Checkout-free developers pursue troves of shopper data

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Checkout-free technology is very limited in availability and very much a work in progress, but developers and investors are relying on its promise to accelerate payments' broader evolution from streamlining execution to determining intent.

"I started at Procter & Gamble, and we wanted to know how the consumers' decisions were being made," said Janet Bannister, a partner at Real Ventures, a Toronto technology investor. "Autonomous checkout provides that."

In the age of Uber and Apple Card, knowing why a purchase is made has become much more important than how a transaction happens because that data can inform future marketing and enrollment strategies.

Real Ventures is looking for opportunities in the burgeoning checkout-free VC market because it not only fuels payments innovation, but it also has downstream analytic appeal, according to Bannister. "These checkout-free companies can track at a much more specific level who is going into which store, what time they are picking up an item and can give info about what decisions are being made at the shelf level," Bannister said.

Bannister's career tracks several waves of payments innovation. Bannister served as an executive at eBay as it was expanding in the early 2000s; was the founder of Kijiji, a popular Canadian e-commerce website; and more recently has been an early-stage fintech investor who has gotten the jump on current trends such as installment credit and alternative payrolls for the gig economy.

Real recently made an investment in Vantage, a Toronto firm that uses AI to analyze a consumer's interactions while shopping to anticipate loyalty marketing and other consumer engagement.

The advent of checkout-free technology gives the model of firms such as Vantage a boost since the underlying systems produce an extra layer of intelligence to work with, creating a broader economy that includes the checkout-free companies, the merchants and other marketing startups that can take advantage of the extra data.

"Cashierless technology will become more and more prominent and will initially be a value-add differentiator for merchants and will later become a technology that is expected by consumers and that large merchants will need to deploy in order to be competitive," Bannister said.

The cameras and other sensors do more than ring up a sale. They produce data around intent, Bannister said, adding more context to shopping analysis than has been available in the past.

Behavior analysis has long informed security and marketing, but a real-time video record of in-store shopping allows brick-and-mortar retail to catch up with online shopping by having more information about precisely how people shop.

"Do they walk up and grab materials off the shelf? Do they look at the items? Do they read nutritional information on cereal?" Bannister said. "A retailer can use [checkout-free] technology to spend marketing budgets based on this level of information."

Checkout-free technology has been gradually taking hold, with Amazon Go getting most of the media's attention. But Amazon's example is helping to spark other deployments, such as Giant Eagle's supermarket chain in the U.S. and Sainsbury's in the U.K., while there's a growing market of technology developers.

There are lingering challenges. Amazon is still trying to properly scale its Go stores, and the technology appears to be a better fit for grocery than other retail categories.

There's also the expense of deployment.

"While cashierless technology may result in cost savings for retailers, initially it will involve a significant cash outlay and systems upgrade," Bannister said. "This is another technology that — at some point — they will need to invest in just to remain competitive. And while the technology will reduce costs and improve merchandising and marketing, it will initially require a significant cash-outlay with the efficiencies being realized over a longer time period."

But these long term benefits include optimizing store layout, personalizing offerings and increase marketing effectiveness, Bannister said.

This gives a way to sell around the upgrades that are required to adopt checkout-free technology, or the fact that the technology is still early stage and not deployed at scale.

"For the first time, in a brick and mortar store, we can provide detailed information to give retailers the ability to market to their customer better via store layout, targeted promotional offers, as well as improve the overall customer journey in-store in a cost-effective manner," said Krishna Motokuri, CEO and co-founder of Zippin, a San Francisco-based checkout-free technology developer.

One of the benefits that Standard Cognition, another San Francisco-based checkout-free developer, offers is the ability of checkout-free technology to measure impulse buys and in-store promotions. These strategies can now marry real-time visual data with payments tracking, and inform a response to how stores sell to people who are in line.

"If people aren't waiting in line, how do stores approach them," said Michael Suswal, co-founder of Standard Cognition. "We know people buy batteries, for example, when in a checkout line. Having a picture of how people shop can help determine how to sell items like that, or how to deploy promotions in stores."

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Venture capital Venture funding Fintech Retailers Point-of-sale Digital payments Online payments