Can a startup benefit by beating Amazon to market?

Standard Cognition's Michael Suswal says his company — often compared to Amazon Go for its cashierless checkout model — is not racing to market against Amazon.

But he does admit there's a benefit to getting there first.

"Amazon's doing its own thing, I don't think they're really launching into other stores beyond their own," said Suswal, co-founder and chief operating officer of Standard Cognition. "But there's excitement for us … to offer this technology to the world."

Standard Cognition is a Silicon Valley startup that's developing a shopping model that uses cameras to recognize the items that consumers are buying, then handle the payment without human intervention. It got a shot in the arm on Tuesday via a $5 million investment that will help the company deploy its technology faster. Charles River Ventures led the round with participation from Initialized Capital, Y Combinator and several smaller firms and angels.

John Novak

Including this round, the company has raised $6M to date. It has already hired engineers and business staff to expand programming and sales efforts.

The company hopes these new resources will accelerate its timetable, with new plans to have stores up and running by the spring of 2018, or about six months out. It is demonstrating the technology at its facility in Santa Clara and is in "advanced talks" with retailers about full deployment. It did not name its clients, but said it should be ready to make announcements in a few months. Suswal also didn't say what the company's original timetable was, though it could have been several months or more beyond its current target.

"We have a lab that's up and running, so you can see some of the technology in its development state, but a lot of it is further along," Suswal said.

The race centers around the reliability of the underlying technology. Amazon has run into trouble with crowds as small as 20 people its Amazon Go concept store, which would likely need to accommodate much larger crowds in full deployment. Amazon did not answer questions about technology upgrades to Amazon Go by deadline.

Standard Cognition doesn't want to be hamstrung by the same issues, and is adding new analysis technology to increase the accuracy for the cameras that capture and recognize items in the store; this project will benefit from the hiring of more engineers.

To be successful, the platform must not only eliminate checkout times but also surpass the performance of human cashiers.

"The technology allows very similar items to be differentiated better than a cashier," Suswal said. "In grocers for example, cashiers often make mistakes on produce. Machines can better recognize the difference between a jazz apple and a fuji apple, where cashiers are only 97% accurate."

The technology is advancing quickly, with the improvement beyond human recognition coming in the past few months, Suswal said, adding that makes the model more attractive to retailers. That places added onus on Standard Cognition to get a deployment out in the market as the machine learning technology matures.

"I don’t think any retailer would be able to have any confidence in a machine vision system without these advances," he said. "Like other tech that depends on shoppers putting items in a specific basket or making the shopper scan things with their phone, you increase the potential for loss. The advancements in machine vision and machine learning, both from the cutting edge research externally and internally, are the only way we could bring this technology to market in 2018."

Standard Cognition is selling into the anxiety that followed Amazon's announced acquisition of Whole Foods and retailers' need to update their technology to accommodate digital payments. Standard Cognition is also looking outside the U.S.

"In Japan, there's a labor shortage and they can't hire people to work in stores," Suswal said.

In the U.S., wages are a pain point. "Retailers are in a predicament, especially in New York and California and other places where minimum wage is increasing," Suswal said.

There are signs of acceleration among retailers looking to move further away from checkout, this portending more demand for technology that reduces reliance on physical checkout.

Last week, Shake Shack opened a location that does not accept cash; Visa has incented stores to give up cash as part of a marketing campaign this year; and order ahead apps are rapidly becoming a staple for retailers such as Starbucks.

Order ahead will lay the groundwork for stores without checkout counters since the technology creates a shopping and payment flow that does not rely on traditional checkout lanes, according to payment consultant Richard Crone.

"Stores are going to be reconfigured," Crone said, adding video will be a primary technology that supports a new way of self-checkout. "You are no longer scanning items but directly walking out of a store with them."

Beyond technology, there are also consumer adoption challenges.

Despite the public impression, smartphones aren't ubiquitous, even in the U.S. Mercator Advisory Group's CustomerMonitor Survey found that 30% of consumers with an annual income of $50,000 or less don't have a smartphone. Deployments that focus heavily on digital payments or cards at the expense of cash could risk locking some consumers out, said Tim Sloane, vice president of payments innovation at Mercator Advisory Group.