Shufersal Ltd. (TASE:SAE), the largest supermarket chain in Israel, has set up an initial pilot store in Tel Aviv with no checkouts, in which customers take products from the shelves and leave the store without pulling out any means of payment.
The pilot is the product of a strategic collaboration between Shufersal and Israeli startup company Trigo Vision, which was founded in 2017 by brothers Michael and Daniel Gabay. The brothers originally sought to develop a smart supermarket trolley, but the collaboration with Shufersal diverted them from that track.
The user experience is similar to that in the checkout-less stores of US online retailing giant Amazon, Amazon Go. The customer simply takes a product from the shelf and leaves the store. He or she is automatically charged though a smartphone app.
The pilot store's 100 square meter-ceiling is covered with a network of 35 cameras that track everything that moves in the space, and through AI technology identify each customer and the products they take from the shelves. This is not a matter of a self-service checkout, but of the complete abolition of barcodes and scanning at a checkout.
The system identifies products with customers as they pick them off the shelves, and records the products each customer buys. It can also identify and record the replacement of a product when a customer decides not to purchase it. The "brains" of the system are not actually in the store, and all that can be seen within the store is the cameras covering the ceiling.
In addition to the dummy Shufersal store in Trigo Vision's offices, sources inform "Globes" that a first store is already networked with cameras and real-life results are being examined there. The store is the one in Century Tower on Ibn Gvirol Street in Tel Aviv. Shufersal refused to comment on this point.
Payment can be made in two ways. One is by being identified by means of a smartphone app, allowing customers simply to take products and walk out of the store, with payment made automatically by credit card. The second method, for those who prefer to buy without the app, is by means of payment terminals that do not identify customers. There is no need to scan goods at these terminals. The system identifies all the goods in the trolley, in the hand, or in a bag, and automatically displays them on the terminal screen. All that remains to do is to pay, by cash or credit card.
The possibility of paying with cash, in addition to the app and credit card, is a response to criticism levelled at Amazon Go stores, where the use of an app and a credit card is obligatory, making the stores unusable by people without credit cards. An Amazon Go store recently opened in New York does allow payment by cash.
The payment terminals save waiting in line for other customers to scan their purchases, and also take up less space than self-service checkouts, making them effectively cheaper, and making it possible to install more of them.
Privacy
As far as customer privacy is concerned, the technology that Shufersal is trialing there is no documentation or photographing of the customer. The cameras identify a shape as a human being, but do not document the person or recognize their face of gather information about them. Part of the method is identification not by face but by outline.
Moreover, unlike Amazon Go stores, which were built around the new technology, Trigo Vision's system can be installed in existing stores, making implementation much cheaper.
According to Bloomberg, on the basis of analysis by Morgan Stanley, the investment in an Amazon Go store starts at $160 million. The cost of installing Trigo Vision's system in a Shufersal store ranges from $150,000 for a neighbourhood Shufersal Sheli store (400 square meters) to $350,000 for a large Shufersal Deal store (around 4,000 square meters).
Although the system is highly accurate, it still needs adaptation to certain situations, such as very small items, identifying a parent who comes to the store with a child who also puts items in the parent's trolley, opening of a product within the store, or a requirement to present identification before purchasing alcoholic beverages.
What will happen to the checkout staff?
"The lead feature is the idea that there is no need for checkouts," says Michael Gabay, and Shufersal Executive Vice President, Human Resources, Administration and Information Technology Zvika Fishheimer joins in with "For us, the primary value is the customer experience, to leave without waiting in line and without passing through a checkout. Stores will not be left without manpower, but its function will change."
Gabay says that the technology has much more to offer besides eliminating checkouts, from stock management and warnings of shortages on the supermarket shelves, to learning customers' selection and purchasing habits. The system can map spots that customers come to more often ("hot spots'), and can monitor which shelves they tend to reach out to more frequently, and even how long they deliberate between a leading product and a new competitor. The system also has the advantage of being able to detect theft.
"Because of barriers to introducing technology, Shufersal will have a significant advantage. This could bring people back to the physical stores, without the annoying experience of waiting at the checkout," says Fishheimer.
"I got the idea of placing cameras on the ceiling from Shufersal," says Michael Gabay during the tour of the store. The two companies signed an agreement under which Shufersal is also involved in the system specifications, that is, how it will work, which components it should contain and which not (for example, the decision to forego facial recognition), and how payment will be made. The agreement also guarantees Shufersal exclusivity in operating the system in the Israeli market for several years.
Trigo Vision currently employs 35 people at its Tel Aviv headquarters, most of them technology people, in computerized vision and artificial intelligence, who have worked at global giant companies in the past.
"The ability to obtain a clear and immediate response about the system's performance seems like something to be taken for granted, but it's difficult to get at global companies. We receive immediate, transparent feedback from Shufersal on the spot. In this respect, Israeli culture is very helpful," Gabay says.
"We have a full commercial agreement - the business model in the agreement mentions a price for all the stores and for the entire process, from now until installation is complete," adds Fishheimer. "We're talking about three to five years to full rollout of 360 stores, and next year we'll launch the first store. We want to turn all of Shufersal's stores into this kind of store."
The two are unforthcoming about the rest of the details of the agreement between them, but Shuferal confirms that is has not invested in Trigo Vision and does not hold shares or options on shares in the company. At any rate, Trigo Vision has so far raised some $7 million from financing rounds led by Israel venture capital firm Vertex and British form Hetz. The company confirms that a further round is underway, details of which have not yet been disclosed.
Outside of Israel, Trigo Vision is working with three retail chains in Europe, and is at the pilot stage with them.
Published by Globes, Israel business news - en.globes.co.il - on June 2, 2019
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