The Cost Of NOT Doing

Or, the story of how Retailer X loses $1.1B to inertia.

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Enterprises make endless efforts trying to fully understand the cost of technology. Quotes, RFPs, business cases, ROI models, countless sessions with finance, presenting to leadership, presenting to capital committees, and the list goes on. But sometimes, the true cost is not really there. It’s hiding in plain sight.

It’s the cost of NOT doing something. 

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Innovation Sabbatical? 

Grocery retailers are on an admirable journey of equipping for e-commerce. For the past 30 years, and especially through the last 5, they have been busy building complex technology stacks, including websites and apps, countless software systems, delivery 3rd parties, AI, Robotics, and even drones. Yet lately, you could hear voices calling for a break. As newspapers get filled with CFC and MFC challenges, and the quick-commerce craze mostly over, many grocers might be mistaking 2024 to be a sort of a Sabbatical year for innovation. 

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Cost of automating

In the background, the threshold cost of e-commerce fulfillment technology has plummeted 200x, from ~100 million dollars for a CFC, through 10s of millions for an MFC, our SFC™ now starts at just $450K a pop. The threshold cost to automate fulfillment was never so low.

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Cost of NOT automating

The cost of not automating has actually shot up to historic heights. Let’s look at Grocery Retailer X - with an annual e-commerce business of $2B:

Retailer X stands to lose $1.1B by NOT deploying robotic SFCs!

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Here are the numbers: 

The gray line at the bottom shows the trending annual e-com losses Retailer X suffers, while the pink link at the top is the optional annual profit Retailer X can have as a result of deploying SFCs across the estate. The space between the lines is the accumulated profit gap between both scenarios for the next 5 years.

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The math behind the $1.1B is simple yet solid:

Let’s assume ordinary, fully loaded, manual fulfillment performance rates:

Retailer X is set to lose $871M through 2030 in his e-com business:

Our SFCs can save Retailer X 80% of the labor. The icing on the cake - the cost of the SFC technology only represents 20% of the financial savings:

The difference between the steady-state and the SFC model is a whopping $1.1B. 

Summary

It is very rare that the cost to apply innovation can be so drastically lower than the potential size of the prize, yet this is exactly the situation for grocery retailers today. 

Retailers the size of Retailer X can leverage our SFC technology to avoid losing $871M while turning a $197M profit from e-commerce in the 5 years through 2030. 

Grocers rarely get a chance to squeeze a billion dollars from their existing business.

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