2016 was a glowing year for retail as more consumers’ disposable income levels rose, leading to more spending online and in-store. As the year turned to 2017 and retailers were looking beyond sales figures and into their operational details of profitability, margins, innovation, and their ability to compete, things didn’t looking so rosy.

In January, Macy’s in the U.S. announced it would be shutting 68 locations. J.C. Penny followed suit and has planned closures for 138 stores. Sears has been selling real estate and brands like their Craftsman line to stay afloat, but after the release of Sears’ annual report, the company revealed there is “substantial doubt” that they can stay in business.

Coinciding with this harsh state of retail reality is the rise of automation bots. No, not the 45,000-strong Amazon army of robots being used in their fulfillment centers. I'm talking about automation bots, which have the potential to make retail rosy again.

Let me explain.

What Are Bots and How Are They Used?

Bots are considered to be artificial intelligence in the form of automation software designed by programmers to perform repetitive, mundane tasks, or provide quick answers to pre-programmed questions.

One simple example of how an automation bot works is the online calendar event invite, which I suspect we all use almost on a daily basis.

The design within the calendar event entry page enables you to invite others, and once you save that event to your calendar, the bot is programmed to automatically send an email invitation to all those you included in the event, so you don’t have to. If the invitees accept, that triggers a notification to be automatically sent to you. And when the event is due to happen, you and all the people invited are automatically sent reminders. Another example is Google’s search engine, where bots are called spiders, crawling the web on their own to speed through search results versus a human-led manual process.

Chatbots are being integrated in a variety of business sectors to quickly communicate information between internal teams and departments like human resources to answer common employee questions relating to holidays, health care providers, or finding expense report forms. Consumer-facing chatbots offer simple levels of customer service to automatically provide hours of operation, location, return policies, or suggest products and services.

Slack-based bots are being used for financial transactions like PayPal, while Capital One’s Alexa Skill for the Echo is a bot designed to let customers manage their account information and check balances, pay credit card, auto, and home loans bills.

Bots are also becoming popular with messenger apps like Facebook, where DJs are enabling fans to opt-in to automatically receive tour dates or links to new exclusive tracks. Or sports teams like the Denver Broncos, who deliver quick bits of information like directions to the stadium, game schedules, rosters, and stats on players. Whereas British Vogue's Facebook bot delivers snippets of news, tips, and scoops on fashion shows and designers.

Although the rise of bots is growing across many verticals, this is in no way eliminating the need for human interaction, and at times, intervention.

I’ll get to that in a moment.

Bots in Action: Automating Retail Workflows

Let’s first look at bots in the retail environment. They are designed to automate repetitive back office tasks and perform workflows quicker than a human while reducing the potential for errors.

Automation bots have the power to turn a retail operation in a more positive cash flow direction by lowering operational costs and increasing efficiencies in order processing, fulfillment, shipping, and stock control.

Through a retail management platform that supports automation, the software engineering is already done for you.

The design of the bot happens in minutes by simply creating a New Rule, then applying a Condition through the drop down menu. These can include things like which city or state the order is being shipped to, what SKUs are contained within the order, which currency it's in, what the payment status is, or a number of other options. These bots also have the ability to assign numerous conditions to one rule. Next is to set the Action to take when the condition(s) are met, such as fulfilling the order, updating the status of the order, updating the warehouse inventory, invoicing the order, and more.

Within this automated back office environment, you can do more with less. It allows you to ship more products out of the door with less staff, whilst having more money and time to dedicate towards strategic front office priorities in marketing and product development. Finally, you can excel in personalized customer service, while spending less on manually performing invoicing, inventory management, order updates, and fulfillment.

Are you ready for a profitable peak season? It's time to find out!

The Human Touch and Artificial Intelligence Come Together

There are always exceptions to the rule, and that includes bots.

Forbes reports that approximately 90% of customer service calls to a retailer focus on questions that can easily be answered by a chatbot, such as, “Where’s my stuff?” But those bots are also designed to first, be very transparent about the interaction the customer is having with a retailer as an automated service bot and not a real person. Second, the customer is able to opt out of the chatbot conversation at any time and be connected to a real human being.

The same goes for automation bots in retail, where managing by exception is a key component to its design. You can create a rule to meet the condition of an order exceeding a certain value, being shipped to a certain location, or being ordered by a customer who is a repeat returner of goods. You could then set the action to require human review before going any further in the order process and being released for shipment.

Plus, every single order may not meet the specific criteria set by the rules created, and your staff will need to tend to those orders. But this is also the beauty of bot automation: that it can provide added intelligence over time. As those orders come in containing unexpected conditions, trends can be gleaned and new rules created to meet those conditions, furthering the automation process of the back office workflows and operations.

Retail is Facing a ‘Perfect Storm’ of Cost Pressures

According to a new report out by Deloitte, “A Brave New World: the Retail Profitability Challenge,” 2016 U.K. retail sales rose by 3.3% in value terms, which is more than double the rate in 2015. That said, the ability for retailers to continue to grow both top line and bottom line profitability is waning.

Deloitte reports that discounting during the 2016 Christmas season hit record levels, and their analysis showed profitability declining with three-year average margins falling by two percentage points between 2010-11 and 2014-15. “Strong growth in sales has not lead to a commensurate increase in profitability. Margins have remained under pressure as prices have fallen for most of the last five years.”

The cost pressures are originating from new competitors entering the market with different business models and cost structures, increases in property and staffing costs, all of which is leading to what Deloitte calls: “a perfect storm that retailers are having to assimilate into their cost model.”

To keep their competitive edge, many retailers have tried to be all things to all people, which requires investments that have become more difficult to sustain in a time of dropping margins.

Continual changes in consumer shopping behavior is impacting physical stores and many U.S. major retailers experience closures. The UK’s retail market is seeing a mere growth in store sales of just 1.1 percent, while online sales have increased by 19.2 percent. Many retailers were not aptly prepared for the costs associated with moving from a strictly brick and mortar model to online and omnichannel, a move they made to stay competitive, but which led to an unexpected decline in profitability.

How Bots and Automation Can Lead to Thriving in Retail

The Deloitte report provided three key recommendations for evolving your current retail model to one of profitability and sustainability:

1. Focus on quality customer engagement and understand every step of the buying journey to optimize the shopping experience;

2. Stop trying to be all things to all people by becoming specialized and the premier go-to retailer for a specific niche; and

3. Focus on driving innovation, which will lead to greater returns and profitability.

To further elaborate on the third point, automation bots enable you to achieve goals of reducing store costs and overheads. Automating ordering, fulfillment, inventory, accounting and all those manual, time and cost-consuming processes will enable you to augment your workforce towards the front office. Your employees will see opportunities to grow within a company that is also growing, excited to play a part in your longevity and competitive edge.

With that reduced overhead, investments can continue to be made in innovation for you to succeed in: “creating a more immersive and differentiated experience” for your customers and your business.

Not only can you survive the storm, you can thrive for many years to come.

Want to know more? Book a demo today and find out just how much automated workflows can help you and your business.

This article originally appeared on ITProPortal.

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About the Author

Derek is CEO of Brightpearl, responsible for the overall company strategy. Co-author of the Omnichannel Survival Guide, Derek is recognized as a leading retail expert, and his mantra is to deliver on Brightpearl’s mission to automate the back office for today’s merchants. During the 1990’s Derek founded two IT companies, including Ireland’s first online advertising agency building database driven websites and offering SEO services. Most recently, he served as Senior Vice President of field sales and marketing for Norton, responsible for $1.7bn of revenue globally. Since Derek became CEO of Brightpearl in spring 2016, the company has seen significant growth in its core customer base, cementing its position as an invaluable asset for mid-sized merchants seeking a competitive edge.