<p>The Smarter Store How AI is powering the future of retail The technology market intelligence platform. CB Insights software lets you predict, discuss and communicate emerging technology trends using data in ways that are beyond human cognition. See what other customers have to say at http://www.cbinsights.com/customer-love A few of our happy customers The most publicly reference-able customers of anyone in the industry Beti Cung, Corporate Strategy, Microsoft "We use CB Insights to find emerging trends and interesting companies that might signal a shift in technology or require us to reallocate resources." @cbinsights #AIretail Join the conversation on Twitter December 12 13, 2017 | San Francisco, CA A-ha! is a gathering of Fortune 1000 executives, investors, academics, and startup founders discussing the next wave of ideas and technologies that will shape our world. SPEAKERS INCLUDE Daymond John The Shark Group Star of ABC's Shark Tank and CEO FUBU Founder/CEO Liza Landsman Jet.com President Sold to Walmart for $3.3B Mudassir Sheikha Careem Co-founder & CEO MENA's $1.2B Unicorn Benedict Evans Andreessen Horowitz Partner "Working Out What's Happening Next" at a16z Deepashri Varadharajan @deepashriv dvaradharajan@cbinsights.com 2 About the presenter Senior Intelligence Analyst and Writer, Artificial Intelligence Deepashri Varadharajan received her undergraduate degree in engineering at Vellore Institute of Technology in India. She later studied journalism, and received a degree from the Columbia University Graduate School of Journalism. Before CB Insights, Deepashri worked for organizations including Al Jazeera America, Deccan Herald, and interned at Siemens India. Zoe Leavitt @zoe_leavitt zleavitt@cbinsights.com 3 About the presenter Senior Intelligence Analyst, Consumer Prior to joining CB Insights, Zoe worked in equity research and drove consumer analytics efforts at the consumer finance group of the Bank of China in Shanghai. Her research has been cited in the New York Times, the Wall Street Journal, and more. Zoe is a graduate of Stanford University. 1 2 3 4 5 Macro trends in retail AI in e-commerce Startup ecosystem AI in the physical store Trends to watch 9 The Smarter Store: How AI is Powering the Future of Retail Macro trends Automation, AI reshapes retail 10 Amazon dominates e-commerce, with AI core 11 The e-commerce giant has a strong AI focus. Its internal projects include Lex (NLP), Rekognition (vision). Prime customers can now place orders through Alexa. More than 3,200 stores are shutting down here's the full list April 17, 2017 A 'retail apocalypse': Stores close at record rates 12 Adapt or die. Retailers are partnering with startups to survive in a highly competitive landscape, understand their customers, and drive traffic both online and offline. 13 How automation is transforming retail 14 MANUFACTURING ROBOTS WAREHOUSE AUTOMATION ONLINE IN-STORE Logistics & moving items Inventory management & demand forecasting Pick & place robots Packaging robots Computer vision for measurements & styling Chatbots for CRM Personalized product recommendations Visual search Targeted ads On & offline consumer behavior analytics Computer vision for automated checkouts Robots for inventory management Robotic sales assistants Delivery & logistics Drones & delivery robots Demand forecasting Route optimization AI in e-commerce Use cases of artificial intelligence 15 Customers want to easily find what they're looking for. 16 Alibaba Group backed Israel-based e- commerce search startup Twiggle in Q2'16. Vision: Finding items without keywords 17 Automobiles Wine General retail General retail Retailers want customers to never leave. 18 Dynamic Yield focuses on personalized search, recommendations, and behavioral messaging, among other things. Select investors: Baidu Capital, Bessemer Venture Partners, ClalTech, Global Founders Capital, Innovation Endeavors, Marker and Vertex Ventures Israel 1:1 targeting and merchandising 19 Select investors: Bain Capital Ventures, Battery Ventures, Lightspeed Venture Partners, New Enterprise Associates, and Salesforce Ventures Retailers want to understand consumer behavior across devices. 20 Appier uses deep learning to collect and analyze audience behavioral and browsing data. Select investors: AMTD Group Company, EDBI, Line Corporation, NAVER Corporation, Sequoia Capital India, and SoftBank Group AI in commerce Startup trends, deals, top investors 21 Commerce is a leading industry for AI deals 22 https://www.cbinsights.com/research-artificial-intelligence-startup-deals CATEGORY Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 HEALTHCARE HORIZONTAL APPLICATIONS CYBERSECURITY COMMERCE AD & MARKETING BUSINESS INTL. & ANALYTICS FINTECH & INSURANCE IOT/IIOT SALES & CRM AUTO TECH PERSONAL ASSISTANTS HR TECH EDUCATION NEWS, MEDIA & ENTERTAINMENT AGRICULTURE HARDWARE FOR AI TRAVEL LEGAL REG TECH SOCIAL PHYSICAL SECURITY REAL ESTATE IT & CLOUD SERVICES SPORTS SOFTWARE DEV. & DEBUGGING MISC Low deals High deals Global AI commerce equity funding since '13: $1.26 BILLION across 256 DEALS 23 Top 2017 rounds go to startups in Asia Top rounds in 2017 Trax (Singapore) 64M/Private Equity Computer vision for retail Appier (Taiwan) $33M/Series C Cross screen consumer behavior analysis 24 AI commerce: Annual global financing history 2013-2017 (as of 11/617) $59 $254 $223 $389 $334 $394 (Full-Year Run Rate) 28 40 56 71 61 72 (Full-Year Run Rate) 2013 2014 2015 2016 2017 YTD Disclosed Funding ($M) Deals Q1'17 busiest quarter for AI commerce deals 2017 opened with the busiest quarter for deals, followed by a slowdown in the following quarters. Outside the US, Q3'17 saw 7 deals to countries in Asia, including 4 in China, as well as 3 deals to startups in France and United Kingdom. 25 AI commerce: Quarterly global financing history Q1'13 Q3'17 VC interest in AI commerce peaked in 2016 VC and corporate interest in AI commerce picked up in 2015, when investors like Google and Salesforce backed startups including Modsy and Msg.ai. The trend continued in 2016, before a slowdown this year. 26 AI Commerce: Unique investors 2013-2017 YTD (as of 11/6/2017) 44 42 61 75 52 3 12 15 21 17 35 41 62 58 46 2013 2014 2015 2016 2017 YTD Venture Capital Corporate/Corp VC Other 2017 Recent VC-backed deals 27 AI transforms the in-store experience AI helps retailers a) turn massive amounts of available data into insights, and b) automate rote tasks, freeing up store employees for higher-impact work. 28 29 Behind the scenes AI can help manage repetitive, time-intensive tasks behind the scenes in stores, freeing up store associates for higher-impact interactions with shoppers. Stores can become more experiential and differentiated from e-commerce. AI can analyze disparate data streams to optimize retail planning Celect, spun out of MIT, uses machine learning to model customer behavior and optimize retailers' merchandising, assortment, and pricing strategies. Celect raised $15.1M from In-Q-Tel, Activant Capital, August Capital, Fung Capital Management, and others. 30 AI supports inventory management 31 Nextail uses AI to help retailers improve inventory allocation and manage daily store replenishments. Disclosed funding: $1.6M Select investors: Nauta Capital Blue Yonder uses AI to help retailers improve inventory planning and reduce out-of-stocks. Disclosed funding: $75M Select investors: Warburg Pincus Everseen uses machine vision and video analytics to monitor the point of sale and reduce losses. Disclosed funding: N/A Select investors: Marcol Eversight uses machine learning to help retailers and CPG brands test and deploy better promotions. Disclosed funding: $25.2M Select investors: Bow Capital 32 Trax Retail combines AI, IoT, augmented reality Trax uses machine vision to help CPG brands monitor their products on store shelves and create detailed augmented reality recreations of store environments for audits. It also works with retailers to observe stores in real time. Trax raised $147.6M from Warburg Pincus and others, and in July it acquired Nielsen's store observation unit. Select Clients: Sources: Fortune, St. Louis Post-Dispatch, Recode, Progressive Grocer, CNBC Walmart is Putting Shelf-Scanning Robots in Over 50 U.S. Stores October 26, 2017 Stores roll out robot staffers 33 SoftBank's humanoid Pepper robot already greets shoppers at 10K+ venues around the world. Pepper can answer questions, interact via touchscreen, and collect shopper data. Pilot programs reportedly boosted shopper traffic by 20-70%. However, if robots do not add clear value for shoppers, the novelty may wear off and Pepper's impact on foot traffic may fade. Humanoid Robots Attract Shoppers 34 Simbe Robotics and Fellow Robots produce in-store robots that scan shelves and monitor inventory to reduce out-of-stocks, correct misplaced items and labeling errors, and gather analytics for store management. Fellow works with Lowe's, Yamada, and others, and Simbe works with Schnuck's, Ahold, and others. While B2B Robots Scan Shelves and Inventory 35 Walmart plans to expand its partnership with Bossa Nova's robots to 50+ stores. The fully autonomous robots use machine vision to scan shelves and monitor inventory. Bossa Nova has raised over $24M in funding, and Intel Capital led its Series C in October. Walmart Taps Bossa Nova Robotics for Inventory Management 36 Beyond robots: could holograms be on the rise? NY-based Satisfi, a platform for conversational commerce, recently partnered with augmented reality company VNTANA to launch an interactive AI hologram. AI-powered holograms could answer basic questions for shoppers, while observing store activity and visitor demographics. 37 Select Clients: 38 In-store engagement Facial recognition and AI-powered digital screens can make stores more engaging, while collecting shopper interaction data. Sephora's smart mirrors drive in-store engagement While Sephora has long driven engagement by offering in-store product try-on, today it uses screens to offer virtual try-ons and makeup tutorials. These screens offer memorable in-store experiences, reduce staff time spent on managing try-ons, and collect and record data about which products shoppers try. 39 ModiFace technology powers Sephora's screens and app ModiFace uses AI and augmented reality to power virtual try-on experiences for Sephora and other beauty brands. ModiFace's patented technology can identify facial features and skin conditions, then make personalized product recommendations or show shoppers how they would look using different products. 40 Patent: Method, system, and computer program product for generating recommendations for products and treatments Patent: System, method and application for skin health visualization and quantification Patent: Method and system for simulated product evaluation via personalizing advertisements based on portrait images + AI Startups Battle for Beauty Brands 41 Select Reported Clients: Select Reported Clients: Adaptive screens help engage and monitor shoppers Advertima offers digital screens that can analyze in-store shoppers and adapt content in real time to engage them. It aims to detect gender, age, and other data, and will allow shopper interaction via speech, touch, gesture, or smartphone. Swiss-based Advertima raised $5M from Migros, Switzerland's largest retailer. 42 43 Could facial recognition replace payments? Alibaba partnered with Chinese startup Face++ to unveil facial recognition-based payments. Face++ has raised $608M from Foxconn and others, and earned a $1B valuation in Oct'17. Alibaba is currently piloting the pay-by-face technology in select KFC locations, and could expand it to retail. 44 Automating checkout Startups aim to use AI to automate the checkout process and take cashiers, and even cash registers, out of the store. QueueHop smart tags help secure self- checkout QueueHop provides connected security tags, which unlock automatically once the shopper has paid at a self-checkout kiosk or via mobile app. It aims to help retailers speed checkout and reduce cart abandonment, while providing AI-powered personalized suggestions to shoppers. 45 Select Clients: Machine vision makes first steps toward checkout automation Pre-launch startup Standard Cognition aims to use machine vision to enable automated checkout. The system would track shoppers' carts throughout the store, and automatically display the charges at a self-serve kiosk by the door. In the future, shoppers could pay automatically via mobile app. 46 Numerous startups already operate fully automated, human-free convenience stores in China. These modular stores integrate with mobile payment apps such as Alipay and WePay. Shoppers scan their phones to access the store, then scan again to pay and exit. The stores aim to use AI and machine vision to track shoppers throughout the process. Human-free storefronts roll out across China 47 Xiaomai Disclosed Funding: $36.9M Select Investors: Sequoia Capital China, Junzi Capital, Aplus Capital BingoBox Disclosed Funding: $14M Select Investors: GGV Capital, Ventech China F5 Future Store Disclosed Funding: $5.9M Select Investors: Sinovation Ventures, TCL Capital 48 Managing the customer journey As retailers face new opportunities to gather direct data from consumers online and offline, they can use AI tools to turn that data into action. Hundreds of startups help retailers gather offline data Startups are using AI, IoT, Bluetooth, and other new technologies to crack open the "black box" of brick-and-mortar stores. These new observation methods help retailers build a clearer picture of offline shopper activity. 49 50 And AI can help merge online and offline data to create better customer profiles Paris- based Teemo (dba Databerries) tracks shopper activity to provide targeted offline mobile marketing. Its personalized messaging aims to drive in-store sales. Teemo raised $17.9M from Index Ventures, Mosaic Ventures, and others. Select Clients: AI helps brands track and parse online feedback Startups such as Quantifind ($49M in disclosed funding), Remesh ($3M), Revuze ($4M), and Converseon ($7.5M) use AI to help brands monitor consumer sentiment. Others, such as Yotpo and Signpost.ai, use AI to drive shoppers to contribute reviews. 51 52 How does AI support Walmart's strategy? Walmart's patents focus on guiding shoppers through stores, speeding up the checkout process, and keeping the shelves stocked. AI supports omnichannel growth Laurent Desegur VP Customer Experience, WalmartLabs 53 Source: VentureBeat "We are enhancing the shopping experience through machine learning we want to make sure there is a seamless experience between what customers do online and what they do in our stores." Sources: VentureBeat, RetailDive, Fortune, Engadget, Fortune Walmart Expands Use of In-Store Inventory Robots October 30, 2017 Walmart builds and partners for AI growth 54 Improving e-commerce through AI 55 Sources: Predictive shopping patent, Machine learning system, Search term patent Patent: Predictive shopping Application: March 2017 Patent: Machine learning system Application: October 2016 Patent: System and method for calculating search term probability Application: July 2017 Dozens of Walmart patents focus on checkout 56 Sources: Smart cart patent, Preauthorized payment patent, Item scanning patent Patent: Smart cart for self-checkout of retail merchandise Application: November 2016 Patent: Distributed processing for preauthorized payment Granted: July 2017 Patent: Simultaneous item scanning in a POS system Granted: February 2017 Walmart has filed 25+ patent applications related to drones since 2016. Observing and serving shoppers by drone 57 Sources: Dispatching a drone patent, Retail facility patent, Monitoring premises patent Patent: Dispatching an airborne drone to carry an item to a customer Application: November 2016 Patent: Method to carry an item within a retail shopping facility Application: September 2016 Patent: Apparatus and method for monitoring premises Application: December 2016 58 What's Amazon doing in AI? AI infuses Amazon's B2C and B2B businesses, while helping Amazon internally. E-Commerce Amazon focuses AI efforts on: 59 Logistics Business Services Dozens of patents aim to automate supply chain and logistics By searching on the CB Insights platform for the keyword "unmanned" within Amazon's patents, we can pull up dozens of automation patents. 60 Amazon considers AI for manufacturing 61 Patent: On demand apparel panel cutting Granted: October 2017 AI and 3D printing create personalized products 62 Patent: Fulfillment of orders for items using 3D manufacturing on demand Granted: June 2017 Patent: Item delivery using 3D manufacturing on demand Granted: June 2017 Amazon automates the warehouse 63 Patent: Inventory facility Granted: January 2017 Patent: Modular, multi-function smart storage containers Granted: May 2017 Patent: Systems and methods to facilitate human/robot interaction Granted: May 2017 AI supports entirely new warehouse methods: Under water 64 And Above the Clouds 65 AI supports e-commerce leadership Jeff Bezos CEO, Amazon 66 "Machine learning drives our algorithms for demand forecasting, product search ranking, product and deals recommendations, merchandising placements, fraud detection, translations, and much more." In e-commerce, patents improve search AI helps Amazon automate product identification and image tagging. This supports faster categorization of merchandise, and helps the site pull up more relevant products in response to search terms. 67 Patent: Identification of item attributes using artificial intelligence Granted: October 2017 Amazon considers enhanced security in the face of AI In several patents, Amazon notes that as AI improves, e-commerce sites may have more difficulty separating bots from human users. In response, Amazon proposes advanced CAPTCHA tests using optical illusions, facial recognition, and more, to verify human users. 68 Patent: Turing test via reaction to test modifications Granted: August 2017 Amazon's consumer smart home products use natural language processing and machine vision opening new platforms for ordering products, while gathering new data streams about consumers' at-home activity. AI creates new purchase platforms 69 In a recent patent, Amazon proposes using at-home video hubs (similar to the Amazon Show) to observe people's activities, emotions, biometric data, and more. Combining sales and data collection 70 Patent: Automatically staged video conversations Granted: October 2017 Amazon Show image AI could power drone delivery 71 However, Amazon struggles with human- free stores Amazon delayed the launch of its much-hyped automated grocery store, Amazon Go. Amazon Go opened a pilot location in Seattle in late 2016 for Amazon employees, with plans to launch publicly in 2017. However, it failed to open as scheduled, facing problems in handling store traffic. 72 Amazon productizes its AI, serves other retailers Amazon offers APIs that let clients integrate chatbots, voice functionality, and image recognition into products without training their own AI models. It serves retailers including Nordstrom, Nike, Stitch Fix, and Brooks Brothers. 73 Sources: CNBC, WSJ, CNBC, Business Insider, RetailDive Walmart to Vendors: Get Off Amazon's Cloud June 21, 2017 AI & AWS: Retail support or threat? 74 Trends to watch M&A targets, big players, future jobs 75 Future of retail is a fusion of two worlds 76 PHYSICAL DIGITAL AI Startups are acquisition targets for brands and big tech companies 77 Alibaba is spending $15 billion on researching quantum computing, AI, and more 10/11/2017 E-commerce giants will continue pushing the boundaries of artificial intelligence 78 Measurable impact and barriers to entry Bill Lewis EVP of Consumer Products (Retail and Distribution) Capgemini Consulting 79 source: www.retailtouchpoints.com/features/trend-watch/despite-hype-don-t-expect-quick-adoption-of-robotics-in-retail "The costs out of the gate for these robots are high, especially to run many of the tests. The use cases are still being understood and I think right now most retailers are trying to focus on their e-commerce integration with stores." Preparing for a reshaping of the workforce. 80 If retailers look to develop tech in house, AI talent will continue to be in high demand. In-store automation would eventually lead to fewer hands on deck for repetitive tasks. But it would put the focus back on customer-facing tasks, strategic planning, and product design, among other things. Retraining employees is a recurring theme. But with advances of AI in e-commerce, retail jobs like sales may not translate into e-commerce sales positions. Where is all this data from? The CB Insights platform has the details on all the deals included in this report 81 CLICK HERE TO SIGN UP FOR FREE CBInsights.com @cbinsights +1(212)292-3148 </p>