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Mars' coffee rejection. Grocery robots. High-protein Cheetos. 
CB Insights celebration

Shop like you stole it

Hi there, 

Amazon grabbed headlines recently with rumors of plans to open up to 3,000 human-free Amazon Go stores by 2021. Today it has 4. 

But these aren't even the most ambitions plans for unmanned retail out there. 

In Japan, leading drugstore supply company Paltac partnered with SF-based startup Standard Cognition to open 3,000 human-free stores by 2020. 

In China, startup Bingobox already operates over 300 automated convenience stores, and recently signed contracts with 7 city governments to keep expanding. 



Over 150 other startups are already working on human-free retail around the world. (CB Insights clients can see the full list here). They've raised $1.3B in total, with 68% of deals taking place in China. 

What's going on? 

Human-free retail isn't a new idea; some date it to ancient Greece, where texts describe a coin-operated machine dispensing holy water in temples. 

Since then, the history of retail automation is one of slow fits and starts. 

  • 1880s: The modern vending machine is invented in England.
  • 1916: Piggly Wiggly debuts in Memphis, TN as the first self-service grocery store. Instead of handing shopping lists to a clerk who'd assemble the order, Piggly Wiggly stocked products on shelves and let shoppers browse and fill shopping carts themselves for the first time. 
  • 1984: The self-checkout till is invented. 
  • Early 2010s: Apple, Walmart, Stop & Shop, and several others begin to launch self-checkout programs that let shoppers scan barcodes themselves by phone and pay through mobile apps. 
  • 2016: Fashion retailer Rebecca Minkoff launches a self-checkout system using RFID anti-theft tags that automatically unlock after payment. The system failed to catch on and startup Queuehop, which had powered the system, now seems to be defunct. 
  • January 3, 2018: Chinese e-commerce platform JD.com opens the world's first human-free convenience store to the public
  • January 22, 2018: Amazon Go opens to the public


Great name, great 1916 business model

What's different this time? 

This time, we have machine vision. 

Amazon Go, JD.com, Standard Cognition, Bingobox, Zippin, and others all use AI-powered cameras to track shoppers and products through the store.

Compared to other recent mobile methods, machine vision promises:

  • A better experience for shoppers. The rise of mobile phones drove the early 2010s' push into cashier-free retail, but it required shoppers to learn a new habit — scanning products themselves. Self-checkout tills have the same issue. Machine vision platforms, on the other hand, promise shoppers they can simply walk out with products. 
     
  • Lower costs for retailers. The cost of retrofitting existing stores is still high, of course. But installing cameras once may be cheaper than continuously tagging every product with RFID or IoT tags to track them, as certain models have required. 
Many startups still use mobile apps for human-free retail, but it's machine vision that will likely support the model at scale.

And beyond machine vision, the next step is facial recognition.

Already prevalent in China, facial recognition lets cameras visually match in-store shoppers to their digital wallets and online profiles. 

Amazon Go and other US players say they don't use facial recognition (yet). Shoppers still have to scan their phones at some point in order for the system to link their digital and physical identities. It remains to be seen whether US shoppers' desire for privacy outweighs this small extra burden. 

What to watch: 

Of course, taking cashiers out of the equation has major implications for shoppers and workers

For CPG brands and retailers, it brings new opportunities including: 

  • Setting up sales channels in new places. With the decline of centralized shopping locations (and mall vacancies at a 7-year high) companies need to go to the shopper. Cashless kiosks and unmanned storefronts can bring points of sale to sidewalks (CafeX), gyms (Vengo), cars (Cargo), and more. 
     
  • Turning offices into points of sale. Offices get a special call-out as they're a focus for a number of unmanned snack bar startups, including Byte Foods in the US and Xing Bian Li and Xiao E Weidian in China. We covered the office sales trend more fully here
     
  • Improved online and offline marketing. By using mobile wallets in physical stores, cashless and unmanned retail merges shoppers' online and offline identities, helping companies form fuller pictures of their behavior. Also, human-free retail tracks shoppers continuously through stores and gathers new data about how people react to shelf displays, store layouts, and more. 
     
  • Localized support for delivery. As Curbed wisely put it, for Amazon Go, "opening 3,000 stores may not be as important as opening 3,000 last-mile distribution centers." We know based on Amazon's patents that setting up networks of small urban warehouses is a high priority, and Chinese startups like Xiaomai already use unmanned stores to support 30-minute delivery. 
     
  • More in-store automation. While we wait for human-free checkout to spread, expect major retailers to take intermediate steps by investing more heavily in in-store automation. We've seen recent roll-outs of in-store robots like Bossa Nova at Walmart to monitor and restock inventory. But, robots may be overkill compared to a newer trend: in-store conveyor belts. Alibaba's cashless grocery stores use them to help shoppers and pick up products to fulfill online orders, and just today, CB Insights picked up a new patent showing Walmart's considering a similar system. 



This type of in-store automation could even pick up products for store visitors. 

Just yesterday, Takeoff Technologies (covered in more depth for clients here) launched such a model.

Shoppers will order groceries via mobile app, and robots will prepare them in small fulfillment centers, then hand them off to shoppers when they drive up. Israeli startup Commonsense Robotics follows a similar strategy. 

Was picking out our own groceries a hundred-year aberration, from Piggly Wiggly to today?

Maybe we'll return to the pre-1916 model of picking up pre-filled orders after all. 

Stay hungry,

Zoe
@Zoe_Leavitt


P.S. My colleague Natan Reddy (@natan_reddy) will be diving into more retail tech trends in an online briefing next week; save your spot here

Deal of the week

Coffee maker Lavazza is acquiring Mars' coffee business for an estimated $650M. The deal also includes units in coffee vending and office coffee delivery. 



The deal calls attention to the wild momentum in coffee investment and M&A we've seen this year. 

Coffee startups are on track to raise over $1B in 2018, while Nestle just paid $7.15B to sell Starbucks products outside the US, and Coca-Cola acquired Costa Coffee for $5.1B.

Mainly, CPG leaders are spending big to boost their coffee businesses — shifting resources toward coffee and de-emphasizing less healthy products. 

Mars appears to have made the opposite decision. 

CB Insights Hits
 

Amidst The Retail Apocalypse, Target, Nike, & Adidas Are Using These Local Strategies To Bring Customers In The Door

From snack aisles for co-eds to city-specific running shoes, retailers are fine-tuning their product offerings to meet the needs of their local communities. Read more.
 

[Client Only] These Brands Are Bringing The Athleisure Trend To Work

"Workleisure" is gaining popularity. These brands are emphasizing technical fabrics, versatility, and durability in everyday garments. Check them out.
 

[Client Only] High-Protein Cheetos? Patents Show Food Giants’ Snacking Plans

Protein is hot, and recent patent applications hint at ways food leaders hope to harness the trend to grow their snacking businesses. Learn more.

CPG News & Views

Notable deals

Another coffee deal. Dutch Bros, the largest drive-through coffee chain in the US with 300+ locations, sold a minority stake to PE firm TSG Consumer Partners. 
Restaurant Business Online

Walmart's VR buddy. Virtual reality startup STRIVR raised $16M, bringing total funding to $18M. STRIVR designs employee training programs in VR for companies, and recently partnered with Walmart to train over 1M store associates. 
Business Wire




Walmart's plus-size bet. Walmart acquired Eloquii, a D2C plus-size clothing brand, for an estimated $100M. The deal follows its other recent apparel acquisitions of ModCloth, Bonobos, Moosejaw, and ShoeBuy, 
TechCrunch

JAB's empire expands. The growing world of JAB, which we mentioned last week, made another acquisition. Keurig Dr Pepper acquired water and energy drink brand CORE for $525M. The deal highlights a focus on healthy beverages. 
PR Newswire




Text for pizza. Braze, a mobile engagement and personalized marketing platform for brands, raised $80M at an $850M valuation. Braze works with Gap, KFC, Urban Outfitters, Domino's, and other clients, and supports 1.5B customer engagements per month. 
MarTech Advisor

Everything is new again. Re:Store, which is billing itself as a combination co-working space and product showcase for startup retail brands, raised $1.7M. Brands can pay Re:Store for co-working space and for shelf space to show their products to shoppers...kind of like a department store. 
Fortune

Don't mess up date night. The Infatuation, a network of restaurant review sites, raised $30M from consumer technology company WndrCo. Earlier this year, The Infatuation acquired restaurant review brand Zagat from Google. 
Fortune




Fewer cows. Meatable, a Dutch startup working on lab-grown meat, emerged from stealth mode and announced a $3.5M fundraise. The startup hopes to commercialize its products by 2021. 
Food Navigator

Disrupting Clorox. While The Honest Company took off several years ago (and has struggled since), home care hasn't been a popular area for startups. However, this week saw 2 news items in the vertical: Frey, which sells biodegradable, natural cleaning products, raised $2.4M in seed funding; and Society, a members-only, D2C brand of natural cleaning products, went live
FinSMEs and Fast Company




Grocery tech. Shelf Engine, which promises predictive inventory management for grocers, raised $4.3M. The startup works with over 250 retailers so far. 
Geek Wire

Quite a cup. Vadham Teas, an India-based tea e-commerce platform, raised a $2.5M Series B and plans to expand into the US. 
Cyberinject

The power of maps. Foursquare, which launched nearly 10 years ago as a location-based social network, raised a $33M Series F and continues its pivot toward B2B. Today, Foursquare offers location-based data analytics to 120K+ companies, and its services include helping retailers trace the brick-and-mortar impact of digital marketing. Retail-focused investor Simon Ventures led the round. 
Venturebeat

Internet of crops. Agtech startup Centaur Analytics, which uses IoT to monitor the produce supply chain and reduce waste, raised a $3M seed round. Centaur already works with clients in 12 countries. 
AgFunder News




Recent news & perspectives

Billion dollar brand. Clean skincare startup Drunk Elephant is on track to cross $100M in sales this year, putting it in league with other beauty companies that have attracted $1B+ acquisition price tags. CB Insights clients can read more about the clean beauty trend here
Business of Fashion

Picking up koji. Wild Earth, which makes vegan pet food using the koji fungus, hit markets this week. Wild Earth ultimately plans to move into lab-grown meat. 
Business Insider

From cells to shots. Biotech startup Endless West (formerly Ava Winery) debuted its first lab-synthesized whiskey. The startup initially aimed to replicate rare and expensive wines in the lab, creating replicas that are identical on a molecular level to high-end wines from specific vineyards and vintages. Now, it's moved on to whiskey. 
WSJ

You look like a fun...gi. Mushroom tech startup Ecovative launched a new initiative to support lab-grown meat development. Ecovative, which has so far focused on environmentally-friendly, fungi-based packaging, now hopes to use mushroom cells as "scaffolding" on which to grow meat cells.
Business Insider




Still hungry. Atop its recent acquisition of Pirate Brands (which we discussed here), Hershey's is seeking more snack brands to acquire. 
Food Dive

Sob. The retail apocalypse isn't over yet. Mall vacancies continue to climb, hitting 9.1% this quarter, the highest since Q3'11. Lower-end malls have been the hardest hit. 
WSJ 
And one more thing... 

The World of Wearable Art competition just kicked off in New Zealand, and the photos are really something. 

See more from The Atlantic

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