{"id":24355,"date":"2017-11-15T20:00:49","date_gmt":"2017-11-16T01:00:49","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/rise-of-the-machines-hbcs-salvation-or-destruction\/"},"modified":"2017-11-15T20:00:49","modified_gmt":"2017-11-16T01:00:49","slug":"rise-of-the-machines-hbcs-salvation-or-destruction","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/rise-of-the-machines-hbcs-salvation-or-destruction\/","title":{"rendered":"Rise of the Machines: HBC\u2019s Salvation or Destruction?"},"content":{"rendered":"

Changing Retail Landscape<\/strong><\/p>\n

The World Economic Forum estimates that 30-50% of retail jobs are at a high risk of computerization. Over the next ten years, the rise of automated technologies has the potential to displace over 6 million retail jobs within the United States.\u00a0 In-store and distribution centers roles remain the most vulnerable positions to the emergence of e-commerce and automated machines as traditional roles become redundant and expendable[1]<\/a>.<\/p>\n

The retail industry has faced pressure in recent years from various disruptive trends such as increasing competition, increasing costs, and the rise of e-commerce.\u00a0 Retail companies across the country have cut thousands of jobs and announced hundreds of store closures to combat the challenging operating environment.\u00a0 In 2017, several prominent retail companies including Toys R Us have filed for bankruptcy[2]<\/a>.<\/p>\n

Hudson Bay Company (\u201cHBC”) is an international department store retailer with sales of ~$14 billion and operations in North America and Europe. \u00a0Over the last 5 years, HBC\u2019s stock price has declined over 30%[3]<\/a>, underperforming the S&P TSX by 60%. \u00a0HBC underperformance can be attributed to its declining same store sales growth and weakening margins, negatively impacted by the vast adoption of e-commerce and automated machines. It is critical that HBC adopt innovative strategies to enhance its digital presence,\u00a0 optimize its cost structure and improve its supply chain to remain competitive in this new environment.<\/p>\n

Short Term Strategy<\/strong><\/p>\n

In the short-term, HBC has focused on bolstering its digital platform. In 2016, HBC acquired online flash sale retailer, Gilt. Gilt has a member base of over 9 million members and generates $500 million in sales in which ~50% of orders are from its mobile platform[4]<\/a>. The transaction reflects HBC\u2019s strategy to grow its online presence and leverage Gilt\u2019s mobile capabilities to access more consumers.<\/p>\n

Expanding aggressively into e-commerce is crucial for HBC as customers are increasingly shopping for products online. Retail e-commerce sales in the United States is expected to grow 10% per year to a $638 billion industry by 2022[5]<\/a>. The growing importance of e-commerce has forced retail businesses to evolve the \u201cfinal mile\u201d of their supply chain. Traditional brick and mortar retailers are required to bolster their online product offering and digital consumer experience to compete with online retailers such as Amazon which facilitates roughly 43% of all US online retail sales[6]<\/a>.<\/p>\n

Long Term Strategy<\/strong><\/p>\n

In the medium-long term, HBC is focused on increasing speed and reducing costs across its supply chain. In 2016, HBC unveiled its first robotic fulfillment system at its Canadian distribution center. The distribution center featured some of the most advanced automated distribution technology in the retail sector.\u00a0 The system is 12 to 15 times faster than a tradition manual process and will enable the company to deliver orders 3 times faster than distribution centers using the next best robotic technology[7]<\/a>. The new automated system will allow HBC to significantly cut costs across its distribution network as traditional manual tasks become expendable and deliver products to customers faster. HBC has plans to install the second robot fulfillment system in Pennsylvania, DC in 2017[8]<\/a>.<\/p>\n

HBC\u2019s continued distribution center investment is required to remain competitive in an industry in which companies have adopted robotics in their supply chain to improve efficiency. \u00a0In 2014, Amazon rolled out fulfillment robots at select distribution centers, cutting operating expenses by ~20%. Amazon estimates it can achieve $800 million in cost savings if it rolls out robots across its entire distribution network[9]<\/a>. \u00a0As the retail industry continues to shift towards automation it is imperative that HBC continues to invest in new technology to remain competitive and serve customers cost-effectively.<\/p>\n

Opportunities amidst Challenges<\/strong><\/p>\n

In order to thrive in the challenged retail environment, HBC should adopt the following strategies.<\/p>\n

    \n
  1. Invest in Automated Kiosks\n
      \n
    1. Improves customer buying experience as Kiosks provide customers with detailed information about products and services offered<\/li>\n
    2. Increases convenience as customers can check out without a cashier and without waiting<\/li>\n
    3. Decreases labor costs as stores will need less professionals to service customers<\/li>\n<\/ol>\n<\/li>\n
    4. Continue to aggressively invest in distribution centers automation\n
        \n
      1. Improves ability to compete with Amazon and large e-commerce players<\/li>\n
      2. Improves ability to process increasing online demand<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n

        Key Considerations<\/strong><\/p>\n

        As automation and e-commerce becomes more prevalent, HBC will continue to face various uncertainties:<\/p>\n

          \n
        1. What new technologies should HBC invest in to gain a competitive advantage over competitors?<\/li>\n
        2. How should HBC manage any potential negative publicity as the company shifts from manual to automated processes?<\/li>\n
        3. How will e-commerce continue to evolve? How will consumers use mobile devices to buy goods in the future?<\/li>\n
        4. How can HBC improve its digital platform to attract more consumers and compete for consumers in the online marketplace?<\/li>\n<\/ol>\n

          (Word Count: 779)<\/p>\n

          [1]<\/a>\u00a0Michael Shavel, “Retail Automation: Stranded Workers?”,\u00a0IRRC Institute, May 2017, https:\/\/irrcinstitute.org\/wp-content\/uploads\/2017\/05\/FINAL-Retail-Automation_Stranded-Workers-Final-May-2017.pdf, accessed November 15, 2017<\/p>\n

          [2]<\/a>\u00a0Lauren Thomas, “Here are the retailers that have filed for bankruptcy protection in 2017”, CNBC, September 2017, https:\/\/www.cnbc.com\/2017\/09\/23\/here-are-the-retailers-that-filed-for-bankruptcy-protection-in-2017.html, accessed November 15, 2017.<\/p>\n

          [3]<\/a> Based on Google Finance as of Nov. 13, 2017<\/p>\n

          [4]<\/a>\u00a0Press Release, “Hudson\u2019s Bay Company to Acquire Gilt”,\u00a0 HBC,\u00a0 January 7, 2016, http:\/\/www.businesswire.com\/news\/home\/20160107005521\/en\/Hudson%E2%80%99s-Bay-Company-Acquire-Gilt, accessed November 15, 2017.<\/p>\n

          [5]<\/a>\u00a0Industry Report, “Retail e-commerce sales in the United States from 2016 to 2022 (in million U.S. dollars)”, Statista, October 2017, https:\/\/www.statista.com\/statistics\/272391\/us-retail-e-commerce-sales-forecast\/, accessed November 15, 2017.<\/p>\n

          [6]<\/a>\u00a0BI Intelligence, “Amazon accounts for 43% of US online retail sales”, Business Insider, February 3, 2017,\u00a0http:\/\/www.businessinsider.com\/amazon-accounts-for-43-of-us-online-retail-sales-2017-2, accessed November 15, 2017.<\/p>\n

          [7]<\/a>Press Release, “Hudson\u2019s Bay Company Unveils First-in-Canada Robotic Fulfillment System at Scarborough Distribution Center”, HBC, November 4, 2016,\u00a0http:\/\/www.businesswire.com\/news\/home\/20161104005600\/en\/Hudson%E2%80%99s-Bay-Company-Unveils-First-in-Canada-Robotic-Fulfillment, accessed November 15, 2017.<\/p>\n

          [8]<\/a>\u00a0Investor Presentation, “HBC Spring 2017 Investor Presentation”, HBC, April 10, 2017, http:\/\/investor.hbc.com\/common\/download\/download.cfm?companyid=AMDA-1ETYKL&fileid=936676&filekey=568961BB-5752-42FF-8F13-FA902250134F&filename=HBC_Spring_2017_Investor_Presentation.pdf, accessed November 15, 2017.<\/p>\n

          [9] <\/a>Eugene Kim, “Amazon’s $775 million deal for robotics company Kiva is starting to look really smart”, Business Insider, June 15, 2016,\u00a0http:\/\/www.businessinsider.com\/kiva-robots-save-money-for-amazon-2016-6, accessed November 15, 2017.<\/p>\n","protected":false},"excerpt":{"rendered":"

          Under pressure from the emergence of automation and e-commerce can HBC embrace the trends which threaten its business to gain a competitive advantage?<\/p>\n","protected":false},"author":10005,"featured_media":24356,"comment_status":"open","ping_status":"closed","template":"","categories":[471,49,16],"class_list":["post-24355","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-automation","category-e-commerce","category-retail","hck-taxonomy-organization-hbc","hck-taxonomy-industry-retail","hck-taxonomy-country-canada"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nRise of the Machines: HBC\u2019s Salvation or Destruction? - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/rise-of-the-machines-hbcs-salvation-or-destruction\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Rise of the Machines: HBC\u2019s Salvation or Destruction? 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