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Accelerating 2017: What Amazon Go and McDonald's Trends Really Mean

An ending of a three-year nationwide fight for the $15 minimum wage has become epic — McDonald's announced it will replace employees with machines in all of its 14,000 restaurants nationwide. The restaurant is not only expanding its digital self-service ordering stations but also plans to install expensive industrial robot arms that will roast fries and grill Big Macs with precision and speed but without complaints or strikes.

From restaurants to computer stores, from supermarkets to post offices, they're everywhere. Self-service machines are an increasingly common sight, promising a faster, interesting and more convenient customer experience. Technologies change single-task jobs and leave only experienced employees who can help the customer with individual needs.

The latest breakthroughs will accelerate the automation trend more than ever in 2017. The question of how much it costs to replace workers with robots isn't a question of morals. It's simply economic.

The Basics and Trends

According to the iconic 1965 Moore's Law, the power and speed of electronics double approximately every two years. The more engineers cram onto a chip, the cheaper general electronics become.

While Automation and Robotics work on the same microchips, Moore's law gives an upcoming promise of groundbreaking changes in the retail and customer service industry.

Frank Levy, an MIT professor emeritus of urban economics, sees self-checkout automation as the next wave of technological change in the retail area, the first being barcoding (which improved the volume of work a cashier could handle).

Following a 2013 Oxford study calculation, there is a 93.7% chance that restaurant order-takers will be fully automated compared to a 92.3% chance of the automation of retail sales people. But some breakthroughs still need to be done.

Well... less than two weeks ago, after four years of work, one of Silicon Valley's titans, Amazon, actually made this kind of breakthrough that will push the automation trend in the customer service industry like never before.

Robots and Knowledgeable Employees in Big Retail

Amazon Go is a concept of a 1,800 square foot retail shop. It pushed the boundaries of computer vision and machine learning to create a store where customers could simply take what they want and go. No lines and no cash promise a new shopping experience, not only for trend-hunting hipsters but for average consumers too.

In fact, it's hard to change 3,793,621 U.S. retail establishments into Amazon shops overnight, but robotics have been stepping into this industry for the last decade and surely now they're doing it faster than ever before. Here are some latest examples:

While the self-service check-out system is the most popular robot in today's food retail shops, it has disadvantages too. Retailers Albertsons LLC, Big Y, and IKEA, for instance, have already pulled their self-checkout cashiers due to customer rejections of a slow and uncomfortable buying experience.

Yes, self-checkout can replace cashiers and automate processes, but it is incapable of replacing human customer service.

For example, when we come to clothing shops, we want to hear reliable employees' opinions of whether this color shirt goes with jeans. When we come to a restaurant, we love asking the waiter specific questions about wine or food. Bartenders can suggest their personal mixed cocktails and computer shop consultants give you technological suggestions.

We love to hear interesting stories and knowledgeable opinions on specific questions, and one of the best places to get this live data is in niche retail shops.

While big food retail seeks the best customer experience to drive sales, human customer service will go from technical maintenance to more individual service. From cashiers to consultants, automation will cut technical single-task jobs but will lead to more professional employees.

Thanks to McDonald's and Amazon Go and the super competitive market, this trend has started accelerating more than ever.

Rough Calculation

So, how much does it cost to replace an employee?

Here's the math: a worker being paid $15 an hour costs his employer $38,500 a year. If the average robot costs $35,000, in less than a year that store has paid for it in reduced wages, and eliminates that $15-an-hour cost forever after.

This is a calculation made by McDonald's due to employees' fight for a $15 minimum wage. In the low-cost commodities industry, expensive robots and automation are worthy of installation only if the employees' price is comparably too big.

Since it's worthy to automate single-task processes, robotics will come to retail only in two cases: if robot prices drop or the minimum salary goes up. Both scenarios are increasingly going separately one from another. First—because of Moore's law; second—because of rising minimum wage and living standards.

According to the OECD, United States employees work 1,789 hours per month, while people in Germany work comparably less — 1,371 hours.

The U.S. minimum federal wage is $7.25 (with a White House proposal of $10.1), while Germany has a minimum wage of €8.50 per hour ($9.47). That sums to about $13,000/year minimum salary in U.S. and about $11,600/year in Germany. Well... Some automation is even possible with this low price.

In the case of McDonald's, full automation was worth a cost when the minimum salary grew up to $15/hour. That's because the cost of machinery today isn't expensive at all, even if you calculate its short three-to-five year validity.

A fully interactive self-service order-taking kiosk costs a grand total of $10,540. Self-service checkouts cost from $20,000. And the most efficient industrial Kuka robot arm price starts from $50,000. Suppose, if you are as big as McDonald's and order 44,000 Kuka arms, you might get a decent discount.

In the long run, robots can be much cheaper. The research and development might cost a lot of money in the short term, but once breakthroughs are made, robots cut costs like nothing else. That’s why cheaper and cheaper robots will replace more and more single-task jobs in 2017.

Conclusion

Automation shifts all industries in an exponential rate and it's only a matter of time when it will change our daily life – cooking, home cleaning, or shopping. Robotics as the 4th industry revolution promises unimagined progress and smoother customer experience.

Will we run out of jobs because of technologies? Of course not. Millions of people will lose their robotic single-task jobs but will find new ones, smarter jobs which evolved together with technologies.

Last month's news of Amazon and McDonald’s, ongoing innovations, only lead to a single conclusion— customer service industry will be way more automated in 2017 than ever before.