Automating a business involves huge upfront costs, whether it’s a warehouse, a marketing department or a call centre. In the long run, though, it should enable scaling without requiring lots of extra staff. This is known as operational leverage and can often catalyse share price rises.
- Capex could boost margins
- New avenues for growth
- Strong cash flow
- Lots of data to accelerate AI offering
- Richly valued
- Low-margin retail business
- Potential recession headwinds
The problem for lots of businesses nowadays is they need massive scale for this to work. This is partly because robotics are expensive and you need millions, if not billions, in the bank to afford such a project. On top of this, the investment only makes sense once economies of scale kick in. A fully automated warehouse serving one customer would be a massive loss-maker, but if it could serve 100,000 customers it would soon have paid off the initial investment.