Hudson's Bay Co. is racing to add robots to its Toronto distribution centre that handles e-commerce orders, betting that the investment will give it an edge in the retail digital wars.
The new robot system, called Perfect Pick, will operate six to 10 times faster than human stock pickers when it's running next fall, Jerry Storch, chief executive officer at HBC, said in an interview.
Perfect Pick is three times faster than the Kiva robots that HBC has in its U.S. Saks Fifth Avenue warehouse in Tennessee, he said.
"It means that we can leapfrog the competition and provide better customer service," he said, after HBC reported improved fourth-quarter results but also heavier spending to upgrade its technology and stores. "It definitely reduces the overall labour requirements. … But we're growing so phenomenally rapidly on the Internet that we will keep adding people."
Retailers are moving to adopt more robots and other automation to help improve efficiency and cut labour costs, pouring money into new technology in a bid to keep up with – or even beat – Internet powerhouse Amazon.com Inc.
Amazon.com acquired the Kiva Systems warehouse robot developer in 2012, ending the robot maker's burgeoning business of selling to other retailers and allowing it to focus on getting Amazon's orders to customers faster.
Still, technology comes at a price. HBC said its capital spending in the coming year will be between $750-million and $850-million, which is "well ahead of prior forecasts," said Sabahat Khan, an analyst at RBC Dominion Securities.
Mark Petrie, a retail analyst at CIBC World Markets, had previously expected HBC to spend $550-million in 2016.
HBC said about 30 per cent of its 2016 capital spending will be devoted to digital and other technology initiatives.
Mr. Storch said he expected higher-than-usual overall spending for the next few years as HBC re-engineers itself for a new retail era. "These are great investments for the future."
Jim Danahy, CEO of retail consultancy CustomerLab, said investments in "ultra-accurate, ultra-high-speed, high-volume inventory and picking systems are increasingly important for every retailer, whether bricks and mortar or online."
He said the tech tools can help retailers be more precise. "Unlike Amazon, which is designed mostly for individual customers, HBC's system must restock complex assortments of goods in massive quantities for hundreds of stores across North America, as well as send that single item to an online customer in Yellowknife. Perfect Pick does both."
Robots and other new technology also help reduce labour, warehousing and inventory costs, Mr. Danahy added.
On another virtual front, HBC is working to get all of its banners on a common Internet platform – the one used by Saks Fifth Avenue, which is leading the way in digital efforts at the company. HBC's other key chains include its namesake, Hudson's Bay, as well as Lord & Taylor in the United States and Galerie Kaufhof in Europe.
HBC is also transferring digital know-how from its recently acquired Gilt.com fashion site to the retailer's other chains, Mr. Storch said. HBC can learn from Gilt.com's strength in mobile technology and personalized pitches to customers, he said.
"We know the Internet is the most transformational and important development in retail today," he said. "And we're going to be leaders in that."
Richard Baker, governor and executive chairman of HBC, said it is five to seven years behind rivals such as Macy's Inc. and Nordstrom Inc. in making digital investments. With its latest efforts, HBC will end up with warehouse technology that is better than that of Amazon, he said.
In its fourth quarter, HBC's digital sales jumped 22.8 per cent on a constant-currency basis from a year earlier.