For Brazilian retailer, going checkout-free may mean building new stores

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Legacy retailers are starting to get serious about checkout-free technology, bringing new insights into the challenges inherent in replacing decades-old traditional checkout layouts at stores.

In some cases, such as Brazil's Lojas Americanas, the best option may be to start from scratch with brand-new stores, without the baggage of old technology or ingrained shopper behavior. Lojas Americanas has made a strategic investment in Zippin, a checkout-free tech provider, and will work with Zippin to develop checkout-free technology for its stores in Brazil.

"In existing stores you have all of these checkout counters that are already there. In a new store you're starting from a blank slate," said Zippin’s co-founder and CEO, Krishna Motukuri.

The first store — Zippin's first real-world deployment beyond its own lab-style concept store in San Francisco — opened in Rio de Janeiro, with a new store expected to open soon in Sao Paulo.
The initial stores are new Ame Go stores, which vary in size from 250 to 3,000 square feet, and will be in mostly urban centers with high traffic and a "captive" consumer base, meaning they'll have a steady flow of people from nearby financial office and housing complexes.

There's a mix of new stores, retrofitting existing stores, and an Ame Box checkout-free store-within-a-store concept.

"From a technology standpoint there's really no difference," Motukuri said, adding retrofitting existing stores maintains elements of the older model.

While each retrofit has some differences, there's still the work of managing how consumer traffic flow will change as the system of manual or self-checkout is replaced with a mobile experience.

"The main difference is in the customer experience," Motukuri said. "In a 'new' store the consumer is checking in at the entrance and grabbing what they want, and there's no place to checkout, so they're just walking out of the store."

Zippin, whose founders include former Amazon and SRI staffers who worked in retail technology and artificial intelligence, opened its first concept store in San Francisco about a year ago, a 180-square-foot location that uses AI and sensor fusion technology to replace checkout and self-scanners. Zippin uses overhead cameras and shelf sensors to identify items and track purchases, which are then charged to a shopper's mobile app or another payment method of the retailer's choosing.

It's one of several companies that are pursuing checkout-free technology, attracted to the data that the model can yield. Standard Cognition, another San Francisco-based company, has been raising venture capital and making investments of its own, buying robotic mapping company Explorer.ai. A Berkeley, Calif.-based startup Grabango has deployed its checkout-free technology at Giant Eagle, a Pittsburgh-area grocery chain.

And all of these companies are operating in competition with Amazon, which has opened about a dozen Amazon Go stores with ambitions to open thousands more. Walmart is also experimenting with alternatives to traditional checkout, and Shell and IBM have also run tests on checkout-free technology.

The concept received more attention when Standard Cognition recently received a new funding round that brought its valuation to more than $500 million.

Checkout-free technology is attractive to investors and retailers because it provides a video record of shopping and payments, creating vast potential for incentive marketing, since retailers can see how shoppers are interacting with items. The video also provides another way to provide security from payment fraud.

But so far, the technology's very limited. Amazon has introduced intentional mistakes to train checkout-free systems to respond to conditions inside a store, such as different natural lighting or unanticipated delays due to consumer movements. Checkout-free stores have also been challenged in handling large crowds and larger store sizes.

Most of the deployments thus far have been in small-scale supermarkets or convenience stores.

The Giant Eagle deployment is starting with smaller stores, though it does plan to add larger footprint stores in the future; and Amazon is reportedly ready to open a 10,000-square-foot version of Amazon Go, which would be large enough for a supermarket and fulfillment center.

Lojas, which has a variety of store sizes from convenience store to full-scale supermarkets in its 1,500-location chain, did not comment for this story. Zippin's technology is designed to retrofit existing stores and work in larger stores and non-grocery categories, though Lojas is starting with smaller new stores first. "We are working with them on the methodology to launch the same technology in larger stores," Motukuri said, adding the upfront hardware investment for larger deployments is proportional to the store's size.

The challenges are less about the technology than the merchandising, Motukuri said. "The way these items are displayed will have to evolve."

While checkout-free technology may deploy easier in new stores, it's still vital that the technology can be workable in existing stores, according to Alastair Mitchell, a partner at EQT Ventures, a European VC firm that has invested in Standard Cognition.

"It is absolutely critical that the technology can be retrofitted, since only a tiny percentage of a retailers' estate is new build versus existing stores at any one time," Mitchell said, adding it's particularly true in larger-format grocery stores. "And margins are too thin to have to build new stores or 'stores within a store.' "

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