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Kraft Heinz leads $12m Series A for smart checkout startup Zippin

December 12, 2019

Smart retail check-out technology startup Zippin has raised a $12 million Series A led by Evolv Ventures, Kraft Heinz’s corporate venture capital arm, to enable product innovation, technical team growth, and expand its partnership and sales efforts. This brings the company’s total funding to $15 million. This is Evolv’s fourth investment.

Other investors in the round include SAP.iO, Scrum Ventures, major Latin American distributor Arca Continental, and Nomura Research Institute and NTT DOCOMO Ventures from Japan. Existing investors Maven Ventures, Core Ventures Group, Pear Ventures, and Montage Ventures also participated in the over-subscribed round.

Like many of the other smart checkout startups, Zippin combines camera-based computer vision including facial recognition, AI, and sensors. Since launching in 2015, the company serves four autonomous public stores and a number of private pilots.

The smart checkout space is heating up. Last week, AFN reported on another player, Accel Robotics, which announced a $30 million Series A for its eye-in-the-sky offering that allows consumers to collect items and walk right out the door while their bill is handled through an app.

It’s all about the data

The investment may seem like an odd play for a consumer packaged goods company that does not run retail stores but it’s really about the data. 

“It’s all about understanding what’s going on in the value chain that Kraft Heinz participates in as a huge food and beverage CPG company,” Smriti Jayaraman, principal at Evolv Ventures, told AFN. “One of the trends we observe is how retail and retail formats are changing with consumer preferences and behaviors, evolving to demand less friction and better experiences. Technology like Zippin will be front and center.”

It also sees major value in the potential for smart checkout technologies to provide data about shopper behaviors and preferences and it’s not alone in pursuit. 

“Emerging tech in the retail environment also has the potential to expose brands like those in the Kraft Heinz family to consumer experiences and consumer data. With the ability to deploy things like computer vision and AI in the retail environment, it generates a set of consumer data that didn’t exist before.”

What drew Evolv to Zippin among the many emerging players in the smart checkout space was its team and its proven track record to date. In September 2019, it was revealed that the Sacramento Kings’ Golden 1 Center is now offering Zippin checkout. Sports venues have been flagged as a popular target for smart checkout technologies to cut down on the consternation that attendees often experience when having to wait in line for food, drinks, and merchandise.

“They have a lot of traction including live stores we’ve been able to visit. Customers are seeing the benefits of the technology and we really think that shows they’ve cracked the code on how something like this consumer experience should work,” she explains. 

Given that most of the smart checkout companies are using a similar combination of technologies — computer vision, AI, and shelf sensors — the way that winners are crowned in the space may come down to pure differentiation. 

“Zippin’s turnkey infrastructure piece stands out and at the end of the day, it’s by launching small formats in controlled environments and gathering data early that Zippi has been able to launch in stores quickly and go live earlier than some of the other startups in the space. Larger retail environments are just harder. If you can do a smaller format and can have sensors and cameras, it’s just a little easier to achieve accuracy levels.”

While a remaining focus on small-format stores is unlikely to create the billion-dollar business VCs strive for, it is a growing segment of retail overall. Grocery stores are getting smaller as consumers start to shop more frequently, forgoing what was typically one big supermarket shop each week, according to the US 2018 Grocery Tracker report. While the median total store size is still as big as 41,651 square feet, offering over 33,000 items, big name retailers are dabbling with smaller format stories, like Target as it aims to penetrate college towns, while Meijer opened its second small-format store earlier this week. Meanwhile, increasingly popular urban retailers like Trader Joe’s and Aldi have stores measuring closer to 12,000 square feet.

Some grocery retailers are even dabbling with in-house answers to smart checkout in a small format space. Ahold Delhaize is piloting an in-house technology at a small-format store called Lunchbox located at its Retail Business Services campus in Massachusetts. And, of course, what discussion of smart checkouts and small format retailing is complete without a nod to Amazon Go.

“Regarding differentiation, it’s more about taking an approach that’s working well early on, and again grocery and CPG retail is a huge market. There’s room for multiple winners,” said Jayaraman.

Social license for smart checkout’s eyes in the sky?

Other major CPG players are already fast at work hunting down consumer data and exploring the potential that it may unlock. Kroger, the world’s largest grocery store chain, runs a data analytics firm called 84.51°. It recently launched Stratum, a tool that offers CPG brands valuable data-driven insights about how their products are selling. The subscription-based service is available to Kroger’s brand partners and Kroger also plans to use the technology to evaluate how it’s private label products are performing. Of course, Kroger could have kept Stratum all to itself, but commercializing the offering and monetizing it as a SaaS is a testament to how hungry retailers are to learn more about consumers.

Ahold Delhaize also runs Peapod Digital Labs to collect data insights for its handful of grocery banners including Food Lion, Giant Food, Hannaford, and Stop & Shop while Albertson’s digital media platform has executed 300 campaigns for 150 CPG brands.

Lurking throughout the excited conversations about data, however, is a big concern that could be a dealbreaker: privacy.

“CPG manufacturers risk losing the trust of valued consumers if they feel that hyper-personalized promotions blur the line between helpful familiarity and surveillance,” Mayur Gupta, global head of marketing technology and innovation at Kimberly-Clark, recently told Vision Critical. “The strategic application of data analytics can give CPG manufacturers a competitive advantage but the trust of the consumer is of equal, if not greater value.”

One way to alleviate consumers’ concerns about data collection and usage is by providing them with tangible benefits. If the solution that the retailer offers based on that data has a direct positive impact on the consumer’s life, such as helping them find products they like, remembering their frequent buys, or offering them alluring deals, then the data acquisition is seen as less of an invasion and more of a service.

“Zippin’s technology in geographies where there are privacy concerns doesn’t utilize facial recognition data. It’s a bird’s eye view of the top of your head so to that extent they are clear from a privacy standpoint,” Jayaraman said. “We feel good about Zippin’s technology and its approach.”

But the most cutting-edge aspect of smart checkout is the bird’s eye view component. Even if a consumer entering a store has opted to not participate in smart checkout technology, for example, the camera can still observe their behavior including how long they spend in the store, which departments they visit, how long they view a particular item, and which items they buy. Regardless of whether startups have cracked the smart checkout technology code, securing social license will be the biggest transaction it has to process.

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