Instacart acquires Caper AI, a smart cart and instant checkout startup, for $350M, as it moves deeper into physical retail tech

Instacart made its name by providing a way for consumers to bypass shopping in stores in person, by ordering items online and getting them delivered to their homes — a business that positively boomed in the wake of the Covid-19 pandemic. But with physical stores still looming large in the world of groceries, Instacart is also wants to play a role there, too. Today, the company announced that it is acquiring Caper AI, a startup that builds smart cart and cashier-less checkout technology that uses computer vision and other techniques to detect items and ring them up for shoppers.

Instacart confirmed that it is paying around $350 million for the startup, in a combination of cash and shares.

The acquisition is part of Instacart’s expanding “B2B2C” retail technology strategy. Alongside its mainstay online ordering and grocery delivery service, the company — as of March this year valued at $39 billion — is building out a stack of products and services for stores that they in turn can use to provide new services to their customers. It follows just weeks after Instacart acquired FoodStorm to help stores take and manage catering-style larger orders of ready-made food.

Instacart’s CEO Fidji Simo (who joined earlier this year from Facebook), said in an interview with TechCrunch this week that this acquisition is in keeping with what retailers themselves want and need to do.

Against the backdrop of huge competition from the likes of Amazon — which has its own cashier-free check out technology and is getting much more aggressive with its physical store strategy — retailers are chasing a customer base that increasingly expects and will use more modern, digital services than earlier generations of shoppers.

“We are… unlocking for retail partners [what] we think is what’s next. We are meeting the evolving needs of customers online or offline. Retailers want to develop unified offerings that break down silos,” she said. “We see ourselves as a retail enablement company… We already have a vast platform to power commerce services [covering] both delivery and pick up that already blends the lines.”

Simo said that the plan will be to continue Caper’s business as it is today — the company already has smart cart technology development deals with Kroger and Wakefern in the U.S., Sobeys in Canada and Auchan in France and Spain; and it provides smart checkout counters (where items are placed in a weight-sensitive box that scans and automatically rings up the items for the shopper) across a range of smaller convenience stores. Now Instacart will shop Caper’s tech to its wider network of existing grocery partners, too.

“I’m incredibly proud of the business we’ve built and the technological leap forward our products represent for the entire grocery industry. The powerful technology we’ve created is intuitive for customers, easy to deploy for retailers of all sizes, and creates a physical retail ecosystem that never existed before,” said Lindon Gao, cofounder and CEO of Caper AI, in a statement. “We share Instacart‘s vision of enabling grocery retailers with new innovations that create step changes for their businesses, and we’re proud to now be joining forces with Instacart to develop even more solutions that help bring the online and offline together for retailers.”

But it will also supercharge Caper’s expansion and how it is used. For example, there are plans to integrate Caper’s tech into Instacart’s app: people who start their in-person shopping lists on the Instacart app can then use the Caper technology to automatically ring up the items once they are in stores.

While this deal will be bringing a hardware business, as well as more hardware expertise, to Instacart, the company looks like it will be taking a more conservative approach to that area, at least in the short/medium term.

“For now we want to focus on these [existing] products,” Simo said of Caper Cart and Caper Counter, as its two products are called. “It’s important to get the tech absolutely perfect and adopted globally. There is a lot of work to do to get to scale.”

For Caper, this is a great landing. The company had raised just $13 million from investors that included Lux Capital, First Round, FundersClub and Y Combinator. Simo said that Instacart proactively approached Caper to do a deal while it was in the middle of fundraising, and it was intent on acquiring rather than just investing to bring the IP, talent and existing business into the Instacart fold.

But, it has to be said that as an independent startup, Caper would have been facing a very impressive and large slate of competition.

Amazon has built its “Just Walk Out” technology (as its cashier-free tech is called) mainly to run in Amazon’s own brick-and-mortar stores, but with Amazon you should never count out how it might eventually productize its own technology and sell it to others as a service (as it has done with AWS, its fulfillment tech, and so on). Trigo out of Israel has raised over $100 million and just today debuted its latest customer, the supermarket giant Tesco, which is using its tech in its new GetGo stores. Standard Cognition, now valued at over $1 billion, wants to be in 100 stores by the end of this year and most recently brought on Circle K as a customer. Shopic and Imagr are also working on continuing to hone their technology, and there are a number of others.

In that regard, this acquisition will give Instacart a way of competing against all of the above, and also getting its oar in to be the provider of that tech to retailers. A lot of the technology for cashier-free is still relatively nascent, and therefore some conceptions of how it should look and work are very expensive — perhaps cost-prohibitively so. Caper AI’s approach, Simo points out, is plug and play and relatively easy (and therefore cheaper) to implement than systems that involve retrofitting entire stores with overhead cameras, large computing systems to process the information, bringing in new physical carts and so on.

“We were attracted to the smart cart solution the form factor that retailers will already understand,” she said. “And that doesn’t require a big investment.”

On the other side of the equation, of course, is the labor situation: solutions like these inevitably will raise questions of what the impact will be on people who traditionally would have worked as cashiers. And for Instacart, it’s notable that it is buying into technology that removes people from the checkout equation precisely at the same time that it is facing backlash of its own over its labor practices. These issues are unlikely to be resolved with or without this specific acquisition, but there are questions and choices that Instacart, grocers, and consumers need to consider longer term.

This article was originally published on TechCrunch.com. Read More on their website.