At Focal Systems, we believe that there will always be a place for brick and mortar retail, particularly in the grocery space. Customers want to touch and smell fresh produce, to personally select health & beauty aids, to explore new products, and they want the instant gratification of being able to run into a store and buy what they need. A study by Rutgers University shows that consumers spend 6 times more in brick and mortar stores than they do online, and 78% of shoppers prefer buying in stores vs. through the internet. This explains why offline retail still makes up 90% of total retail purchases globally, or $20 trillion dollars!
So the headline here is that brick and mortar retail still matters. But the industry must adapt with the times. Goldman Sachs analyst Matthew Fassler said recently that "Retail is not dead; it is changing.... The retailer of the future will likely be a retailer of the past — just the most efficient version therein." We at Focal Systems could not agree more.
Most retailers recognize that managing labor costs is a big part of the future success of their business, but automation needs to be done in a way that doesn’t alienate shoppers. Case in point: the self checkout lane can be a frustrating process, and not necessarily a time savings for customers. In the UK, grocery retailers started using self check-out at least 20 years ago and there is already fairly heavy adoption of it. But in the past 10+ years, self-scan has been tried by many retailers in the US (via mobile phone apps or the hand-held guns). Nielsen research shows that even after years of implementation, fewer than 10% of US shoppers use mobile phones or and-held scanners for self checkout (12% globally).
A study of 1 million transactions in the UK found that shrinkage from self-checkout totalled 3.97% of sales, compared to baseline of 1.47%, or an incremental 2.5%! This means loss from self checkout maybe worth GBP 4.8 billion in the UK alone - a particularly staggering sum in the context of shrinking margins and rising competition. Research shows that everyday customers (those who would not normally steal by any other means) disproportionately steal at self-checkouts.
Focal Systems is already delivering continuous, real-time out-of-stock detection using our proprietary Deep Learning Computer Vision software to analyze images captured of store shelves captured by our special shopping trolley-mounted cameras. We are now piloting our patent-pending Auto Checkout solution with several retailers, using these same cart-mounted devices. This solution allows Focal Systems to deliver a truly frictionless shopping experience, where shoppers can simply toss items into their trolleys and go.
Unlike Amazon Go and other solutions that leverage shelf sensors or store-mounted cameras, Focal Systems’ solution is scalable, cost-efficient for even large format stores, and does not require any store retrofitting. Unlike Amazon Go, we don’t have to worry about privacy issues associated with identifying individual shoppers. Rather, we are simply recognizing the products dropped in an individual trolley. And unlike Amazon Go, we don’t have to worry about the risk of misattributing purchases from one shopper to another (unless people are going to start putting their groceries in someone else’s cart)! Focal Systems mitigates theft by recognizing and counting the items entering the trolley.
Best of all, the utilization rate of Focal Systems’ solution is 11X higher than mobile self-scan adoption because shoppers don’t need to download any app to their phone, grab a separate device, or adopt a new behavior. Customers simply shop like they normally do. We even go one step further: our trolley-mounted devices also highlight to shoppers the promoted products that are nearby, and help them search and locate products within the store as well. Shoppers love deal alerts and product search functionality. Retailers love it too - we deliver an average of 11% increase in basket size!
Focal Systems builds Deep Learning Computer Vision systems to automate Out of Stock detection and Automated Checkout. Deep Learning Computer Vision will help drive labor efficiency for retail, and the applications are limitless. But truly shopper-friendly CV solutions like Focal System’s Auto Checkout will win the hearts and minds of customers, and help mitigate the sales erosion from online, even driving sales growth. This is the future of retail, and we are excited to be a part of the transformation.