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That Whole Foods is an Amazon warehouse; get used to it

Earlier this week, in Brooklyn, near the waterfront, Amazon opened what looks from the outside like a typical Whole Foods store. It isn’t open to the public, however; it’s a new fulfillment center.

“Grocery delivery continues to be one of the fastest-growing businesses at Amazon,” the company said in a statement about the location, noting that it has hired hundreds of new employees to aid in its operations. “We’re thrilled to increase access to grocery delivery.”

Americans sort of knew this was coming. Still, the pace at which buildings of all sizes are being either built or converted into e-commerce fulfillment centers — and closer to city centers — has become a bit breathtaking. According to the commercial real estate services firm CBRE, since 2017 at least 59 projects in the U.S. have centered on converting 14 million square feet of retail space into 15.5 million square feet of industrial space, and that trend is “absolutely going to continue,” says Matthew Walaszek, an associate director of industrial and logistics research at CBRE.

It has played out fairly quietly to date, save for the occasional headline about, well, Amazon, typically. Last month, for example, the Wall Street Journal reported that the ever-expanding conglomerate is in talks with the largest mall owner in the U.S., Simon Property Group, about converting both former and current JCPenney and Sears stores into distribution hubs from which it can deliver its products more quickly.

Amazon needs the space. Meanwhile, Simon needs a tenant that can pay its bills. That’s a tall order right now for many brick-and-mortar retailers that were already under pressure and watched foot traffic disappear entirely with as the country largely shut down in March in response to the pandemic threat.

In fact, despite that Simon recently partnered with another outfit to buy retailers Brooks Brothers and Lucky Brand out of bankruptcy (Simon and fellow mall operator Brookfield are also reportedly in advanced talks to buy J.C. Penney), some view the moves as a means to buy time as it reconfigures its properties to accommodate one anchor tenant.

That exact scenario has already played out at Randall Park Mall in a Northeast Ohio suburb (a mall, incidentally, that this editor occasionally frequented as a teenager growing up in Cleveland). Once filled with gaudy stores like Piercing Pagoda and Spencer’s Gifts, the mall — among the world’s largest enclosed shopping centers when it opened in 1976 —  is now the site of an 855,000-square-foot facility filled with mobile robotic fulfillment systems.

A local outlet reported its conveyor belts would stretch farther than 10 miles if laid in a straight line.

It isn’t always Amazon that’s snapping up these properties, of course. There are a number of other large e-commerce players that are rapidly expanding their physical footprint right now, along with opportunistic developers betting the U.S. will also focus more on domestic manufacturing facilities in a post-COVID world.

There are other big grocery chains that, like Amazon’s Whole Foods, are increasingly focused on developing fulfillment centers — sometimes right inside a store that sees foot traffic. At an Albertson’s in South San Francisco, for example, customers blithely shop around an automated rack-and-tote system at the store’s center that preps orders for pickup and delivery.

To a certain extent, this ongoing shift in use was inevitable. The U.S. has the strange distinction of featuring 24 square feet of retail space per capita. By comparison, Canada and Australia have 16.8 square feet and 11.2 square feet per capita, respectively. “We just have a lot of retail — we are over-retailed — so it’s not surprising that properties are struggling,” Walaszek says.

The pandemic has only poured figurative fuel on fire. Forbes estimates that upwards of 14,000 real-world retail stores will close in the U.S. this year. Meanwhile, during the first six months of the year, consumers spent $347.26 billion online with U.S. retailers, up 30.1% from $266.84 billion for the same period in 2019, according to U.S. Department of Commerce data parsed by the news and research outfit Digital Commerce.

It’s still a niche trend — retail properties being converted to industrial use. While 14 million square feet has been converted in recent years, it’s a drop in the bucket compared with the 14.5 billion square feet of industrial real estate in the U.S.

That won’t change overnight, either. For one thing, retail-to-industrial conversions involve buy-in from local zoning officials whose constituents are often concerned about congestion, noise and pollution, among other things. Retail rents are also significantly higher than industrial rents — more than double in some markets — so it’s “a hard sell to a retail landlord to convert to industrial where revenues aren’t going to be as high,” notes Walaszek.

Still, thanks to a confluence of events — from a battering of the broader retail industry to the runaway growth of Amazon specifically –  both big and small fulfillment centers are beginning to spring up and fast.

As Amazon’s first “permanent online-only” Whole Foods in Brooklyn underscores, they may wind up in what seem like the unlikeliest of places, too.

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Attabotics is Fixing Old Supply Chain Problems with New Automation Technology

Founder of Attabotics, Scott Gravelle, shares the idea that formed the business and the experiences that inspired him to build robots

Solving a big problem can start with a small observation. For Scott Gravelle, founder of Attabotics, his idea to build robots started with ants, and observing how they seamlessly build colonies together.

Big companies like Amazon also rely on coordinated and seamless productivity to ensure smooth fulfillment, and they’re turning to automation technology. Yet, other large retailers and newer, smaller e-commerce businesses who don’t have the internal resources to access this kind of technology are having a tough time keeping up. Ahead of the 2019 holiday season, Nordstrom shared that it knew of these challenges, and partnered with Attabotics to improve and speed up fulfilment — keeping its customers and gift recipients happy.

Founded by Scott in Canada, Attabotics creates automation technology to improve storage, retrieval, and fulfillment in large warehouses like Nordstrom’s. We spoke with Scott on the idea that sparked the launch of his company and the entrepreneurial spirit that lit the way.

How did you get the idea for Attabotics?

The very first thought to enter my brain was, “What would be ideal for a robot but not for a person?” Humans are often put to work in spaces that aren’t always optimized for them. But I know machines can be built around these human constraints, while incorporating ergonomics into the human roles. For example, if robots are retrieving and storing products, warehouses wouldn’t need to have row and aisle constraints for humans and products can be stored in compact storage spaces.

I also observed ants! The way they build colonies is fast, efficient, and seamless, and I knew there had to be a way to build something that could do the same for warehouse fulfillment. I played a lot with geometry and modeling in CAD, and I spent two years validating the technology before raising funds to grow a team and turn this idea into a reality. And now… it’s real.

I imagine a future where anybody can use this kind of tech, whether as a purchase for their own business or as a service model to give retailers a cost advantage. Along with the operations and business benefits, it has the power to lower the carbon footprint, between cargo, cardboard boxes, and transportation. I see a future where we can move jobs back into our cities. With this kind of technology, we can create smaller facilities, create jobs closer to public transportation, and be in the communities where the goods are being purchased.

How did your journey as an entrepreneur begin?

I didn’t think it was possible to be an entrepreneur until I was 30. I grew up in a blue collar, middle class family, and the surrounding community didn’t have high expectations for my career. People expected that I’d work with my hands and become a skilled tradesperson, so I followed that path and built cabinets and remodeled kitchens for years. But while I was on the job, my brain was always buzzing with ideas. I had a passion to solve problems and could barely focus on my work because of what was going on in my brain. It made me a horrible employee.

I often tried sharing my ideas with people, but few people thought they were good. They were frequently shut down. Yet, the same curiosity that made me a bad employee (and probably an annoying friend) is what made me an ambitious entrepreneur. I hustled my way into entrepreneurship and started my first business with my small savings and lots of blood, sweat, and tears.

Years later, when I first started thinking about the idea for Attabotics, I remembered how I felt earlier in life and wanted to make sure my work environment was different. We’re not just building robots — we’re creating the space I wish I had when I was younger, too. Everyone has a voice, everyone is encouraged to share their ideas, and passion is welcome.

What’s the biggest lessons you’ve learned as an entrepreneur?

Entrepreneurs need to pick partners carefully so you’re not stuck with people who aren’t aligned. If each person is following a different North Star, no one ever gets to where they want to go. When picking long-term partners, like a co-founder, pick thoughtfully and take your time.

Also, I’ve heard a lot of assumptions within the entrepreneurial community that investors want founders to have all the answers. It’s not true. When you have questions or concerns, you should feel comfortable reaching out to them for help. Make sure the people on your investment team are the people you want to spend time with and trust to reach out to.

How did you choose your investors?

For any founder-investor relationship, it’s important to make sure both are aligned on objectives and goals. If you have to pivot because the investor doesn’t have confidence in what you’re doing, it likely means you have selected the wrong investor. You want someone who wants to build a mutual trust that allows for complete transparency and honesty. It’s the only way the relationship works.

In my journey, I knew I wanted to find like-minded people who share my vision for the future of work and want to work to solve the biggest problems. The venture world is full of people with money to deploy, but I look for synergy to help with things like technology and speed to market. I knew I found the right investor-partner in Rick Prostko when I hugged him after a board meeting. He’s genuine, supportive, and offers a wealth of knowledge–all qualities that are so important to me through this journey.

Rick Prostko, Managing Director at Comcast Ventures (left) with Scott (right)

What’s a productivity hack you’d share with new entrepreneurs?

When building a new company, it’s a race against the clock, but I believe that taking time to research and engage is powerful. I never like to make a rushed decision unless I have a good understanding. This differs from analysis paralysis. If you know and understand the problem you’re working to solve and believe the solution is right, it gives you more conviction to push forward.

The last thing is, so many people tell new entrepreneurs to fake it until they make it. I disagree. If you work with smart people–smarter than you–they’ll always know that you’re faking it. It’s not worth it. Be real, so people know how to help you.

In our Founder Spotlight series, entrepreneurs from our portfolio companies share insights about the problems they’re working to solve, tips on how to build new companies, and valuable advice to new entrepreneurs.

Attabotics is Fixing Old Supply Chain Problems with New Automation Technology was originally published in The Forecast on Medium, where people are continuing the conversation by highlighting and responding to this story.

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