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State of work: Retail braces for e-commerce earthquake

B.C. must prepare now for incoming automation revolution, say researchers.
e-commerce
Image: Pixabay

BIV special report: With the digital industrial revolution radically retooling the labour landscape, BIV looks at automation, unionization and other major issues facing employers, employees and the culture of work in the lead-up to Labour Day

BEIJING – A tangled web of belts and rollers sits high up in the ceiling moving bags of assembled products as they would in any assembly-line setting. The bags are filled, hooked and lifted to the ceiling, where they gradually disappear – one by one – into a slot on the far wall after being transferred from the initial vertical belt.

But this isn’t a car factory. It’s a 7Fresh supermarket in the outskirts of Beijing, where the bags – packed full of groceries that consumers ordered online using a mobile app moments ago – are zipped along a network of automated lines that would make Henry Ford proud, before landing in delivery vehicles dispatched to customers’ doorsteps.

There’s one key element curiously missing in the process: people. Other than a staff member loading bags, no one else in the market touches them on their journey to the outside world.

And industry observers note that the trend seen in China – automation, driven by e-commerce, artificial intelligence and other cost-efficient new tech – will one day be the norm here in B.C., whether people are prepared for the phenomenon or not.

“All the people that say that this will never happen need to go to China and see right now,” said Andreas Schotter, professor of international business at the Ivey Business School at the University of Western Ontario. “It is happening. And that automation will come; at this rate, the threat is, if we don’t embrace it and support firms to automate here in Canada, they will automate somewhere else.”

Chinese e-commerce giant JD.com is a prime example. The owner of 7Fresh has been building its own Chinese delivery logistics infrastructure from scratch since 2007 and now boasts 15 fully automated warehouse facilities and sorting centres.

It also began developing drones in 2015. It now operates almost 100 drone-delivery routes and has already accumulated more than 300,000 minutes in flight time.

JD.com officials said the largest of the drone-delivery networks, located in the northern Chinese province of Shanxi, covers a 300-kilometre radius.

Tracy Yang, director of JD.com’s international media team, said the company decided to build its own logistics network 11 years ago because 70% of its complaints at the time revolved around logistics.

“Some customers were getting things that were broken, or they didn’t get it on time. That’s why we decided to invest heavily in the network, and it has become our most important asset.”

At JD.com’s head offices near Beijing, the lobby convenience store has no clerk. Customers gain entry by scanning their phones. Sensors and cameras do the rest to ensure a customer’s account is deducted the amount for whatever goods he or she takes from the store.

But the retail sector is only one industry in China embracing a major shift to automation. At a restaurant at the Nanjing headquarters of Suning – another Chinese retail conglomerate – a robot in the lobby leads customers to their tables. At Beijing’s public Friendship Hospital, most patients sign in via automated kiosks that register patients, direct them to the right department and book them into open appointment spaces. (Younger patients skip that line completely by booking with mobile apps.)

“E-commerce is no longer an option here for businesses,” said McKinsey & Co. Shanghai’s Caleb Balloch. “It is a requirement. You are either going e-commerce or you are out of the game. And it’s not just online.… Consumers are now blending the experience of online and offline. They jump easily between the two, and the integration of the various channels is incredibly important.”

Schotter added that some programs can now work in fields like accounting or even law services, essentially putting every sector’s labour costs – and jobs – under the microscope.

Schotter said there are already many instances of “dark plants” that employ a manager and a skeleton crew to oversee automated processes ranging from automotive manufacturing to retail consumer management.

The key, he noted, is for Canada and B.C. to ask hard questions. For example, how can the economy deal with the oncoming wave of automation and AI?

“Automation and the digital revolution will wipe out most routine jobs, both manual jobs and cognitive jobs. But non-routine work will remain and thrive.

“We in Canada will be in danger if we do not address this now much more radically.… And creativity and critical thinking are what sets us apart from machines.”

Another way to deal with the automation revolution, Schotter said, is to focus investment where technology can significantly improve people’s lives.

“We have a massive shortage of family doctors, and there’s big hope that AI and automation can help our health-care system dramatically. I can see a future where the most common illnesses are diagnosed through automated programs that people can access from home, and then they can get treated by going directly to the nurse practitioners and pharmacists … without clogging the existing health-care system.”

JD.com’s Yang said consumers also hold the key. She noted that part of JD’s initial success as an e-commerce retailer resulted from goods being delivered by uniformed employees.

The company has stressed the personal touch on some fronts, especially in luxury retail, where consumers prefer the products being delivered by a human being.

As such, she said JD doesn’t view automation and e-commerce as a zero-sum, either-or proposition.

“What’s the future for retail? We think it’s going to be without boundaries. We will have shoppers who will be able to buy things from their smart speakers, just by talking to them. We will see smart refrigerators that tell consumers what they need and may want … but the consumer will be able to buy whatever they want, wherever they are, and no matter how they want to buy.”

(This report is part of Business in Vancouver’s participation in the Canada China Business Council media fellowship, which includes flight, meal and accommodation costs in China.)