Amazon Go’s rival bulks up to become a bigger threat

Retail technology provider Standard Cognition is putting its quick-rising valuation to work to stockpile tools as the checkout-free market enters a more competitive phase.

The San Francisco-based startup has made acquisitions to fuel its fight on two fronts—one against Amazon Go, the most well-known brand in the race, and another against the myriad startups that are nipping at its heels.

Standard Cognition recently acquired DeepMagic, a New York-based startup that builds computer vision technology, for an undisclosed sum. DeepMagic's technology allows consumers to use a payment card to access small retail locations, generally a kiosk at a mall, then have their purchases automatically charged to that card.

John Novak

The guts of DeepMagic's model is a mix of cameras, the internet of things and AI that recognizes items for purchase, and also processes video streams from those cameras.

Those elements are a key part of unattended retail and checkout-free payments, since the video stream can glean valuable information that pairs payments to marketing and business management—enabling traditional stores to mimic the mix of buying preferences and digital shopping that Amazon provides.

Concept stores and pilots have dominated checkout-free deployments, which will need to demonstrate real-world results to gain traction. Retailers also face more general pressure to bury payment execution as part of a broader experience that includes data-driven shopping and marketing. Data and AI can play a role in that.

“Think of computer vision as computers that can see and then translate what they see into action,” said Michael Suswal, co-founder and COO of Standard Cognition. “In this case, cameras can see individuals and items they may pick up in a store, and accurately identify who has what.”

Standard Cognition will incorporate DeepMagic’s technology into its own stack. Since most initial checkout-free stores have been relatively small, the progression is to build systems that can recognize a broader range of items in larger store footprints.

“Computer vision is essential for true autonomous checkout, where no one has to scan anything or stop to check out,” Suswal said. “Computer vision also removes the need for shelf sensors and turnstiles, which put big limitations on how retailers can lay out their stores, and also prevent them from making changes to their layout or how merchandise is displayed.”

For Standard Cognition, DeepMagic follows an earlier acquisition of Explorer.ai, which builds robotic mapping software and has experience deploying technology in autonomous vehicles. In-car technology seems far from brick and mortar retail, though the intersection between the two is possible in the long-term, give the use case of mobile ordering that’s often cited as part of automotive innovation. Other technology such as augmented reality can also potentially benefit checkout-free payments.

“At this point, Standard is completely focused on autonomous checkout. It’s likely that we’ll expand into other retail innovations over the long term,” Suswal said, adding the DeepMagic acquisition helps Standard Cognition augment its intellectual property portfolio. Patent battles aren’t a major part of the checkout-free market now, though it’s a possibility as the technology matures.

Standard Cognition’s acquisitions have been fueled by investment. The company recently passed $500 million in valuation, or halfway to unicorn status, demonstrating the attractiveness of checkout-free technology. Amazon Go has caused much of that buzz, but so has the ability of the technology to support other retail innovation.

Some larger deployments have started, including at supermarkets and sports facilities. Standard Cognition is involved in a rivalry in that vertical, as Zippin is providing the technology behind the Sacramento Kings checkout-free deployment, while Standard Cognition is outfitting the Red Sox’s new minor league ballpark in Worcester, Mass.

In an email, Charles Steinberg, the president of the Worcester Red Sox, said the Red Sox parent organization would monitor the deployment for a possible deployment at Fenway Park.

Both Zippin and Standard Cognition are in a market that includes AiFi, Grabango and more traditional Silicon Valley companies that are building AI technology that could be applied to retail or self-checkout, like IBM and Microsoft.

“2020 will be a breakout year for autonomous checkout as these developers will be competing for market share and making it more cost feasible for autonomous checkout in larger store settings as well as standalone venues such as airports and office buildings,” said Ray Pucci, managing director of merchant services at Mercator, adding the keys to increased retailer adoption are installation costs and store size. “We are now seeing more developers rolling out autonomous checkout systems for retailers, and that should start to see the price of technology come down.”