gigli said. “Manufacturing is still our bread and butter, but more and more we see customers … in the retail sector and in the grocery sector.”

Vertical storage systems, also known as vertical lift modules (VLMs), can handle a variety of tasks for retailers, including holding products for distribution to stores or inclusion in online orders. The units can also store completed orders until customers are ready to pick them up or delivery personnel arrive to transport them to people’s homes.

In a sign of the grocery industry’s growing interest in VLMs, Modula officials spoke at last year’s Groceryshop conference with representatives of companies including H-E-B, Kroger, Whole Foods Market, Giant Eagle, Associated Wholesale Grocers and Lowes Foods, according to David Lind, the company’s director of business development. Modula also connected at the trade show with U.K. grocery chain Tesco, according to Lind.

In 2021, Wakefern Food, the East Coast grocery cooperative that includes banners like ShopRite, Dearborn Market and The Fresh Grocer, said it had begun testing a VLM from Modula rival Kardex Remstar in the Home department at a ShopRite store in Kingston, New York.

A lower-cost alternative to MFCs

Vertical storage systems hold promise for grocers because of their relatively low cost compared with automated micro-fulfillment centers (MFCs), said Marc Wulfraat, founder and president of MWPVL International, a Montreal-based supply chain consultancy that advises grocery chains.

“I started looking at [VLMs] and paying attention because I really think there's a future here in North America for this technology,” Wulfraat said.

VLMs are also attractive because they are less complex than MFCs, which can cut down on maintenance costs, Wulfraat added. “You can have somebody who's doing other forms of maintenance in the building … take care of the equipment” instead of needing dedicated technicians to deal with mechanical issues, he said, referring to VLMs.

Still, Wulfraat said, it could take time for interest among food retailers in vertical storage technology to ramp up, much as MFC technology has been somewhat slow to take off. “It always takes a little bit of time for people to catch on and understand new solutions that come to the market, particularly in the automation sector,” he said.

Wulfraat said VLMs can be especially useful in helping retailers store and fulfill orders for items like dry goods that can be stored at ambient temperatures but need to always be on hand, adding that he thinks they will gain momentum with grocers in the U.S. in distribution centers before making their way to supermarket backrooms or dark stores.

“It's an area of business that everybody struggles with because your pick line gets elongated by all of these slow-moving items that have to be stocked in the warehouse, and you never seem to have enough floor space for them,” Wulfraat said.

Gigli said Modula’s ongoing efforts to build its business with grocers in the United States are taking shape as it works on vertical storage initiatives for food retailers in Italy, which have been ahead of food retailers in other countries in embracing the concept.

Before the pandemic began, Modula installed about a dozen VLMs at a distribution center that serves stores operated by Italian grocery chain Conad, but the technology company didn’t see much interest for its products from other grocers until 2020, when it began working with Tulips, an Italian e-grocer, said Gigli. Modula is also working with Coop, another grocer in Italy, he said.

As e-commerce demand has leveled off following the surge brought on by the pandemic, Modula is positioning the relatively low cost of its gear as a key advantage compared with MFCs, which can cost several million dollars or more to build. By comparison, Modula’s automated storage towers typically cost about $150,000 each to install, Lind said.

Gigli added that Modula emphasizes its ability to install its equipment quickly and rapidly bring on additional storage capacity when it has discussions with retailers. It takes the company four to six months from when it receives an order for a vertical storage unit until installation is complete, he said.

According to Gigli, workers can summon goods and orders using a control panel at the base of a VLM, or the control software can be integrated with a grocer’s online grocery platform, allowing the unit to automatically ferry items to a worker when an order comes in from a shopper.

The units can also be insulated to maintain interior temperature and humidity levels, Lind said.

Setting the temperature of individual totes

As they start to pay closer attention to VLMs, grocers are also showing increased interest in technology that can keep food refrigerated or frozen on a tote-by-tote basis instead of requiring goods to be kept in chilled rooms that may have a lot of empty space, said Dana Krug, senior vice president for cold chain at Phononic, a supplier of temperature-controlled totes compatible with VLMs and MFCs.

Phononic’s totes feature solid state cooling units the size of a smartphone that can bring the interior of the unit from room temperature down to a specific temperature in under an hour, Krug said. The totes can also be controlled remotely, allowing retailers to turn the cooling system on or off as needed even when a tote is stored inside a VLM. That makes the equipment, which depends on carbon dioxide and water instead of conventional refrigerant, much more efficient than compressor-based cooling systems, Krug said.

While companies in sectors such as healthcare and the life sciences have used the company’s cooling technology for more than a decade, retailers have only been showing interest in its equipment for about three years, Krug said. The company is not ready to identify retailers it is working with, he said.

Phononic displayed its totes at the 2022 Groceryshop conference inside a vertical storage unit from Vidir Vertical Solutions, a VLM supplier it is partnering with to demonstrate the technology to food retailers. Vidir has installed VLMs for retailers including Home Depot, Kohl’s and Walmart, according to the company’s website.

“The beauty of the vertical racking and our system working with it is that flexibility to flex your order capacity at any given time. If I need more order capacity, I add more totes … it doesn't mean I'm taking up more space inside the store,” said Krug.

Grocery wholesaler Associated Food Stores (AFS) announced in May it has teamed up with Symbotic to bring the technology provider’s automated warehouse system to its distribution facility in Utah, per a press release. 

AFS, which serves around 400  retailers, said the use of the artificial intelligence-powered, robotic technology will increase efficiency and reduce costs. AFS and Symbotic said the technology will improve overall supply and delivery to stores, as well as help expand selection. They also framed the tie-up as a way to boost worker satisfaction.

“We believe implementing the Symbotic system creates great opportunities for our distribution center team members to grow their skill sets and expand their future opportunities with the company,” Glen Keysaw, AFS’ vice president of distribution, said in a statement.

Keysaw said at the time of the announcement that all current workers at the distribution center would have jobs following the arrival of the technology — a statement likely aimed at assuaging concerns that automation will replace workers. 

Symbotic’s automated system relies on a fleet of vision-enabled, autonomous robots that whiz around a warehouse to pick and pack products in high-density, mixed SKU pallets. 

“It’s a strategic investment that can increase efficiency and enhance our ability to service our member retailers,” Roger White, AFS’ executive vice president and chief operating officer, said in a statement. 

In March, United Natural Foods, Inc. (UNFI) said it teamed up with the company to bring the AI-powered robotics to its distribution center in Centralia, Washington. Last year, Walmart announced plans to deploy Symbotic’s technology to all 42 of its regional distribution centers over the next few years as part of a broader supply chain upgrade. 

While the adoption of automated e-commerce fulfillment has been slow in the grocery industry, that technology could start to make more headway following the pandemic’s acceleration of online shopping and rising labor costs. 

BJ’s Wholesale Club announced plans to deploy autonomous aisle-scanning vehicles from Simbe Robotics to all of the club retailer’s locations, the companies announced in mid-March.

The robots, known as “Tally,” use computer vision-driven cameras to collect images of items on store shelves and use the data they record to track stock levels, ensure products are in the correct location and monitor prices.

BJ’s goal in bringing the Simbe robots to its stores centers around the company’s desire to use data to get a clear sense of operating conditions as it looks to become more efficient and serve customers better, according to the announcement.

The robots, which can traverse an entire store several times per day, feed information to cloud-based servers that use artificial intelligence to guide store employees in stocking shelves, locating products and handling other tasks. “Ultimately, Tally allows team members to be more efficient and re-focus more of their time towards providing exceptional customer service,” according to the press release.

BJ’s follows supermarket chains including Schnuck Markets, Hy-Vee and The Save Mart Companies in electing to use Simbe’s technology in its stores.

Meanwhile, in October 2022, BJ’s rival Sam’s Club announced that it had finished installing automated inventory-scanning equipment on existing robotic floor-scrubbing machines in all the Walmart subsidiary’s approximately 600 locations. The scanning devices depend on artificial intelligence software from Brain Corp to run the scanning equipment, which sits atop robots provided by Tennant Company, an industrial cleaning equipment supplier.

In addition to deploying technology to improve its ability to keep tabs on products on store shelves, BJ’s plans to upgrade its locations so they can better serve digital customers, President and CEO Bob Eddy said in March during the retailer’s Q4 2022 earnings call. Eddy noted that while curbside pickup now accounts for half of the company’s online sales, many of its stores were not designed with e-commerce in mind, adding that the company installed facilities to enable pickup at its stores in only a couple of weeks.

“We never built the infrastructure inside these clubs to allow them to efficiently store and refrigerate products and make sure that they're getting out to the parking lot in an efficient manner,” Eddy said. “And so some of our clubs will look kind of haphazard that way. They’ve outgrown the initial shot of capital that we put in there.”

BJ’s has also recently been concentrating on expanding its retail footprint. The company also announced in March it plans to add five new stores to its fleet, one of which will be in Madison, Alabama, and is the retailer’s first location in that state