The Small Business Recovery
The technology that’ll help small businesses in the next pandemic
COVID-19 has accelerated all sorts of business transformations, but some just weren't quite ready yet.
COVID-19 has accelerated all sorts of business transformations, but some just weren't quite ready yet.
The weather is turning cooler and you realize you really need a new coat and a warmer face mask. You open your favorite shopping app with retailers from around your neighborhood, and see a coat and mask you like. You stand in front of the mirror, wearing your AR glasses, and try both items on. You like them and decide to buy them. The app triggers a drone to have the items delivered to you from a local fulfillment center a couple towns over. They'll be there in about 15 minutes. While you wait, you order some groceries, and the robot that's sent to deliver them tells you a friend also purchased you an arrangement from the florist down the road that will be in the order with your groceries. She says the flowers are to celebrate your birthday at home, seeing as parties are forbidden right now.
As much as the prospect of another life-altering pandemic is likely the last thing anyone wants to think about as the current one still rages on, experts say it's entirely possible that another one could breach our shores in the near future.
In the current pandemic, it's now become a trope that industries are being transformed years or even decades ahead of when many thought possible. Technology like cloud computing, mobile, contactless payments and advanced logistics software has managed to help many businesses stay afloat during this pandemic, even when they can't welcome people into their stores. But there's a host of technology in the works that just wasn't quite ready for prime time.
Here's some of the technology trends that may help businesses through the next pandemic.
In February, just before the pandemic started to shut down life in the United States, NHTSA, the country's highway safety agency, approved the first ever vehicle for U.S. roads that didn't meet its traditional safety standards. It's a small vehicle, maybe twice the size of a Little Tikes Cozy Coupe, but it could have massive ramifications on how goods move around the country.
The vehicle NHTSA approved was made by Nuro, a 4-year-old startup founded by Jiajun Zhu and Dave Ferguson, two former researchers on Google's self-driving car program (which is now Waymo). Nuro's goal is to automate last-mile delivery for things like groceries, pharmaceuticals and other things you might pick up on your errands around town. Small robots like Nuro's could cut down on the number of short car trips people take each week, and reduce the number of large vehicles on the road; if there's no one driving the vehicle, there's no reason for it to be very big.
And during a pandemic, Nuro's goal has an even sharper edge: It keeps strangers far more than 6 feet apart from each other. "The customer can use a touch screen or phone app. With the phone app, you don't have to touch anything. You just grab your groceries. It's truly contactless," Ferguson told Protocol at the start of the pandemic.
But in reality, Nuro is still just in the testing phase, operating primarily in the Houston area for now. If you happen to live in that area and signed up for beta tests with CVS, Walmart, Dominos and Kroeger, then you may well start to see what the future of home delivery looks like. But even then, it's still not benefitting local businesses that don't have the scale and budget to test out developmental tech.
"It's much lower hanging fruit to begin working with a very large chain that already has website ordering," David Estrada, Nuro's chief legal and policy officer, told Protocol. Working with large companies that already have stores across the U.S. and partnerships with delivery companies in place makes Nuro's job easier, Estrada said. But the eventual goal is to serve any business that wants to get its products out to customers. The problem then is having to figure out how to make them discoverable to customers. "As we get further along the tail to local businesses, then clearly what's going to be needed as some form of website aggregation or a front door," he said.
And this isn't just some concession to Main Street down the line; Estrada said it's core to the long-term viability of the company, given just how much commerce is done through mom and pop shops. "We're trying to address becoming a delivery platform that's the backbone of local commerce," Estrada said. "[If] we think about how big delivery is getting already from the likes of Amazon, still 90% of the retail industry is local."
For consumers, the jump to online ordering during the pandemic has happened in what they've needed most: food. "Consumers really adopted grocery delivery pretty quickly," Estrada said. But the aim is to replicate the success seen in the grocery industry for other sectors. "There's a giant future ahead that has yet to be addressed," he added.
But perhaps this is putting the cart before the horse — or driverless vehicle. While NHTSA has approved Nuro's vehicles for testing on U.S. roads, don't expect to see them puttering around your neighborhood anytime soon. Only about 20 states have explicit rules around allowing autonomous vehicles on their roads, Estrada said, and the industry is still looking for a set of standards to follow. "A question is whether a standard will be adopted," Estrada said. "There's a lot of attention being paid to a new standard called UL 4600, which puts together a pretty rigorous set of standards for being able to confirm that autonomous technology is safe."
"Autonomous vehicles have been in production for about 10 years now, and there is not one single large-scale commercial operation of vehicles yet," Estrada said, but argued that the technology isn't what's holding back driverless vehicles from proliferating. "I think, because of our existing regulatory structure and legal structure, companies are actually acting very, very conservatively by not putting large scale operations on the road."
Estrada said that the common line about wide-scale autonomous vehicle deployment over the last decade has always been that they're about five years away. But now with Nuro, he expects a much larger rollout on the horizon. "We're now at a place with the technology, the type of operation we want to conduct, to be in wide-scale operation much sooner than five years," Estrada said.
It's not just land-based autonomous delivery that would've been a boon during this pandemic. Companies like Alphabet's Wing, Zipline, Flirtey and Flytrex have all been running small-scale tests at various places across the U.S., which could have helped fulfill orders without contact, as well as get medical supplies and tests to people in more-remote areas.
Wing has been working with small businesses in Christiansburg, Virginia, as well as larger chains like Walgreens, to help them continue to sell during lockdown. Two businesses that joined as Wing expanded in the area back in April, Brugh Coffee and Mockingbird Cafe, saw a massive jump in sales. In their first weekend of drone deliveries, Mockingbird sold 50% more pastries and Brugh twice as much cold brew as they would over a regular weekend, a representative for Wing told Protocol.
Earlier this month, Zipline, best known for autonomously delivering medical supplies in Africa, announced that it would be partnering with Walmart to deliver goods near its Arkansas headquarters. Days earlier, Walmart made a similar announcement with Flytrex, another autonomous drone-delivery company, for Fayetteville, North Carolina.
But examples like these have been piecemeal and at a small scale. The FAA has moved quickly to approve COVID-related delivery setups like these, but as of yet, there are no comprehensive regulations that allow companies to operate in every state flying autonomous delivery drones.
Flytrex has been working with the city of Grand Forks, North Dakota, (one of the drone industry's hot spots) during the pandemic, along with its more recent Walmart partnership.
"When we announced the Walmart partnership in Fayetteville, we were sure we were getting spammed by robots from the amount of people who registered for the service," Bash said. "We didn't publish anything, there wasn't even the link to download the app."
"The excitement level is huge," Bash said. "From the few customers that we've got, they're using it a lot more than you'd expect, we've got people standing in line waiting."
Right now, the drone delivery services are trying to show that they can operate safely in one area before expanding. Bash said he hopes to be serving hundreds of homes across the U.S. by next year. Once the model works, it should provide delivery access to all sorts of on-demand options that are currently infeasible outside of dense urban areas.
"Most of the U.S lives in suburbs, and they can't get on-demand delivery, it is not profitable for the food delivery companies," Bash said. "You're driving your 1-ton car, you have a courier that weighs 80 kg, all of that to deliver a hamburger."
Bash envisions installing drone deployment devices at shopping centers around the U.S., where independent vendors and major chains could all load up delivery orders to be sent out to customers. But for the time being, it's likely that drone deliveries will be the domain of larger chains and restaurants. "The problem with small retailers is that usually they don't have their online stock availability," Bash pointed out.
One way that small businesses can more easily compete with the big players is to know their inventory like the Amazons and Target of the world, as Bash suggested. A novel solution to this problem, as well as one that can help cut down on supply chain struggles and generally reduce the number of people who have to touch a product before it gets to the end consumer, is microfulfillment.
Even before the pandemic, companies had started investing in microfulfillment. The concept is simple: Most store chains operate on a hub-and-spoke model, where inventory is stored at distribution centers and ferried out to local warehouses and stores. Walmart stores, for example, tend to double as their own warehouses, but they're also massive; not every seller has that sort of square footage at every store. When a customer places an order, the product has to get from wherever it's stored to wherever they are, which could be the other side of the world, across the country or even just a couple dozen traffic-filled miles away. Moving the distribution center closer to the customer, especially in dense areas, to cut down on delivery times requires new ways of thinking about storage. Most warehouses, even highly automated ones like Amazon's, store products on shelves, where humans or robots have to travel down long hallways to retrieve items for each order.
Microfulfillment companies like Fabric, Takeoff Technologies and Attabotics are aiming to upend that paradigm, shrinking the fulfillment center into a smaller, three-dimensional space. Attabotics claims that it can reduce the footprint needed for storing products by up to 85%, with a robotic solution that sees bin-carrying boxes moving around a 3D cube that can be expanded or contracted based on demand. The company's CEO, Scott Gravelle, said that inbound interest has skyrocketed as a result of the pandemic. "Due to COVID, everyone's now taking this opportunity to relook at what business they believe they need to have and they'd like to have on the backside," Gravelle said.
With systems like Attabotics', the goal is to be able to put a full fulfillment center closer to the end customer. To date, the Candian company has worked with larger chains, like Nordstrom, but as a result of the pandemic, new companies are seeing the value in storing products and filling orders with as few people as possible. "Distributing supply chains from centralized to decentralized, operating it as a holistic network and moving the goods closer to the consumer, to save time, transportation costs and packaging — none of that has changed," Gravelle said. "It's just being increasingly validated."
For smaller businesses, much like with deliveries, the path to survival is likely going to be relying on shared services. To compete online, companies need to know what they have in stock and where it is — something usually only larger stores can manage. By using shared microfulfillment services and a delivery provider, a small retailer could fulfill an order online just as easily as Amazon or Target could. (Products like FastAF, which recently launched in Los Angeles, are aiming to be that marketplace for small businesses to compete with online.) "The back room of the store is not revenue generating, so is it possible, in a shared ecosystem, to create the inventory storage as well as the ability to fulfill on direct to consumer ecommerce orders?" Gravelle asked. "There has to be a fundamental change in the industry in order to keep small and midsize businesses relative and competitive in the market in the future."
The problem, as Gravelle sees it, is whether solutions like these can roll out in time to keep these small businesses alive. Pandemic or not, Gravelle said that North America has been "over-retailed for a very long time," and condensing has been in the cards regardless. "Sears is a 100-year-old company, no one would have thought in the '70s that it was ever going to go anywhere," Gravelle said.
Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.