Hudson's Bay turns to robotic technology to amp up its e-commerce offering
A Hudson's Bay robotic shuttle sits on display in front of the company's new robotic fulfillment system in Toronto on Friday November 4, 2016. THE CANADIAN PRESS/Frank Gunn
Linda Nguyen , The Canadian Press
Published Friday, November 4, 2016 8:53PM EDT
TORONTO -- Canada's oldest retailer, Hudson's Bay Company, is placing its future in the hands of robots.
The national department store chain has spent more than $60 million in upgrades to its Toronto distribution centre, including the addition of a state-of-the-art robotics system that it says should speed up the delivery of products to customers.
Products that may have taken 2 1/2 hours to locate and ship under the traditional manual system should now be out of the warehouse within 15 minutes, the company said.
At an unveiling of the technology, CEO Jerry Storch said it was like moving on from "an abacus to a MacBook Pro."
With the OPEX Perfect Pick robotic system, an item purchased online is located in the warehouse in less than 30 seconds, and packed into a box, ready for mailing.
It is the first time the Perfect Pick system has been used in Canada, which operates 300 robots to store and retrieve products from bins the size of a recycling blue box.
About two-thirds of the 725,000-square foot distribution centre has been converted to use the system. The rest of the space still relies on manual labour, where workers push carts and locate bulky items for shipping.
Hudson's Bay (TSX:HBC) said the technology eliminates the need for workers to walk 15 kilometres a day in the warehouse tracking goods and improves the accuracy of shipped items to 99.7 per cent, up from 97 to 98 per cent when done manually.
HBC said there have been no layoffs since the system began operating at limited capacity in July, though it will mean fewer hires in busier shopping periods. The distribution centre has around 300 full-time, permanent employees and expects to hire about 200 to 300 temporary workers over the busy Christmas holiday period, down from 600 to 700 last year.
Storch said the company wants to meet customers' needs, whether they want to shop in store or online.
"I don't believe it's a leap of faith," he said. "It's a strong statement of confidence in the future."
Retail expert Brynn Winegard of Winegard and Company said it is the right move for a retailer like Hudson's Bay, who has "deep pockets" to invest in technology to set them apart from other bricks and clicks rivals.
"Amazon is eating a lot of their lunch from a market share (perspective)," she said, noting that the U.S.-based online retailer recently announced that customers signed up for its Prime premium service in Toronto and Vancouver will be eligible for same-day delivery. The e-commerce behemoth uses another form of robotics technology known as the Kiva system in its warehouses.
Speed is critically important to online shoppers, especially among the younger generation, said Winegard.
"Millennials are technologically savvy and they expect things to be ready and available to them quickly, she said. "They have high immediate gratification needs."
Hudson's Bay saw an increase in its online sales in its latest quarter. For the period ending July 30, the company reported that its total digital sales across all banners jumped by 84.4 per cent from the prior year.
Storch said the retailer is looking at expanding the technology to its other three warehouses in Toronto and Vancouver, and is also considering offering same-day delivery for some markets now that it has the capacity to fill that demand.
"Nobody, nobody, will beat Hudson's Bay on the Internet," he told a group of investors at the launch.
Founded in 1670, Hudson's Bay operates more than 470 stores under banners such as the Bay, Lord & Taylor, Saks Fifth Avenue, Gilt, and OFF 5TH. It also owns Galeria Kaufhof, Galeria INNO and Sportarena in Europe.