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Step into a branch of Itsu, the Asian quick-service restaurant chain, and one is faced by a bank of self-service kiosks. Customers enter their orders into the brightly lit screens and pay, before bagging their sushi and bento boxes or picking up the noodles or rice bowls from the kitchen counter.
This parade of cutting-edge service automation will soon be amended. “I think we have embraced technology too quickly,” Julian Metcalfe, Itsu’s founder, tells me. Itsu has had only one staffed till in each of its 83 outlets, along with self-service kiosks. The chain is now adding back two more staffed tills as part of his plans for expansion.
It is a counter-intuitive decision, given the line of retailers and hospitality chains announcing that they will automate more. The increasing UK cost of labour, pushed up by rises in the minimum wage and employer national insurance contributions set out by chancellor Rachel Reeves in her October Budget, is prompting change.
J Sainsbury is cutting 3,000 jobs, partly by closing 61 cafés in its supermarkets. Clothing retailers such as Next are starting trials of self-service checkouts in stores, having lagged behind supermarkets. The retail sector has shed 225,000 jobs in five years and the British Retail Consortium says the £5bn cost to the sector of the changes to minimum wages and NI contributions will accelerate the shakeout.
Metcalfe’s change of heart is significant for what it says about the difficulties as well as the opportunities of automation. He is a pioneer of using technology to cut costs, with not only self-service tills but three sushi-preparing robots in each Itsu kitchen. He also describes the restaurant industry as “staggeringly inefficient” in the way it is organised and its use of working time.
“If labour is getting more expensive, that is probably a good thing,” he reflects. He believes in automation behind the scenes: “If a machine can peel potatoes faster than three people, then get it.” But while self-service ordering is second nature to some Gen Z lunchers, many customers still prefer human assistance.
It is hard to blame them. Much front-of-house retail technology requires the customer to make an effort, a tradition that reaches back to shoppers having to put goods in their own baskets when supermarkets were invented. “They are not really automating: they are just making us do the job for them,” says Greg Thwaites, research director of the Resolution Foundation.
Metcalfe is not alone in reconsidering self-service. Wm Morrison, the supermarket chain, has removed some self-checkouts after finding they were cumbersome for shoppers with a lot of items. There is no point in cutting costs if customers buy less or shop elsewhere: one study found that people ordered less from self-service restaurant kiosks if there was a line behind them.
But cost pressures are pushing non-food retailers to follow chains such as Uniqlo in introducing self checkout. Harvir Dhillon, economist at the British Retail Consortium, says that while supermarkets are “reaching the point of diminishing returns” with self service, there is a “big shift” towards the use of in-store technology elsewhere.
There is also less to inhibit investment in technology and replacement of low-wage labour behind the scenes, where customers are not directly affected. That includes kitchen robots at Itsu and greater automation in warehouses and logistics centres for retailers. One effect may be to force a rise in productivity in some low-wage sectors.
Thwaites says it will be tougher for employers to absorb employment cost increases than when a previous Labour government raised employer NI rates in the early 2000s, as the UK economy grew faster. This move will result in a combination of higher prices, raised productivity and a shrinking retail sector, which is “slowly being starved of low-paid workers”.
The burden will be heaviest on small businesses, including shops and cafés, that cannot offset labour cost increases with automation. But, as the quandary facing Itsu shows, even those that employ technology in a sophisticated manner will be faced with difficult choices. Robots can perform some tasks faster than people, without stopping, but they lack the human touch.
“Human beings are immensely sophisticated, so we should treat them well,” Metcalfe says. That is true, but it is more difficult to put into practice in retail and hospitality than industries with better margins and pay (Itsu’s starting rate is £12.75 an hour, including bonus). It will soon be harder still.
