Advanced robotics will transform retail

By October 16, 2013Ecommerce

Advanced robotics offers what is perhaps the most exciting near term investment opportunity that I learnt about at Singularity University last week. Let me illustrate with an example. It is now possible to measure someone for a very high quality custom bike frame, and then have robots cut the steel tubes and then weld them to produce a finished product in under an hour. Even better, it can be done in store in front of the customer. You could ride home with a video of your new bike being made with you in it. Saul Griffith from Otherlab gave us this example. He thinks these steel bike frames are equivalent quality to $12,000 carbon frames and that he can sell them for $6,000 and make a very good profit. One of the great things about this model is that there is only one company taking a margin out of the consumer price, whereas the traditional bike value chain has at least the manufacturer, wholesaler and retailer taking a cut.

What I’ve described here is a retail experience with a whole new level of consumer participation. Being involved in the design and watching the robots at work is a great story and hence a great platform on which to build a brand.

Micro-breweries is an industry where manufacturing on the site of retail has spawned a number of highly successful businesses, not least Brewdog down the road from us here in Camden. As with the bike example micro-breweries use advanced machines and custom software to produce a better product. The robotic arms and associated software are more complicated than micro-brewing equipment and only now reaching the cost and quality threshold where on-site manufacturing becomes feasible. Making the bike frames requires two 3-axis robotic arms which cost $200k, including software.

It’s interesting to think which other products might work with this model. Clothes is an obvious one – customers could be measured on site, choose elements of their design and then wait whilst robot sewing machines made their garment.

  • Holiday in Dartmoor

    Fascinating stuff, again. You can see it applied to most things that are currently mass manufactured. Furniture must be a big potential market.

    Do you think these types of businesses will generate more employment in general? Like a long tail of micro businesses?

    James

  • Holiday in Dartmoor

    Also find the margin observation interesting. It’s how information businesses can compete as well if they go deep enough on a specific topic.

  • http://www.theequitykicker.com brisbourne

    Unfortunately not. Forecasts are that robotics and AI will displace 45% of US jobs in the next twenty years. It’s imperative that our society and political system gets to grips with this. On the one side that means people getting used to the idea that they constantly need to be reskilling to stay in front of technology change (the half life for a skill is now estimated at five years) and the other side is that government needs to fund and support retraining and an education system that is focused on learning how to learn rather than learning specific skills.

  • Holiday in Dartmoor

    Wow, 45%. What about a company like, say, Wool and the Gang? I got the impression from your piece the other week that it was a movement away from automation/mass manufacturing to people/bespoke production. At scale, would these types of businesses fill the 45%?

  • http://www.theequitykicker.com brisbourne

    Good question. Hand crafted bespoke production has real value, especially when it allows extra creativity. As a wild-assed guess I would say that these types of businesses will make a dent in the 45% but not cover all of it. When large swathes of jobs have been destroyed in the past (e.g. the 100% that used to work in agriculture is now 2-3%) we have found new jobs to fill the gap. This time round the destruction will happen more quickly, and it’s an open question whether the creation process will also be faster.

  • JrSkeptic

    I would have said the “brains” for robotics will effectively transform retail more. Is it possible for smart algorithms (brains for robots) to model user behavior well enough across a wireless system to understand where a buyer is in the process of executing a sale? and then possibly manipulate the buyer very much in the same way a sales person uses logic to drive a sale?

  • http://www.theequitykicker.com brisbourne

    Yes. There is a lot of good that will come from AI, but the bad guys will use it too.

    The good news is that unscrupulous computers will be easier to spot and manage than individual sales people out on the field.

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