Season 4, Post 5: Why bother with humans?
The world feels as if it is slowly getting back to normal post-pandemic, at least in your author’s home country, where the UK Government has lifted almost all its previous COVID restrictions. However, some things have clearly changed. Even if we are now returning to the high street and swapping our homes for workplaces (at least on some days), the new world will almost certainly be one with fewer humans in functional roles. Automation and robots are game changers for many industries.
Begin with retail. Sure, we have crossed the digital Rubicon and 20%+ of all retail purchases are now being made online in countries such as the UK and US. However, this still leaves a very large percentage still conducted in brick-and-mortar stores. There is a quiet revolution going on here: think more interactive signage, smart price tags, remote checkout systems and a swathe of other acronyms. The guiding principle is one of reducing friction – in other words, making the retail experience as seamless as possible. This explains why retailers are experimenting with trends such as BOPIS, ROPIS and BORIS, respectively: buy online, pick up in store; reserve online, pick up in store; and buy online, return in store.
Beyond these developments, consider how commonplace contactless payments have become in stores. They now account for 1-in-2 in-person transactions versus 1-in-3 pre-pandemic, per commentary from Mastercard last week. Why tap with your card or phone though, when you could just use a remote check-out service instead? Amazon’s cashierless technology (which we saw in action for the first time in the UK last year) is being adopted by many other retailers too – partly because it is quick, but also since finding people to take positions as cashiers is currently challenging. An alternative version to this technology is being provided by start-up Zliide, which has pioneered the use of detachable digital fobs that are released from high-ticket items (such as clothes) once they are paid for via Apple Pay.
Back in the factory, several companies are swapping out humans for robots. Simple, repetitive tasks such as lifting a piece of metal into a press or moving goods around a warehouse can be done by machines at a lower price than it would cost to hire a worker to perform the same role. Formic, a robot-leasing company, offers its robots from $8/hour. This is less than the minimum wage in 32 US states. Anecdotally, factories that have deployed such robots see many benefits, particularly if they can redeploy existing workers to perform more value-added tasks instead. Additionally, as with some more menial retail roles, finding new employees to perform basic tasks such as the above can be hard. Either way, as we first wrote in 2012, the robots are coming.
3 February 2022
The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Heptagon Capital is an investor in Mastercard. The author of this piece has no personal direct investment in the business. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.
Alex Gunz, Fund Manager
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