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Checkout-free Shopping: It’s Bigger Than You Think

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Cashierless checkout won’t merely restructure retail business models: It will disrupt the entire payments industry.

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A few years ago, Amazon made headlines with its Amazon Go stores where shoppers simply retrieve items from shelves and walk out. This process has often been dubbed “cashierless checkout” but would be more accurately described as “checkout-free shopping,” as the checkout process is entirely eliminated.

While most industry analysts predict checkout-free shopping to impact automation, resource allocation, and store structuring, they’re missing the biggest target: payments.

On the horizon

Purchasing goods without having to check out saves customers time and annoyance while allowing retailers to upgrade their operations.

Amazon employs a combination of hardware and vision-based software in its Amazon Go stores. Each item sits atop a weight sensor. When a shopper lifts the item, they trigger the sensor, which assigns the item to that shopper by video. This solution is functional, but prohibitively capital intensive for small retailers.

Other solutions include QR codes, smart shopping carts and RFID tags. Machine vision, however, is most likely to succeed: It’s entirely software-based and leverages cameras, which most retailers already have for security, thereby minimizing any additional investment overhead.

Industry experts tell me current machine-learning algorithms can already assign goods to shoppers as accurately as the average cashier. Objectively, they’re both functional and economically viable, with startups like Inokyo leading the industry.

In every one of these new technological solutions, an app on the customer’s phone connects them to the store when the shopper arrives, automatically taking care of payment in the background.

For merchants of all sizes, checkout-free shopping provides a host of benefits:

  1. An improved customer experience and faster shopping process means more sales volume will flow through the store: Simply removing checkout lines is worth $37.7 billion.
  2. With no need for traditional cashiers, merchants can reallocate those personnel and financial resources elsewhere for greater profit.
  3. Eliminating checkout lines and checkout hardware will permit retailers to use their space more efficiently and display more products.
  4. As cashierless checkout solutions track movement at the item level, retailers can gain robust analytics on item movements, handling and purchasing behavior.
  5. When grabbing an item and walking out is a form of purchase, traditional shoplifting becomes a thing of the past.

Amazon, Albertsons and Sam’s Club are all trialing checkout-free technology across multiple stores. These retail giants can afford their own proprietary solution but most retailers can’t, so expect a white-label solution such as Grabango, Standard Cognition, or TrigoVision to target smaller retailers.

While the promise of convenience and streamlined operations fuels funding for checkout-free technology, replacing existing payment solutions is an even bigger opportunity.

Attacking payments

Today, credit cards are the most popular payment method for retail in the U.S. Payment processors (the companies that create the terminals you use at checkout) like First Data, Revel Systems and Toast charge about 2.3 percent to 2.8 percent and a flat fee (around 10 cents) from the merchant for every credit card transaction. Especially on low ticket items, this cost can severely cut into the retailer’s margins, one reason many small retailers set a minimum purchase size for paying by card.

Fees are structured this way because card networks like Visa and Mastercard take 1.5 percent to 2.5 percent and a flat fee from every transaction. These “interchange fees” are the largest cost component of processing credit and debit cards, with Visa, Mastercard, American Express and Discover controlling the vast majority of the market.

When checkout-free shopping provides brick-and-mortar retailers with a more direct relationship with their customers, they can easily add payments to that relationship, cutting out payment processors and reaping the rewards. New payment methods are intuitively available if consumers never have to pull out their wallet. Direct ACH transfer, for instance, is far closer to feeless, costing less than 1 cent per transaction. Merchants could share this retrieved economic surplus with their customers in the form of lower prices and loyalty programs.

For those customers who would prefer the sort of perks typically offered via credit cards (reward points, cash back, etc.), new direct-to-customer offerings from the merchant will fill the space: When retailers recapture 2.5 percent plus 10 cents per transaction, they have a significant amount of wiggle room to play with.

Diagrams by Charles Yu 

Coming sooner than you think

The payments landscape can shift incredibly fast. For example, in less than five years China went from a market where transactions were made exclusively via credit/debit cards and cash to payment being primarily made via mobile wallets such as Alipay and WeChat. When I traveled to China last year, more than half of the stores in major cities wouldn’t even accept cards.

Source: Walk The Chat, “China’s mobile payment market share: mobile vs. non mobile.”

Today WeChat Pay and AliPay account for 93 percent of China’s mobile payments. To clarify the sheer magnitude of this growth: According to Glenbrook Partners, in 2019 at only five years old, WeChat Pay processed 365 billion transactions, more than double the entire Visa network (at 138.9 billion). Similarly in the U.S., apps like Venmo have already normalized feeless transfers between end users and are now enabling consumers to pay merchants directly via their mobile wallet.

The American brick-and-mortar retail market is worth more than $5.5 trillion. If cashierless checkout companies capture 5 percent of that over the next four years (a conservative estimate given how fast we have seen digital wallet adoption in other countries), they will have access to a $275 billion market. Expect checkout-free shopping to create a huge land grab, prompting a massive shift in the payments landscape.

Looking forward

Credit cards have long dominated U.S. payments. In the last decade, China, Japan and Southeast Asia have all updated their payment modes, leaving Western countries trailing in the payments landscape. When checkout-free shopping provides American retailers a more affordable option to process customer payments, cutting out the middleman is only a step away. As users adopt these new payment methods, will the card networks even survive?

Written by Charles Yu, a principal at Bling Capital, and the founder of his own angel fund. Formerly an LP at TI Platform Management, Yu’s portfolio includes investments in consumer companies including Spotify, Lyft, Airbnb, Zocdoc, Pinterest and Flipkart.

Illustration: Dom Guzman

Gene sequencing firm Illumina plans to buy cancer screening startup Grail in a cash-and-stock deal worth $8 billion.

Y Combinator today released three new lists on Black-, Latinx- and women-founded portfolio companies as a part of its startup directory.

Source: https://news.crunchbase.com/news/checkout-free-shopping-its-bigger-than-you-think/

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The Briefing: RVShare raises over $100M, Google disputes charges, and more

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Here’s what you need to know today in startup and venture news, updated by the Crunchbase News staff throughout the day to keep you in the know.

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RVShare raises over $100M for RV rentals

RVShare, an online marketplace for RV rentals, reportedly raised over $100 million in a financing led by private equity firms KKR and Tritium Partners.

Akron, Ohio-based RVShare has seen sharp growth in demand amid the pandemic, as more would-be travelers seek socially distanced options for hitting the road. Founded in 2013, the company matches RV owners with prospective renters, filtering by location, price and vehicle types.

Previously, RVShare had raised $50 million in known funding, per Crunchbase data, from Tritium Partners. The company is one of several players in the RV rental space, and competes alongside Outdoorsy, a peer-to-peer RV marketplace that has raised $75 million in venture funding.

Funding news

  • BrightFarms closes on $100M: Indoor farming company BrightFarms said it secured more than $100 million in debt and new equity capital to support expansion plans. The Series E round of funding was led by Cox Enterprises, which now owns a majority stake in the company, and includes a follow-on investment from growth equity firm Catalyst Investors.
  • Anyscale inks $40MAnyscale, the Berkeley-based company behind the Ray open source project for building applications, announced $40 million in an oversubscribed Series B funding round. Existing investor NEA led the round and was joined by Andreessen Horowitz, Intel Capital and Foundation Capital. The new funding brings Anyscale’s total funding to more than $60 million.
  • Klar deposits $15M: Mexican fintech Klar closed on $15 million in Series A funding, led by Prosus Ventures, with participation from new investor International Finance Corporation and existing investors Quona Capital, Mouro Capital and Acrew. The round brings total funding raised to approximately $72 million since the company was founded in 2019. The funds are intended to grow Klar’s engineering capabilities in both its Berlin and Mexico hubs.
  • O(1) Labs rakes in $10.9M: O(1) Labs, the team behind the cryptocurrency Mina, announced $10.9 million in a strategic investment round. Co-leading the round are Bixin Ventures and Three Arrows Capital with participation from SNZ, HashKey Capital, Signum Capital, NGC Ventures, Fenbushi Capital and IOSG Ventures.
  • Blustream bags $3M: After-sale customer engagement company Blustream said it raised $3 million in seed funding for product usage data and digital transformation efforts for physical goods companies via the Blustream Product Experience Platform. York IE led the round of funding for the Worcester, Massachusetts-based company with additional support from existing investors.Pillar secures another $1.5M: Pillar, a startup that helps families protect and care for their loved ones, raised $1.5 million in a seed extension to close at $7 million, The round was led by Kleiner Perkins.

Other news

  • Google rejects DOJ antitrust arguments: In the wake of a widely anticipated U.S. Justice Department antitrust suit against Google, the search giant disputed the charges in a statement, maintaining that: “People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives.”
  • Facebook said to test Nextdoor rival: Facebook is reportedly testing a service similar to popular neighborhood-focused social Nextdoor. Called Neighborhoods, the feature reportedly suggests local neighborhood groups to join on Facebook.

Illustration: Dom Guzman

Venture investors and leaders in the fintech space can visualize a future where such startups will move toward again rebundling services.

Root Inc., the parent company of Root Insurance, launched its initial public offering and is looking at a valuation of as much as $6.34 billion.

Clover Health posted rising revenues and a narrower loss in its most recent financial results, published in advance of a planned public market debut.

Crunchbase News’ top picks of the news to stay current in the VC and startup world.

Source: https://news.crunchbase.com/news/briefing-10-21-20/

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Syte Sees $30M Series C For Product Discovery

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Online shopping has become the norm for most people in 2020, even coaxing traditional retail brands to up their presence to stay competitive. However, now that shoppers can’t see and touch products like they used to, e-commerce discovery has become a crucial element for customer acquisition and retention.

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Enter Syte, an Israel-based company that touts creating the world’s first product discovery platform that utilizes the senses, such as visual, text and voice, and then leverages visual artificial intelligence and next-generation personalization to create individualized and memorable customer experiences, Syte co-founder and CEO Ofer Fryman told Crunchbase News.

To execute on this, the company raised $30 million in Series C funding and an additional $10 million in debt. Viola Ventures led the round and was joined by LG Technology Ventures, La Maison, MizMaa Ventures and Kreos Capital, as well as existing investors Magma, Naver Corporation, Commerce Ventures, Storm Ventures, Axess Ventures, Remagine Media Ventures and KDS Media Fund.

This brings the company’s total fundraising to $71 million since its inception in 2015. That includes a $21.5 million Series B, also led by Viola, in 2019, according to Crunchbase data.

Fryman intends for the new funding to be put to work on product enhancements and geographic expansion. Syte already has an established customer base in Europe, the Middle East and Africa, and will now focus expansion in the U.S. and Asia-Pacific.

Meanwhile, Syte has grown 22 percent quarter over quarter, as well as experienced a 38 percent expansion of its customer base since the beginning of 2020.

“Since we crossed $1 million annual recurring revenue, we have been tripling revenue while also becoming more efficient,” Fryman said. “We can accelerate growth as well as build an amazing technology and solution for a business that needs it right now. We plan to grow further, and even though our SaaS metrics are excellent right now, our goal is to improve them.”

Anshul Agarwal, managing director at LG Technology Ventures, said Syte was an attractive investment due in part to its unique technology.

“They have a deep-learning system and have created a new category, product discovery that will enable online shopping in a way we never had the ability to do before,” Agarwal said. “The product market fit was also unique. We believe in the strong execution by the team and the rapid growth in SaaS. We looked at many different companies, and the SaaS metrics that Syte showed are the strongest we’ve seen in a while.”

Illustration: Li-Anne Dias

Venture investors and leaders in the fintech space can visualize a future where such startups will move toward again rebundling services.

Root Inc., the parent company of Root Insurance, launched its initial public offering and is looking at a valuation of as much as $6.34 billion.

Clover Health posted rising revenues and a narrower loss in its most recent financial results, published in advance of a planned public market debut.

Crunchbase News’ top picks of the news to stay current in the VC and startup world.

Source: https://news.crunchbase.com/news/syte-sees-30m-series-c-for-product-discovery/

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Intellimize Closes $12M Round Of New Funding

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Website optimization startup Intellimize has landed $12 million in new funding, the company announced Wednesday. 

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Intellimize automatically optimizes websites using artificial intelligence. Marketers are able to use the software to try different experiences in parallel and in real time. 

“With A/B testing, all the work is on me,” said CEO Guy Yalif in an interview with Crunchbase News. “With intelligent website optimization, the work is on the machine.”

The company uses machine learning to adjust web pages to respond to a customer’s behavior over time. When a customer goes on a company’s website, Intellimize can give the  customer’s location, time of day, previous website behavior summary, traffic source and other information so marketers can optimize the customer’s experience.

Intellimize says it delivers an average of 46 percent increase in online conversations. And more online conversations can lead to more sales and revenue.

Intellimize, which is based in San Mateo, competes with companies like Granify, accoridng to Owler. 

Addition led the round, with participation from previous investors including Homebrew, Amplify Partners, and Precursor Ventures. The new round brings Intellimize’s total funding to $22 million.

In terms of growth, Yalif said Intellimize had seen its in-target revenue grow 5x in the last year. The company counts Snowflake, Sumo Logic, Tableau, and Unilever Prestige among its customers.

The company plans on using the new funding to significantly expand its team, with a particular focus on people with machine learning expertise, Yalif said.

Intellimize last raised an $8 million Series A led by Amplify Partners in April 2019.

Illustration: Li-Anne Dias

The commerce platform helps direct-to-consumer and B2B brands establish an e-commerce platform designed for their needs.

San Francisco-based Handshake has raised an $80 million Series D led by GGV Capital. 

The SPAC phenomenon is opening the door to the kinds of companies that in recent years have not been tapping public markets.

There’s a lot that’s lost in the clamor to “do something” about the tech industry, namely the impact on smaller companies and the overall innovation…

Source: https://news.crunchbase.com/news/intellimize-closes-12m-round-of-new-funding/

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