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EPISODE 90

How Disruption Happens in Retail and Its Ripple Effects on Ecommerce

With Lindon Gao, founder and CEO of Caper

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Innovation is risky business, especially if you’re a hardware startup. But it’s not just risky on the part of those inventing a new product. The early adopters of that product are putting a lot on the line, too. Which is why certain industries, like retail, have remained mostly the same for decades. Retailers only want to bring in something new if the operational cost of installing and using the innovation are minimal, and if it doesn’t require a massive overhaul of a retail space. This is exactly what Lindon Gao found out when he started exploring this space.

Lindon has been on a mission to disrupt retail since his first application for a smart security tag was accepted by Y Combinator, and while that hardware didn’t take off, Lindon kept going until he landed on an idea that stuck. Today, Lindon is the CEO of Caper, a company bringing smart cart technology into the retail space with increasing success. In fact, Caper’s tech could be coming to a store near you, as the company recently agreed to partner with America’s largest grocery retailer, Kroger, to bring smart carts into chains all over the nation.

On this episode of Up Next in Commerce, Lindon talks us through how Caper is finally bringing change into the world of grocery, and he explains how smart cart technology could have ripple effects on ecommerce, personalization, and the entire customer journey. Enjoy this episode!

Main Takeaways:

  • Where’s The Easy Button?: Implementing new technology isn’t easy in retail. The operational headaches of launching anything new often outweighs the benefit of most of the new tech being presented. Incorporating new tech as a retailer requires finding innovations that don’t need large system overhauls, already naturally fit into the customer’s store journey and provide an added benefit (i.e. more customer data, more opportunities to upsell, etc), to make the investment worth it.
  • Do You Want a Receipt?: Smart receipts are one of the top ways to keep track of consumers after they make a purchase. Receipts offer a window into consumer behavior, and also provide a new area for personalization and follow-up conversations that keep customers engaged.
  • It’s Not Either Or: When it comes to ecommerce and grocery, it is not an either/or question. Both in-store and online shopping will continue, and, in fact, the move toward ecommerce will only push the in-store experience to be even more efficient and streamlined.

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

Key Quotes:

“We saw a huge amount of sentiment from the grocers and retailers who are telling us that they do want to innovate, but their concern is that a lot of innovations requires a lot of infrastructure, operational maintenance, and overhaul. And that makes it very, very difficult. So interestingly, when we presented our ‘Amazon Go’ idea to these store owners, most of them freaked out. They were saying, ‘Hey. Why are you trying to renovate my store? How much does this infrastructure cost?’ I’d say, ‘A couple hundred K.’ And they would say, ‘Look dude, even if you give it to me for free, I wouldn’t want it.’…And the store owner’s said, ‘If you want to make anything work in this industry, you have to make sure that it is something that you bring it to our store and it just works. It shouldn’t require infrastructure overhaul. It shouldn’t require operational overhaul.’ So, we really put that to note. So, we kind of went back to the drawing board, and we thought about, ‘How can we build a technology that just works?’”

“Product recommendation is a big part of our system. Because when we walk into a store, and you shop for groceries, typically you will probably spend 30 to 40 minutes in there. And you probably spend five minutes at the checkout, but 35 minutes in your journey as you browse through the store. And when we were launching the carts and working with grocers, we realized that the bigger piece of the opportunity in innovating retail is actually not automating checkout. That’s a piece of the experience that we can make very seamless. But it’s not the whole picture. The whole picture is, how can we help customer shop through the store during that 35 minutes, and provide them a very digitized and personalized experience.”

“As we increase penetration in the market, we want to come out with a Caper app. Shopping lists were one of the biggest pain points that we have heard from our shoppers. They want to be able to build shopping lists, and come into a store, and upload it inside in our cart. And then, we’ll tell them where everything is inside the store. So, that’s one piece that we’re going to build in. And two is, we really want to build something that’s a little more what we will call the Caper lifestyle. What the Caper lifestyle is, is that, your diets and what you eat are guided by A.I.”

“One of our mottoes is, ‘Making the mundane into something magical.’ So, that includes making the shopping cart into something that’s magical, so that when you put items in there, we just magically recognize it… We want to start enriching every part of your shopping experience that way.”

“When you actually think about the overall landscape of retail, Instacart is the largest ecommerce player. 100% of their transactions are in physical stores. So it doesn’t reduce the traffic inside stores. If anything, it really increased the need to be efficient inside a store.”

“Where I see the future of retail really converging is that you are going to see a lot more retailers not only optimize their stores for the shoppers, but they’re also going to optimize the stores to make sure that it also becomes the local fulfillment center. Because these are the distribution modes that are closest to your house. These stores are just a mile away from your house. So, I don’t see in-store activity going down at all. In fact, it’s going to continue to pick up. And that also increases the need for technologies like [Caper] to make in store experience more pleasant so that when people come back to the store, they enjoy and love that experience as they interact with food around them, but also make it extremely efficient and expedite it.”

Mentions:

Bio:

Lindon Gao is the founder and CEO of Caper, a New York-based retail technology company. Caper is leading the development of an A.I.-powered self-checkout shopping cart, which is launched across the U.S. and Canada with major grocery stores. Caper’s goal is to reshape the physical retail landscape and transform the way people shop in physical stores (which, by the way, still accounts for 92% of total retail sales).

Gao started his first business when he was 14, and hasn’t stopped creating since. Throughout his life journey, he has worked as a waiter, a construction worker, a cashier, a typist, and a tutor. He also worked as an investment banker in Goldman Sachs and J.P. Morgan for two years.

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Transcript:

Stephanie:

Hey everyone, and welcome back to Up Next in Commerce. This is your host, Stephanie Postles, co-founder and CEO at Mission.org. Today, on the show, we’re chatting with Lindon Gao, the CEO at CAPER. Lindon, welcome to the show.

Lindon:

Thanks for having me, Stephanie.

Stephanie:

Yeah. I’m really excited to have you on. So, tell me a bit about Caper. I was doing a little bit of background digging. And maybe, actually, it’d be great to start with your background first. I saw that you were involved with Y Combinator. So, maybe starting off there, and then we’ll get to Caper.

Lindon:

Sure. I joined Y Combinator shortly after I left investment banking. So, prior to YC, I was an investment banker in Goldman Sachs and JP Morgan, have had quite a number of corporate lives, and didn’t really feel like I belonged in finance as much as I belong in startups. I started my first startup when I was 14, my second one when I was 19. So, I’ve always had a lot of passion for the startup industry. And when I realized that there was a big opportunity to potentially pursue in physical retail, I decided to quit my job to start Caper. And we were lucky enough that we got into YC. And our first application, I remember at the time, we-

Stephanie:

That’s lucky.

Lindon:

Yeah. And we built… At the time, we were actually building a different product. We built a smart security tag. You know those that beeps at the door if you try to steel in Zara? We made it such that it will unlock upon payment. So, just imagine, on Black Friday, you could walk into a store. You could take out your phone, tap on that security tag, pay for it, and the security pack will unlock, and then you can leave the store.

Stephanie:

Smart.

Lindon:

Yeah, so…

Stephanie:

What happened with that? I still need that?

Lindon:

I could get into that a little bit actually. So, we built a prototype for the smart security tag. And then, onsite during the YC interview… YC interviews are ten minutes. So basically, within 10 minutes, you have to knock out everything. And they will be firing questions at you. They will be cutting you off during the interview. I’ve thought about something that was very interesting. Since we only had 10 minutes, I wanted to convey industry urgency, our market. So, I printed these t-shirts where it says, “Did you know that customers will leave the store if they have to wait in line for more than five minutes?” 33% of customers will leave.

Lindon:

So, I printed it out on a t-shirt. And I walked in. And all of a sudden, the interviewer is… At the time, it was… I remember it was Geoff, Geoff Ralston, who is the president of YC. He looked at it and it was, “Oh. Interesting t-shirt.” And we started talking. And I remember, at the time, our prototype was working 50% of the times. So, when we did the demo, the prototype… We were hoping that it will unlock. So, we’re praying, praying, praying. And it did. So, if it didn’t-

Stephanie:

Whew.

Lindon:

Yeah. So, if it didn’t unlock, I think I would probably go back to finance and be an investment banker by now, but luckily it did. So, we got to YC. We build the security tag out. We signed on a couple of really, really large apparel customers. And we launched with Rebecca Minkoff in Soho. But we realized that the tech was really difficult to scale, because you need to apply the technology onto every single garment. That means that it was a gigantic operational overhaul. Every week, the store stock needs to maintain it somehow to make sure that all the new inventory that comes in are tagged, and are synced, with the specific unique identifier for each garment. And that just proved to be too much.

Lindon:

And so, we built it for about a year and a half before we realized that we were just being stubborn, and it was too difficult to scale to market. And that’s when we decided to pivot.

Stephanie:

Very cool. So, what happened next after that? Is that when you… Had you already been thinking about a smart checkout grocery option. Or did you all have to huddle and start brainstorming to be like, “What’s next? Where are we going to go now?”

Lindon:

It was very difficult at the time, because we were not a typical YC company, in that we are a small portion of the hardware companies in YC. And hardware companies are not very popular. So, when we-

Stephanie:

They’re expensive.

Lindon:

Exactly. It’s very capital intensive. Investors don’t like to invest in it. So, after we did our demo day, we didn’t raise so much money. We raised like two, three hundred K, in total. Typically, YC companies, they come out, they sign a million dollar term sheet on the demo day. And there I was, after demo day, some of my buddies were signing term sheets left and right. I was just like, “Hey. You guys want to chat?” And they were like, “Ah. You guys go hardware, not really.”

Lindon:

So, throughout the whole time, it was very difficult. So, when we built it, built a security tag for about a year and a half, none of us were getting paid. At the time, it was four co-founders and two early employees. We lived and worked out of a house in College Point in New York. It’s right by the LaGuardia Airport. And yeah, all we did was just we woke up. We worked. We’d eat together, and work, and we’d go to sleep.

Stephanie:

I heard you got in trouble for buying orange juice [crosstalk].

Lindon:

Where did you hear about that? Yes, I did.

Stephanie:

I just did a little creeping on the internet.

Lindon:

It was a very funny story. My co-founders are extremely frugal because we really didn’t have too much money. We were bringing $7,000 per month. And we’d buy groceries together. I’ll walk into a grocery store… It was a habit. I usually drink orange juice. And I dropped it in. My co-founder’s like, “Do you really need to drink this? This is like six bucks.” I’m like, “All right. Maybe you’re right. I don’t.”

Stephanie:

Oh my gosh.

Lindon:

So, it was pretty tough. But it was also very interesting in that the passion really bonded us together. And that’s why our team is extremely cohesive, even today. We barely have any attrition in the company. And our team is like a family. So… yeah. So, we built a security tag for a year and a half. And at the time, when we decided to pivot, we had probably less than probably 100K or something left in the bank. So, we really didn’t have too much money, and we couldn’t do too much with that amount of capital, especially in a hardware.

Lindon:

So, we kind of huddled together and we were thinking about what sorts of things should we pursue next. Or should we just kind of close up, just go home, and start applying for other jobs? And we decided that it was the retail, the grocery, just general physical retail industry has been extremely under innovated over the past decades. If you were to walk into a grocery store after world war two versus today, it will essentially be this… It’s basically the same.

Lindon:

And we just couldn’t understand retailers are not innovating. So, me and my co-founder, Ahmed, took a slightly more drastic approach in that we’re saying, “Hey. You know what? Before we decide on building anything, let’s go out to the market, and let’s talk to grocery store owners.” But before we went to the market, we were brainstorming. What are some of the things that we could do with our capability? So, we thought maybe… If we retrofit the entire store with sensors and cameras, maybe we can enable a check out free experience [inaudible] retail stores.

Lindon:

So, we had this thesis in mind. And ironically, probably six months later, Amazon go kind of launch with the same idea. But we took a very diff-

Stephanie:

That’s not an app. What year was this? And where was Amazon at then? Who solved it first?

Lindon:

Yeah. So, we thought of… Amazon probably thought of it first because they built it. But we thought about it as well. But we kind of took our idea. But we approached these stores and we just asked questions. So, I remember, it was during the winter of 2016. It was very, very cold. Every day I would wake up. Me and Ahmed would wake up at 7:00. We’d go down to the train station, and we’d just take it to any stop. And then, after we’d get off, we would just walk into any grocery stores that we see on Google Map. And it’s a very different place.

Lindon:

You go in, and a grocery store would be like, “Well, what the hell are you guys doing? If you’re not buying anything, just get out.” So, we went through a lot of that. But there were grocery store owners and managers who were willing to talk. So, we just asked them, “Hey. What are some of your top pain points? And what are some things that we can do to help you innovate your store?” And interestingly, we saw a huge amount of sentiment from the grocers and retailers who are telling us that they do want to innovate. But their concern is that a lot of innovations requires a lot of infrastructure, operational maintenance, and overhaul. And that makes it very, very difficult.

Lindon:

So interestingly, when we presented our “Amazon go” idea to these store owners, most of them freaked out. They were saying, “Hey. Why are you trying to renovate my store? How much does this infrastructure cost?” I’ll say, “A couple hundred K.” And they would say, “Look dude, even if you give it to me for free, I wouldn’t want it.” So, I was shocked.

Stephanie:

[crosstalk]

Lindon:

Why? Yeah. And they were like, “Look. It took me six months to install wifi and amplifiers in my store, because I need to rewire my ceiling and install amplifiers in the gigantic store to make sure everything is in line. Do you think you could come into my store to renovate my entire store, and install thousands of cameras? And do you actually think that could work?” So, we’re saying… So, we’re like, “Okay. You’re right.” And the store owner’s said, “If you want to make anything work in this industry, you have to make sure that it is something that you bring it to our store and it just works. It shouldn’t require infrastructure overhaul. It shouldn’t require operational overhaul.”

Lindon:

So, we really put that to note. So, we kind of went back to the drawing board, and we thought about, “How can we build a technology that just works?” And we kind of stumbled upon this idea that, if we compact computer vision and sensory fusion directly into a shopping cart, which is the most common tool in physical retail, we could enable the same type of experience at much lower maintenance. That really also tied back to our first idea of why we failed the smart security tag idea, was it would require a lot of operational maintenance.

Lindon:

And we thought that the smart cart could really overcome a lot of these barriers. So, we built the technology. Actually, before we built it, we just did a 3D rendering of the cart. We took it to the store owners. And immediately, within two months, we signed over probably 30 contracts. So, that was when we saw a huge pick [crosstalk].

Stephanie:

With the cart that didn’t really work? The cart was…

Lindon:

A picture. It was not even a cart that didn’t work. It was picture rendering of what it looks like, and I just described what it would do. And the store owners were very, very interested to sign on. So, that was how we got started.

Stephanie:

Okay. Cool. So, you got 30 new contracts. I’m guessing you had to go out and raise some more money though. Because, with only a couple $100,000 in the bank, even with 30 contracts, I’m assuming you wouldn’t have been paid… at least net 90, probably, or more. What did you guys have to do to get that first version of the cart made?

Lindon:

Yeah. So, very interestingly, and very luckily, my co-founder, hardware co-founders father, actually owns a manufacturing facility in China. So, we have a very-

Stephanie:

Lucky, lucky.

Lindon:

Yes. So, we had a very unique hardware advantage in that we were able to prototype, and built our first versions of the shopping carts directly at his factory. And that was also one thing that, I would say, is our unique competitive advantage, in that we’re able to iterate all hardwares on a monthly basis. Typically, it takes six months to iterate, on a typical hardware. It takes us a month. And that was the reason why we’re able to accelerate our product development cycle so quickly.

Stephanie:

What were some of the early features in the cart that you either got rid of… What does it look like now versus when you first created it.

Lindon:

When we first created it, it was a lot of duct tape, a lot of weird components in there. I think I remember, when we built our first version, we were trying to demo this to a very large European client. And we shipped it over to France. And the entire cart broke. And I spent two days in a hotel just piecing things together before my client meetings. I actually used glue in there too.

Stephanie:

Oh my gosh. And it wasn’t computer driven at that point, right? Or did you already have AI in it, or not yet?

Lindon:

Not yet, at the time, because our idea was that AI was going to take a little more time. So, while we’re building the R and D branch of our government, we were going to go to market first with the barcode scanning version. And that was a very explicit strategy that we had, because we didn’t want to be a heavily research dependent or research oriented company. We wanted to go to market, to understand the market as we go.

Lindon:

So, we built the shopping cart with a scanner, with a screen. And it also has a low cell which measures the weight of what’s inside the basket. And I remember, when we first launched a very, very small trial inside one of the stores in Long Island city called Ruth Seller. We saw users try to use it. The scanner was very… It was a very small scanner that pointed at the side. And no one knew how to register the item into the cart. So, we did a lot of different changes to our scanner model, changes to the screen, and the low cell. And also, low cell was very, very difficult. Because it’s not common knowledge that the scale is inside your grocer…

Lindon:

Your typical grocery stores are regulated by the government. It’s regulated by the consumer affairs, because if your apples are a dollar per pound, and your scale is off, and it’s wrong, then you’re cheating the consumer. So, it’s protected by the consumer affairs. And to be able to pass that certification requires us to send them our cart. And they will put it in a furnace, put it in a freezer, put in automatic weight into our cart and out of our cart 400,000 times. And we need to be reading accurate to 0.005 pounds. So, there’s a lot of additional engineering in a hardware infrastructure that kind of went in there just to get the first versions of the carts right.

Stephanie:

Wow. That’s intense. So, early days, it sounds like the cart was… It wad kind of like having a checkout conveyor belt on the cart. You could scan it. You could weigh things. And you could check out. And that was the gist of it.

Lindon:

Pretty much.

Stephanie:

What does that look like today?

Lindon:

So today, it’s completely computer vision powered. We could directly drop items into the cart. And we’re launching these into retailer stores very, very soon. And it’s one of the paths where we took, where we thought about, “How do we make computer vision scalable?” Because inside a typical grocery store, you have at least 50 to 100,000 unique items. And for each one of these items, we need images of what the item looks like from different angles.

Lindon:

So, in a way, when we started building the scan version of the cart, it really paved the way for the scan less version. Because, as customers are using it, they’re collecting images for us. You scan a Coca Cola. You put it inside the cart. Now, we know this is a Coca Cola. And then, using our cameras, we’re able to collect over 120 images for us to train. So now, we have over 100s of millions of images in our data bank. And now, we’re able to directly enable the scan less version of the cart.

Stephanie:

That’s smart. That’s like Tesla, how it’s always kind of learning as it goes, learning from other cars. You’re learning from every time someone’s putting something in the shop.

Lindon:

Exactly. Exactly.

Stephanie:

That’s great. And then, I also read that it does some product recommendations. Tell me a bit about that.

Lindon:

Yeah. So, you actually tapped into a really, really interesting space. Product recommendation is a big part of our system. Because when we walk into a store, and you shop for groceries, typically you will probably spend 30/40 minutes in there. And you probably spend five minutes at the checkout, but 35 minutes in your journey as you browse through the store. And when we were launching the carts and working with grocers, we realized that the bigger piece of the opportunity in innovating retail is actually not automating checkout.

Lindon:

That’s a piece of the experience that we can make very seamless. But it’s not the whole picture. The whole picture is, how can we help customer shop through the store during that 35 minutes, and provide them a very digitized and personalized experience. So, the personalized recommendations is a part of that which drives the digitization of the store, where if a customer puts in the milk, for example, we could give them recommendations for cookies, Oreos, cereals, and so forth.

Lindon:

And, as we go on, we’re going to start implementing, for example, things like recipe recommendations. “Hey. I notice you have pasta and you have meatballs in your basket. Would you like to have some Parmesan cheese to go with it because we notice that you might building a recipe for meatball pasta?” Or “We notice that you have gluten free items inside your basket. Would you want us to recommend additional gluten free items inside your basket?” And that really creates another layer of digital platform, on top of physical retail, that really never existed before. Right? You have ecommerce, which is a gigantic digital platform. But also, now, in the physical stores, you have a digital platform where you could browse through the stores and interact with items around you through Caper.

Lindon:

We could eventually help you trace the roots of where your products are coming from. We could also help you count calories of what you’ve been purchasing. So, there’s a lot of different ways to play in this market right now. And that’s the most exciting part.

Stephanie:

Yeah. It also seems like there’s an opportunity to kind of see the location of the shopper, and showcase coupons or things like that, based off the aisle that they’re at. Because that’s always something I think about is… Getting a random coupon in the mail, you’re like, “Well, I’m not going to that store. And now, I forgot about it,’ versus if I’m there, and I’m on that aisle, and it’s like, “Oh. You can have a dollar off an egg.” Okay. I’ll get those eggs then, much easier by-

Lindon:

Exactly.

Stephanie:

… transaction than trying to bring something in store.

Lindon:

Exactly. Exactly. And through that… So now, we have some basic recommendations plus nearby deals. And we’ve been able to see average basket size pick up in some of the… I can’t talk about the larger stores, because we’re [inaudible]. But the smaller stores, we’ve seen more than 18% average basket size increase, on a very consistent basis.

Lindon:

Because if we’re able to get the customers to buy a couple more things, that actually drastically helps the retailers top line as well.

Stephanie:

Yeah. So, tell me a little bit about, what does the landscape in general look like for autonomous check? I mean, now we’re talking about location based stuff, personalized stuff. How do you view it interacting with ecommerce? What does the omni channel experience look like over the next couple years? Or what are you guys planning for?

Lindon:

Sure. So, I could start by just talking about the autonomous check out market. And maybe we can probably dig a little more into the ecommerce part. So, here is the general landscape. Basically, you have the Amazon go formats, which are… The start ups, little companies, are building cameras on the ceilings to directly enable all cashier less checkouts. So, this means that you will have to install hundreds of cameras on your ceiling, on top of building a process, and installing GPUs inside the store to make sure that we’re able to process all these images and make sense of it.

Lindon:

The cameras will be used for two purpose. The first purpose is object tracking, which is you track how people are moving around the store. Because you need to apply that item to that particular person so we can’t lose track. The second part is the cameras are also being used for pinpointing where items are inside a store. So typically, what a lot of… We’ve seen companies where, basically, they use cameras to label where items are inside the store. So, they don’t directly do recognition of that particular item, but they label based on where it is inside the store.

Lindon:

And then, there is the other form factor, which is, instead of using the cameras to label where items are in the store, they use smart sensors, basically weight sensors inside the store, where if you pick something up, the weight sensor would detect it and it will know, “Okay. Coca Cola weighs 100 grams.” So, you just picked it up. You picked that one bottle of Coca Cola. And that’s what Amazon does. Amazon does a lot in Amazon Go. And then, there’s the other form factor, which is a lot more similar to, basically, what Caper does right now, which is we compact everything into a device like a shopping cart, or shopping basket. And customers will pick it up and directly use it.

Lindon:

All the compute is done locally inside within this boundary. And it’s also very, very interesting. I think, probably three months ago, Amazon Dash Cart came out, which is the smart cart iteration of the Amazon Go store, which I thought… And I thought it was very, very encouraging for the industry, because Amazon is known for their innovation in the physical retail through Amazon Go. And Amazon Go has been scaling to have 20 stores or so. And all of a sudden, they came out with Amazon Dash Cart. Because everyone thought Amazon Go was going into Whole Foods, was going to go into Amazon Fresh, but it didn’t. And that was precisely the moment when we were happy to find out our thesis has been right all along.

Lindon:

Because we went out there to talk to the grocery store owners. And they told us that it would be operationally intensive to maintain. So, that’s kind of the landscape. And then, beyond the Amazon Gos and the Capers, you have additional self scanning apps, which Walmart had implemented before in their scan and go program. That really didn’t really take off, so they canceled it and kept it to a smaller membership, like Sam’s Club, I think. But that’s kind of the overall field. When you’re really thinking about which type of form factor works, again, kind of going back to my earlier point, the most important factor is return on investment for retailers.

Lindon:

If they’re investing in the technology, what is the cost of the technology? And what is the cost of maintenance for the technology? For in our security tag example, the cost of the technology is low. Each tag costs like eight cents. It’s not worth too much. But the cost of maintaining the technology is big because I need to get the store staff to consistently apply it. One of the concerns on the maintenance of the technology for the Amazon Go form factor, is that it requires the stores to consistently update where all the items are inside a store. So, you definitely need someone else in the background to monitor and make sure your inventory is 100% accurate. Otherwise, you’re going to start catching the wrong items.

Lindon:

With Caper, on the other hand, with our thesis, is that you could do whatever you want inside a store. It’s none of our problem. All we care about is what you put inside the basket.

Stephanie:

Yep. One thing I’m thinking out too is, how do you continue the conversation with people who use Caper shopping carts? I mean, to me, I think of it as, if you at least have an app, you kind of can continue the conversation with that customer once they leave. When they come back in the store, it’s like, “Oh hi, welcome back. Here’s what you got last time.” I’m even thinking about Whole Foods and Amazon check out on Amazon right now.

Stephanie:

How do you guys think about keeping track of consumers in a way that’s helpful and personalized when they get back in the store?

Lindon:

Yeah. So, that’s an awesome, awesome question. And this is something that we’ve been thinking about a lot, which is, how do we tap into consumers? Right now, one of our first ways to do this is to interact with them through the receipt that we sent them. So, we personalize the receipts. We can send them recommendations on the receipt. And when you come back, we give them unique identifiers that they could log in and we could recognize them. On top of that, we also integrate with retailers loyalty program, so that we’re able to track and we’re able to understand the shopper’s purchase history.

Lindon:

So, that’s kind of one part of it. The second part, which is more of a long term vision is, as we increase penetration in the market, we want to come out with a Caper app, where you could track… Shopping lists is one of the biggest pain points that we have heard from our shoppers. They want to be able to build shopping lists, and come into a store, and upload it inside in our cart. And then, we’ll tell them where everything is inside the store. So, that’s one piece that we’re going to build in. And two is, we really want to build something that’s a little more what we will call the Caper lifestyle.

Lindon:

What the Caper lifestyle is, is that, your diets and what you eat are guided by AI. So, if you have a particular fitness goal, when you go into a grocery store, we give you recommendations of recipes of items that are going to help you get there. And that’s a much, much more healthier, and more informed, and AI driven lifestyle that you could pick up. And… Yeah. That’s our very exciting future vision, but we’re not quite there yet.

Stephanie:

I mean, that’s really cool. That’s just… I mean, it’s like the trends right now you see around media blending with content and tech. And that kind of seems like where you guys are headed is starting here, when it comes to the tech piece, and then start introducing the media and functionality, community building, and encouraging healthy behaviors based off what someone wants to do. That’s awesome.

Lindon:

Completely. Completely, because we interface with the customers, at the right place, at the right time, right, as they’re inside, in their store, as their deciding what to buy. So, we have a lot of opportunities to provide our recommendations to the customers. And hopefully, that can enrich their shopping experience.

Stephanie:

Yep. I also like that you guys have the ability to track based on the receipts. And it just kind of opens up a whole discussion around making things that maybe were normally not useful, like a receipt where it’s like, “Well, I’m not going to return any of these groceries. Just throw it away.” Putting something on there that makes you want to keep something. And it’s kind of like finding-

Lindon:

Completely.

Stephanie:

… arbitrage opportunity that maybe many are overlooking.

Lindon:

Yeah. One of our mottoes is, “Making the mundane into something magical”. So, that includes making the shopping cart into something that’s magical, so that when you put items in there, we just magically recognize it, into something like what we just talked about on the receipt side. It’s not… traditionally, not very interesting. But we want to start enriching every part of your shopping experience that way.

Stephanie:

Yeah. That’s cool. So, you’re talking about increasing market penetration. And I saw that you guys signed a big deal with Kroger. So, I want to hear… First off, congrats. That’s amazing. I want to hear a little bit-

Lindon:

Thank you.

Stephanie:

… about that. How did you strike up that partnership? And what does that look out on a national roll out?

Lindon:

Yeah. So, it’s a very, very exciting deal because it is definitely a step towards the right direction in terms of accelerating the adoption of digitized stores. And Kroger’s came to us initially. We had reached out them. But I would say a good portion of our clients are most effective when they reach out to us. And that was a part of… the early part of the process as to how we got to know Kroger, or how we got started on the project.

Lindon:

They’ve been looking into this phase and thinking about what could potentially make sense. And we decided to start working together, very fortunately. And throughout the process, there were definitely a lot of learnings. But fortunately, Kroger wasn’t our first client, so we had gotten a lot of the initial warp up out of the way. And so, we were able to deploy in their stores very, very quickly. And I think one piece that was quite interesting was that, when Dash Cart came out from Amazon, it really accelerated the Kroger’s process. Because there they were, Amazon, making additional innovations inside physical stores, and now they’re actually… Before, people were saying Amazon Go wasn’t going to scale to a larger store.

Lindon:

And Amazon proved people wrong by developing the smart cart. And that was a validation of what we have built. And that accelerated the process as well.

Stephanie:

What kind of lessons did you learn, or would you tell someone else, when you had that first partner versus moving to something like a Kroger?

Lindon:

It’s definitely night and day. We started first by working with a local grocer, a smaller grocer called Food Cellar. The store owner’s extremely friendly, very open minded, wanted to try new technologies. So, we launched with him first. But as we started working with him, we realized that grocery is a extremely complicated market. It’s not like a typical convenience store where everything is just bar coded and stuff. Inside grocery stores, you have promotional deals. Buy one, get one free. Buy one, get one 50% off.

Lindon:

The promotional part of the pricing logic was very difficult. And also integration into the store’s system was also very difficult, because we need to connect to their point of sale system to make sure that we know the latest pricing of what costs what. And we also need to push back that information to their inventory systems to make sure that their overall records are well maintained. So, that part also took a little bit of time. But I think most importantly is really just figuring out the overall flowing process. In grocery stores, you have… They sell produce. Produce are weighted. So, how do we facilitate that to make sure that it’s very easy for customers to understand that this is the way that they add produce?

Lindon:

On top of that, there is also buffets, coffee beans, beans, different types of… They also have a bakery with coffee. And they also have a pizza little section in the store. So, really understanding every single part of that was very, very essential. So, we really learned… We did a lot of learnings at the local grocery store level. And we also ramped up to Kroger. And before we launched Kroger, we actually launched Sobeys, which was one of the largest super market chains in Canada. And by that, we’ve realized the complexity of a larger enterprise organization, how their system is structured, how their processes work.

Lindon:

And then, all through all that learnings, then we started working with Kroger. And with Kroger, we’re still learning along the way. Physical retail grocery is a complicated space, but we have really figured out a lot more things. And now, we’re able to move a lot more faster.

Stephanie:

Yeah. That’s very cool. It also seems like there’s going to be a tipping point where you train the machines, and then just so much data. But then, you don’t really have to do that anymore because there’s only so many products. There’s only so many bottles of ketchup.

Lindon:

Right.

Stephanie:

Where it’s like, “Okay. I know what that is now.” As you start rolling out into future stores, it seems like you’ll get over a hurtle, then it’s kind of like on to the next thing because you’ve tackled that and they’re good.

Lindon:

Yeah. Completely. Because the initial wrap up is always the toughest. But once you kind of get through a certain critical point, then you realize that, “Okay. We have all the images that we need. We have the integration system, the infrastructure we need. We have overcome a lot of the hardware issues,” which I didn’t mention. The hardware issues are also another beast. And so, I think, from our first store, which it was probably launched about a little over… probably over two years, until now, we just learned a ton along the way.

Lindon:

So, we really… A demo environment… Coming out of a demo environment/a pilot environment into actually a production environment where customers are using it on a consistent basis, where thousands of transactions go through our system on a daily basis, it’s different scale. It’s a different beast that we have to manage.

Stephanie:

Stephanie:

And did Y Combinator come back to you now that things are going pretty well? Or did they ask to invest now?

Lindon:

Well, Y Combinator has always been a co-investor along the way.

Stephanie:

Oh happy, I thought they didn’t… Oh, Y Combinator. I’m thinking about the investors at Demo Day.

Lindon:

Oh. The investors at Demo Day, yes. But we’re a little too big for their tech size now. So…

Stephanie:

Yeah.

Lindon:

Definitely, when we started building and started fund raising, it was a different product. And it was a different market dynamic too. Back then, it was like 2016/2017, there were… Cashier less check out wasn’t even a concept. It was like back in 2008 when self driving wasn’t even a thing, and you were trying to build self driving. People were like, “You’re crazy.” Cashier less check out for retail is kind of very similar to that.

Lindon:

But I think a lot of the recent tailwinds in the industry… It really started first with Amazon Go. And then, Amazon acquired Whole Foods. So, it really spurred up Amazon’s intention to tap into the physical retail market. So, it got a lot of people nervous. And then, it kind of evolved into… Recently, you have COVID, which accelerated the need for a more automated checkout process, because cashiers are very prone to COVID risk. You see more than 20% of cashiers were diagnosed with… tested positive with COVID at some point in their lives. And that makes it a very difficult decision for both the retailers, and the shoppers, and the cashiers. Because you have cashiers who are consistently exposed to thousands of people on a daily basis.

Lindon:

Shoppers want to make sure that they’re safe. And retailers want to make sure that their shoppers are safe, and their employees are safe as well. And that kind of accelerated the interest in the market.

Stephanie:

Yeah. Do you see curbside pickup and people shopping for you as a threat to the business model?

Lindon:

Yeah. This is very interesting. So, this kind of comes back to… draws a full circle on the ecommerce portion now. I do think that grocery and general retail is going to continue to be more ecommerce. That’s one part that I definitely recognize, and definitely am aware. And ecommerce is very interesting in that, during COVID, physical stores are actually doing substantially better. Because we systematically shifted the demand from food, basically from restaurants, into cooking at home for yourself.

Lindon:

So grocery, general retail, kind of enjoy a lot of that market expansion. And then, on top of that, then ecommerce came in and chipped a little bit of the market away from them. But then, when you actually think about the overall landscape of retail, Instacart is the largest ecommerce player. 100% of their transactions are [inaudible] physical stores. So, it doesn’t reduce the traffic inside stores. If anything, it really increased the need to be efficient inside a store. And that’s where Capers come in as well. We can help facilitate delivery shoppers to make them more efficient by telling them where all the items are inside the store, and get cashier check out free so that they can walk out of the store.

Lindon:

So, curbside pickup also, also the same. You need someone inside a store to go walk around the shelves to pick up everything. So, where I see the future of retail really converging is that you are going to see a lot more retailers. Not only are they going to optimize their stores for the shoppers, but they’re also going to optimize the stores to make sure that it also becomes the local fulfillment center. Because these are the distribution modes that are closest to your house. These stores are just a mile away from your house. So, I don’t see in store activity going down at all. In fact, I see in store activities… It’s going to continue to pick up.

Lindon:

And that also increases the need for technologies like us to make in store experience more pleasant so that, when people come back to the store, they enjoy and love that experience as they interact with food around them, but also make it extremely efficient and expedite it. So, I’m very bullish on the overall check out free industry.

Stephanie:

Yeah. I see there being opportunity as well, expanding into the Home Depots of the world, and all the stores where it’s like, “Ugh. This aisle is a little too much for me. I just need to know where to go to get what I want, and then just walk out and not wait in a crazy line.” So, it seems like there’s a lot of other industries that would probably be waiting for this…

Lindon:

Completely.

Stephanie:

… after you guys were fully secured.

Lindon:

Completely. We could expand to all retail formats. So, we’re very excited to explore that.

Stephanie:

Cool. All right. Well, this has been such a fun interview. I probably could keep going, but I’m going to shift over to the lightning round. The lightning round is brought to you by Sales Force Commerce Cloud. This is where I’m going to ask a question, and you have a minute or less to answer. Are you ready?

Lindon:

Okay. Sure.

Stephanie:

All right. What’s one thing from 2020 that you hope sticks around in 2021?

Lindon:

That’s a really tough one.

Stephanie:

It can’t be like, “Oh. I hope people continue to shop more in person and not go to restaurants.” It can’t be something that benefits your business.

Lindon:

Okay. I hope that my team momentum keeps up, because 2020, ironically, is one of the years where my team has really gone together, despite COVID, and really accelerated our development. So, that’s one thing that… That was good. And it really proved that work from home… Actually yeah, work from home is here to stay.

Stephanie:

Yeah. I agree. People will not want to go back five days a week anymore.

Lindon:

Yeah.

Stephanie:

What one thing will have the biggest impact on ecommerce in the next year?

Lindon:

Cost of delivery. If cost of delivery goes down, ecommerce would also take off.

Stephanie:

Yep. If you had a podcast, what would it be about, and who would your first guest be?

Lindon:

The cockroach way. I thought about that. I was going to write a book about it.

Stephanie:

About what?

Lindon:

How do you survive building a startup, earning, I don’t know, $2000 a month. It was one of those things. Because we burned $7000 per month for two and a half years. So, not buying orange juice and all that stuff, that was real, and definitely want to talk about that. So, who would I want to invite? An entrepreneur that was very referable, very, very cheap.

Stephanie:

Your co-founder?

Lindon:

Yes. Yes. He will be a great one. He’s still referable today, even though our team [crosstalk]. Yeah, at least… Well, I mean, I’m paying for it myself now. It’s not on the company. So, he can’t stop me.

Stephanie:

There you go. What’s up next on your Netflix queue?

Lindon:

I watch a lot of stand ups, Kevin Hart.

Stephanie:

Yep.

Lindon:

Yeah, it’s awesome. After a long work day, you can sit down and just watch some Kevin Hart.

Stephanie:

Yep.

Lindon:

It’s great.

Stephanie:

Right. And I think you’ll have a good answer for this last question. What one thing do you not understand that you wish you did?

Lindon:

The complications of scaling a team. When we scale from sea drown to the series A, to beyond, my role has really evolved from a independent contributor that’s on the route to execution, to middle manager, which is managing the execution level people, to managing middle managers, to managing managers of middle managers. And along this way, I really learned a lot about management and growing as a CEO. So, that was something that I wish I had known a little earlier, so that I’m able to roll my team along more effectively.

Stephanie:

Good one. All right, Lindon. Well, thanks so much for joining the show. It was a pleasure to have you on. Where can people find out more about you and Caper?

Lindon:

You can find me on LinkedIn. And you can also find out about Caper on Caper’s website, caper.ia.

Stephanie:

Awesome. Thanks so much.

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