Are skyscraper warehouses the key to urban grocery fulfillment?

Image: Urbx Logistics

This is an excerpt from Monday’s (4/5) Point of Sale retail supply chain newsletter sponsored by ArcBest.

Building automated grocery fulfillment systems powered by busy swarms of robots has gone sci-fi to science over the past decade, but it remains prohibitively expensive. In addition to the costs of advanced robotics and accompanying software, real estate costs can balloon into the millions of dollars in urban neighborhoods that have the population density and income levels to support such a model. 

That’s why Urbx Logistics wants to build vertically. The Boston-based robotics startup (aren’t they all?) is planning to build an automated grocery store that stretches 150 feet in the air but can squeeze into as little as 1,800 square feet of space. 

Verticality wasn’t always the plan, but the exorbitant cost of real estate in Boston’s Back Bay area meant the tract Urbx could afford wasn’t nearly large enough to hold all the items the store needed to fulfill its vision for an Instacart-esque concept offering last-mile fulfillment and local grocery storage. 


The first Urbx Market is slated to be built in Boston by the end of next year. The company is pitching the concept as an automated grocery store capable of fulfilling online pickup orders and e-bike deliveries within an hour. The building will also feature a small storefront where customers can order via kiosks or mobile phones and robots will bring orders out within minutes. 
Urbx’s system uses robots that travel vertically and horizontally along fixed tracks and incorporates predictive picking software to optimize their routes. Co-founder Lincoln Cavalieri likened the company’s dual-robot system to mini elevators speeding along the x and y axes at 13 feet per second and 26 feet per second, respectively. Cavalieri believes Urbx’s system stands out with its vertical twist, as well as its fulfillment speed. The dual-robot system, Cavalieri said, can retrieve 50 items in 135 seconds.

(Source: Urbx Logistics Youtube) Watch Full Video

Operating small, automated grocery fulfillment in a densely populated urban market isn’t a new concept, but going vertical might mitigate some of the cost pressures that make automated urban fulfillment so challenging. Cavalieri said the store will cost between $5 million and $7 million to build — roughly the same cost to construct a Whole Foods, he said, but with lower real estate costs and higher e-commerce productivity. 

It’s not a perfect, nor even decent comparison given the scale and location(s), but for context, the more than 300,000-square-foot fully automated grocery warehouses Kroger has been building in partnership with British robotics company Ocado cost roughly $55 million

Beyond the sheer size disparity, the major difference between the two structures is that Urbx is presenting a store, while Kroger is building warehouses. Urbx’s concept isn’t dissimilar to other “store of the future” ideas like Novastore by Alert Innovation or Locai Solutions’ Omni-Store that combine automation with on-site shopping, but one key difference is Urbx has no plans for any walkable aisles or service departments. 


Cavalieri believes if a store can offer speedy fulfillment, quality goods at low prices, shoppers won’t desire the traditional calling cards of grocery markets — the sensory pleasures of seeing the vibrant colors, smelling the fresh aromas and feeling the crisp skin of ripe produce. 

Urbx is entering an increasingly crowded automated micro-fulfillment field that includes market leaders like Fabric, Takeoff Technologies and Demantic, among dozens of other well-funded startups. Even the world’s most famous robotics company, Boston Dynamics, known for its dystopian dancing robots, has begun to develop warehouse automation robots

The pandemic brought online grocery shopping mainstream, and grocers understand automation is key for them to take market share and generate profits. In a recent survey conducted by Blue Yonder, senior retail executives expressed their companies’ intentions to further expand warehouse automation technologies over the next 12 months. 

(Charts: Blue Yonder)

As I’ve written ad nauseam, I am skeptical of rapid grocery delivery and rapid delivery in general post-pandemic. I feel the utility consumers enjoy when utilizing BOPIS to cut 90% off the time of their weekly grocery market run at no additional cost will be more attractive when the need to avoid stores is alleviated. 

And for the retailers, they all are faced with the same challenge of catering to shoppers’ preferences, even as online sales hurt the bottom line. The grocery industry has notoriously razor-thin margins. With every online order fulfilled at a store, grocers take on additional costs of picking and packing orders and in some cases delivering orders to doorsteps. The additional complexities have led to higher labor and technology costs, which are very hard to pass on in the highly competitive market. 

According to estimates from Bain & Co., when shoppers buy groceries at the stores, sales typically generate an operating margin between 2% and 4%. That drops to -5% when a grocer picks from a store and has a customer pickup via BOPIS or curbside. As you can imagine, the margin falls through the floor to -15% when grocers pick from a store and deliver to a customer’s home. 

So in theory, I believe Urbx’s automated omnichannel store concept is well-positioned in a post-pandemic world in which e-commerce takes up a larger portion of grocery shopping but shoppers have no real need to avoid stores. 

However, it remains to be seen whether a store offering little more than kiosks and robots will seem appealing with stiff competition from the likes of Amazon Fresh, Target and other well-funded competitors targeting urban markets. 


For now, this clever twist on micro-fulfillment centers offers a futuristic model for urban retailing and fulfillment. And it comes as companies test out a bevy of automated, unmanned service models, from dark stores to drones and autonomous delivery fleets.  

Final Thoughts. Micro-fulfillment is the way of the future in densely populated areas, but that doesn’t mean exclusively. Target isn’t using automated micro-fulfillment, but it’s been wildly successful leveraging its urban store footprint as distribution hubs to fulfill 95% of online orders either through BOPIS or ship-from-store at the end of 2020. 

Automation isn’t the end all, and micro-fulfillment has major issues with cold chain (hella expensive), big and bulky, and irregular-sized items, and the technology is simply not suitable for most applications currently. 

Experimentation is necessary by players big and small at this stage to further advance capabilities, find efficiencies and bring the cost profile down to justify the investment. In densely populated urban areas where commercial real estate costs are high, vertical solutions can have much higher productivity on less land, while also reducing transportation costs. It might sound crazy, but your spinach may be delivered from the 13th floor in the near future.

Want more stories about the future of retail supply chains? Try Point of Sale, my twice-weekly newsletter covering evolving fulfillment, ecommerce, the consumer and everything in between: https://freightwaves.com/pos

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