How HBC Uses a Robotic Fulfilment System to Supercharge eCommerce Distribution

(Image source: cbc.ca)

It’s no secret that ecommerce is piling huge pressure onto traditional bricks-and-mortar retail. In November, the Financial Post reported that online sales in Canada “have created a large enough dent in retail sales to fill up all the shopping centres in Vancouver, Halifax, Ottawa and Victoria combined,” citing the fall edition of the National Retail Report Canada from Colliers International. Amazon and other online retailers have long been taking bigger and bigger slices of the retail pie, forcing traditional retail brands to invest and expand their online offerings as a direct result.

Four years ago, Hudson’s Bay Co. realized that it had an opportunity to develop a strong ecommerce arm when it identified a gap in the market. “Right now, there is no luxury specialty store, or department store, in Canada that’s online,” Richard Baker, HBC’s Governor and Executive Chairman, told reporters in an interview back in 2013. Since then, the retailer has gone at lengths to fill that gap, taking a proactive approach to luxury ecommerce, even acquiring online retailers such as Gilt along the way.

Now, Canada’s oldest retailer is positioning itself to be the frontrunner in online commerce, and is doing so by placing its future in the hands of robots.

HBC’s First-in-Canada Robotic Fulfilment System

In November, Hudson’s Bay Company unveiled its brand new, state-of-the art robotic fulfilment system – a $60 million upgrade to its 725,000 square foot distribution centre in Toronto. The OPEX Perfect Pick system is the first of its kind in Canada. It operates 300 robots to store and retrieve products in the warehouse at almost break-neck speeds. Products that may have taken up to two and a half hours to locate, pack and ship under traditional manual systems, are now out of the warehouse and on their way to HBC’s online customers in under 15 minutes.

Check out the video below to see it in action.

The Perfect Pick system is between 12 and 15 times faster than traditional manual processes. There are sixteen 200-foot long aisles – each three storeys high – which can hold over one million units of inventory and process 4,200 customer orders per hour. In addition to the 300 completely autonomous robotic delivery vehicles (called “iBOTs”), two custom-built document-handling robots automate the insertion of packing lists, while inventory is moved along 15,000 feet of conveyor for storing and shipping.

“Our customers will benefit from the country’s fastest order shipping system,” said Jerry Storch, HBC’s Chief Executive Officer. “We are proud to be the first to bring this industry-leading technology to Canada […]. This investment in our Scarborough Distribution Center creates an e-commerce technology hub and allows us to expand our e-commerce business, which is a key component to our all-channel strategy.”

Fewer Hires, But No Jobs Lost

Needless to say, the new robotic fulfilment system has shaken up the distribution centre’s operations in a big way. The technology eliminates the need for staff to walk 15 kilometres around the warehouse every day to track goods, as they had to in the past. Accuracy of shipped items has also been improved as a result – up to 99.7% from 97% when done manually.

Despite the robotic presence, there have been no layoffs since operations began. However, HBC have said that the new system will mean fewer seasonal hires in busy shopping periods. There are roughly 300 full-time, permanent employees at the distribution centre – all of whom will keep their jobs. Over the Christmas period, a further 200 to 300 temporary workers were hired, though this number was down from nearly 700 the year before.

Storch has confirmed that HBC is looking to expand the technology to its three other warehouses in Toronto and Vancouver, and will be able to offer same-day delivery to certain markets now that it has the capacity to do so. The overall goal is to continue to meet customers’ needs, no matter if they want to shop in-store or online.

"I don't believe it's a leap of faith," Storch said. "It's a strong statement of confidence in the future of Hudsonsbay.com and our future on the Internet."

Taking on Amazon

Becoming the champion of ecommerce means taking on the might of Amazon. “Nobody, nobody, will beat Hudson's Bay on the Internet,” Storch declares, but the reality is that the king of Canadian ecommerce is still the American goliath that is Amazon. Its Canadian site is number 1, and its American site continues to rank higher than any other international retailer operating in Canada.

"Amazon is eating a lot of [HBC’s] lunch from a market share perspective," Retail expert Brynn Winegard of Winegard and Co. says in The Record, noting that Amazon had recently announced that customers signed up for its Prime premium service in Toronto and Vancouver will be eligible for same-day delivery. And the US based retailer, of course, has its own robotic fulfilment system in its warehouses, known as Kiva.

However, HBC’s CEO insists that its bricks-and-mortar locations offer a competitive advantage, even as it moves further into the realms of ecommerce. Offering customers two different shopping experiences is a key differentiator that Hudson’s Bay has over the US giant, and Storch remains confident.

"Amazon is a great competitor," he says. "But so are we."

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