Walmart launches plan to build micro-DCs inside dozens of retail stores

Retail giant Walmart Inc. is turning to automation technology to scale up the number of brick and mortar stores that will double as fulfillment centers, allowing it to provide same-day pickup and delivery services to shoppers, the company said today.

Walmart plans to build compact, modular warehouses within certain stores and add them on to others, saying those local fulfillment centers (LFCs) will handle everything from fresh and frozen groceries to consumables and electronics.

“Stores are transforming to serve more and more purposes – we’re using them to fill pickup and delivery orders, make Walmart.com deliveries and more,” Tom Ward, the company’s SVP of Customer Product, wrote in a blog post. “Our customers love the speed and convenience of pickup and delivery, and we’re committed to finding faster ways to serve them, which is why we’re scaling the number of stores that will also serve as local fulfillment centers. We’re already planning dozens of locations, with many more to come.”

According to Walmart, the plan follows a successful pilot project for its first LFC, which has been operating in Salem, New Hampshire, since late 2019. The company also unveiled a $2.6 billion plan in 2020 to add "micro fulfillment centers” in the back rooms of 70% of its retail stores in Canada. To expand those initiatives, the Bentonville, Arkansas-based company has now teamed with the logistics tech vendors Dematic, Fabric, and Alert Innovation.

Atlanta-based system integrator Dematic and Tel Aviv-based robotics startup Fabric are contributing their existing microfulfillment product suites. And Massachusetts-based industrial automation startup Alert Innovation will follow on its participation in the original New Hampshire project by providing its “Alphabot” flexible mobile robotics solution, which combines an automated storage and retrieval system (AS/RS) and an automated each-picking system, the firm says. 

“Walmart was the first food retailer to recognize the need to automate fulfillment of online orders at store-level,” John Lert, founder and CEO of Alert Innovation, said in a release. “Walmart’s announcement is exciting as it’s the largest deployment of automated micro-fulfillment technology announced to date by any retailer and represents a major step in the evolution of local fulfillment.”

Together, the three firms are building systems that use automated bots to retrieve items from the local fulfillment center and bring them to a picking workstation, freeing up employees from walking around the retail store to fulfill the order from shelves. Walmart plans to combine that approach with employees who pick certain goods by hand, deploying “personal shoppers” to collect fresh items like produce, meat, and seafood, as well as large general merchandise from the sales floor.

The whole process takes “just a few minutes” from the time the order is placed to the time it’s ready for a customer or delivery driver to collect, Walmart says. And in the future that collection point could even occur in the parking lot, since some stores will offer automated pickup points where drivers and customers can drive up, scan a code, and grab their order directly. 

Walmart’s project is the latest sign of enormous growth in the micro-fulfillment center automation market, which is forecast to jump from $136 million in 2020 to just over $5.3 billion in 2025, according to Rueben Scriven, senior analyst at the London-based market research firm Interact Analysis.

The biggest driver of that trend will be grocery sales, projected to account for more than 50% of all automated micro-fulfillment center revenues over that time period. “While general merchandise retailers tend to fulfill online orders from a centralized location, the vast majority of grocers fulfill online orders from the shop floor,” Scriven said in an email. “This makes it easier for grocers to transition to an automated MFC strategy as they already utilize what is essentially a manual micro-fulfillment strategy.”

We’re looking forward to supporting @Walmart with their online grocery needs! #automation https://t.co/qQYTdx2l4q

— Dematic North America (@DematicNA) January 27, 2021