Sun, Jan 27, 2019 page15

• Amazon Go, one year on, attracts host of cashierless imitators

  Several start-ups are competing to seize a piece of what is likely to become a lucrative market as grocery stores look for ways to eliminate long lines without having to install costly and complicated gadgets

  • By Matt Day and Spencer Soper
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  Mighty AI Inc spent much of its first five years building software that helps self-driving cars recognize real-world objects. The Seattle start-up went so far as to open a Detroit office to cozy up to the US auto industry.

  Then in February last year, Mighty AI’s sales team received an unusual request: Instead of identifying pedestrians and cars, could they track items plucked from store shelves by shoppers?

  A few months later, Mighty AI signed a deal to do just that, joining the race to help brick-and-mortar retailers keep pace with Amazon.com Inc.

  

  A woman pushes a Caper Inc smart shopping cart at a Foodcellar & Co grocery store in the Long Island City neighborhood in Queens, New York, on Saturday last week.

  Photo: Bloomberg

  A year ago, the e-commerce giant opened a cashierless convenience store called Amazon Go, marking its biggest effort yet to change the way people shop in the physical world.

  Today, a fleet of companies are working to replicate elements of Go or invent other ways of streamlining store operations.

  Many are start-ups like Mighty AI, but established giants are wading in, too. Walmart Inc has been testing Go-style technology, and Kroger Co and Microsoft Corp have announced a joint venture to bring elements of the e-commerce shopping experience to the grocery store.

  Amazon Go showed “how far you can go,” Mighty AI chief executive Daryn Nakhuda said.

  Very quickly, the state-of-the-art went from you-scan checkout technology to Amazon’s “just walk out” approach and everything in between, he said.

  Amazon, which operates nine Go stores in three US cities, has announced no plans to sell the proprietary technology to other retailers.

  Even if the Seattle leviathan did offer to license the system, fierce competition with other retailers would probably preclude most partnerships.

  “What we are seeing is Silicon Valley at large, venture capital at large, trying to come up with some solutions” to sell to retailers, said Steve Sarracino, founder of Activant Capital, a Greenwich, Connecticut, investment firm that has stakes in retail technology start-ups.

  “There will be a huge market” for other technology firms to capitalize on, he said.

  That was on display at the National Retail Foundation’s trade show in New York last week, where one such hopeful showed off a blue shipping-container-sized experiment called the NanoStore.

  Built by AiFi, a Santa Clara, California, start-up, the 15m2 store’s limited inventory put it somewhere between a vending machine and small convenience store.

  Like Amazon Go, it was packed with cameras and shelf sensors that track customers as they browse and pick up items. On the way out, shoppers tap an app or swipe a credit card to pay.

  AiFi chief executive officer Steve Gu said his company is following a similar technological route as Amazon, but favors more automation.

  While Go is staffed by clerks stocking shelves and assisting customers, AiFi’s prototype is designed to be completely autonomous in its day-to-day operation.

  Last week, AiFi said Carrefour SA, the French retail giant, and Zabka Polska sp. z o.o, a Polish convenience store operator, had committed to testing the technology.

  AiFi has plenty of competition in the effort to eliminate checkout lines. During a four-week stretch beginning in August last year, three different start-ups opened pilot cashierless stores in the San Francisco Bay Area.

  One was Standard Cognition Corp, whose inquiry started Mighty AI’s shift to working with retail technology companies.

  “This technology was coming regardless” of Amazon’s moves, Standard Cognition cofounder Michael Suswal said.

  “However, Amazon gave the space validity and forced competitors to look for a way to compete.” Investors have also taken interest, he said.

  Venture capital firms last year backed US companies working on store automation with US$111 million, a record in Pitchbook data going back to 2003. About half of that sum went to Standard Cognition.

  The technology behind such pilots is largely unproven.

  AiFi last year said it would unveil a pilot project at a full-sized grocery store belonging to an unnamed retailer before the end of last year.

  However, the calendar flipped without any such launch.

  A spokeswoman said the system was not ready and that confidentiality agreements prevent the company from discussing the matter further.

  Amazon’s own well-funded research-and-development operation missed its announced deadline for opening the first Go store to the public in Seattle.

  The company spent more than a year tinkering with the technology during an employee trial.

  “Whether or not these pilots turn into full-scale rollouts in the near-term is unclear,” Scott Jacobson, a managing director with Madrona Venture Group in Seattle, said of Go’s imitators. “Too soon to say.”

  Others are taking a different approach, aiming to offer customers a bit of high-tech convenience without the expense of shutting down the store for a retrofit to install cameras and sensors.

  Lindon Gao started experimenting with retail technology after getting frustrated with long lines in apparel stores on Black Friday.

  His first effort, in 2016, let shoppers use a code on their smartphones to remove anti-theft tags on clothing and simultaneously pay for the item so they did not have to see a cashier.

  Retailers balked at the idea since it required a big investment of time and money tagging inventory with new devices.

  He shifted his attention to supermarkets, combing grocery stores in New York to ask owners and managers what they wanted in a new system. The prevailing answer was something simple they could use in existing stores without spending a lot of money to knock holes in walls, run wires and install expensive devices.

  So he reinvented the shopping cart by adding a scanner and payment system. The cart built by Caper Inc, the start-up he cofounded, looks like a shopping cart with a laptop and credit card reader mounted to it.

  Shoppers scan barcodes as they fill their carts, which also has a scale for produce and other items sold by weight.

  The cart gets smarter with use thanks to cameras that shoot pictures after each item is scanned, Gao said.

  The plan is that ultimately it will recognize items placed in the cart without scanning.

  He has been showcasing the cart at trade shows, and said he has received interest from grocers looking to bring their stores into the digital age.

  “The Amazon Go rollout and the Whole Foods acquisition made people think they really have to innovate and if they don’t innovate they’ll get left behind,” Gao said.

  Foodcellar & Co, an all-natural grocer in Queens, New York, has been using Caper smartcarts for about a year at its Long Island City store.

  Customers love the technology and some even take selfies with them, store cofounder Metin Mangut said.

  The carts appealed to him since he did not have to install cameras and sensors. If one breaks, he can just get a new cart. The screens direct shoppers to products they want and flash alerts when they are close to items on sale, which helps encourage customers to spend more.

  He is still negotiating the price since he was in a trial, but said the carts are worth it to eliminate lines and free up cashiers to help shoppers.

  “A frictionless experience is part of the future,” he said. “It will be a hybrid. Some people like the interaction. Some people don’t want to deal with anyone and just get what they want and leave.”
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