Automated-checkout startups aim to revamp retail
Cameras, AI automatically recognize shoppers’ choices, charge them when they walk out
Grocery store chains are turning to startups to revamp their stores using artificial intelligence to automate the checkout process as they face thinning margins and competition from new stores from Amazon.com Inc.
Venture capitalists, recognizing this new technology — fueled by cheaper cameras and powerful machine learning technology — have invested $21 million so far this year in three early-stage startups, according to the companies Another startup is venturebacked but hasn’t disclosed its funding.
“Investors are excited about checkout intelligence as they see a world in which offline transactions match or exceed the seamless nature of their online counterparts,” said Avidan Ross, managing partner at Root Ventures, which invested in Mashgin, one such startup. “The way Uber and Lyft made the taxi payment process touchless, the future of offline commerce must include the same grab-and-go feeling.”
There’s ample opportunity to reshape the U.S. grocery industry, which had sales of $648 billion in 2016, according to the U.S. Department of Agriculture. To protect that market, the top grocery chains-led by Walmart, Kroger and Albertson’s-seem ripe for technological change.
“There’s a need for adoption of good technology solutions given the labor situation,” said Bob Goldin, an analyst with Pentallect. “Margins in the grocery
business are so slim. Costs are certainly rising. They’ve got to really look for efficiencies.”
These auto-checkout systems, which are a more advanced version of self-checkout already seen in places like CVS or Walmart, use cameras and artificial intelligence to automatically recognize what consumers pick up on a store shelf and charge them when they walk out. Startups developing these systems promise they will help grocery chains cut costs, ramp up sales, give consumers more convenience, and provide a wealth of data to owners of consumer brands.
There are various auto-checkout approaches. Standard Cognition Corp. uses cameras in the store ceiling, and shoppers can
just walk out and be charged, or pay when they leave at a register that “knows” what they picked up.
Aipoly Inc. also uses cameras in the store to detect what shoppers are picking up. Focal Systems Inc., meanwhile, uses cameras in shopping carts to track what people put in their carts and consumers then pay at a cashier line.
“With faster checkout at hightraffic locations, we increase sales, just because lines disappear. Some of our customers have seen 42% increase in sales because of no lines,” says Abhinai Srivastava, chief executive at Mashgin Inc.
The Mountain View, Calif. startup, backed by Matrix Partners,
Root Ventures, Kleiner Perkins and others, says about 50 of its self-service kiosks are in food-service establishments like cafeterias, where the devices scan a plate of food, recognize the food, and charge customers the correct amount. Its customers include food service giant Aramark.
When the first Amazon Go store opened in Seattle in January, people lined up to try out the newfangled store. The lines are mostly gone but it’s still popular with curious shoppers, who often take selfie pictures in the store. The company plans to open additional stores.
Standard Cognition, backed by $11.2 million from CRV, Initialized and Y Combinator, plans to open its own store to test its technology in its hometown of San Francisco this year. It also recently signed a deal with Paltac Corp., a large supplier to drugstores in Japan. The company intends to test in one store there in early 2019, and eventually run in 3,000 stores in time for the 2020 Tokyo Olympics.
Yet these upstarts will have to navigate thorny issues such as the public’s growing concerns about privacy and job losses as human cashiers are replaced.
Integrating new technology with existing grocery stores’ point-of-sales and inventory systems is another challenge. Legacy IT systems are often antiquated and difficult to change, said Francois Chaubard, chief executive of Focal Systems. The Burlingame, Calif.-based company has developed a shopping cart that automatically scans items customers put in the cart and has raised roughly $11 million from Uncork Capital, Zetta Venture Partners and Y Combinator.
With this new technology comes a powerful tool for collecting data craved by consumer companies. Standard Cognition can see, for example, what products customers pick up before finally selecting the one they buy. They can learn what consumers look at on the product, or what display in a store draws shoppers to a particular product.
Such technology could eventually move into other areas like apparel or movie theaters, or coffee bars.
“It’s just a matter of collecting the data ,” Mr. Suswal said.