Instacart acquires smart checkout startup Caper AI for $350M

Instacart today announced that it acquired Caper AI, a startup developing technologies to automate brick-and-mortar checkout experiences, for approximately $350 million in cash and stock. With the purchase, Instacart says that it aims to help retailers “unify in-store and online shopping [flows] for customers.”

Caper’s New York-based workforce will join Instacart, adding hardware engineering talent to Instacart’s existing product development team. Over time, Instacart expects to integrate Caper’s technology into the Instacart app and the ecommerce websites and apps of its retail partners, allowing customers to build online shopping lists and browse recipes ahead of time and check off their lists as they go.

“Over the years, Instacart has continued to expand its retailer enablement services, helping brick-and-mortar grocers across North America move their businesses online, grow, and meet the evolving needs of their customers. As we look ahead, we’re focused on creating even more ways for retailers to develop unified commerce offerings that help address consumer needs across both online and in-store shopping,” Instacart CEO Fidji Simo said in a statement.

AI-powered shopping

Caper was founded in 2016 by Lindon Gao and York Yang. Gao, the president of jewelry manufacturer JPG Crafts, was previously an investment banking analyst at Goldman Sachs and J.P. Morgan.

“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,” Gao said in a press release. “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.”

Caper offers two products: the Caper Cart and the Caper Counter.

The Caper Cart is a shopping cart that uses computer vision and cameras to detect and add items to a digital shopping list (a la Amazon’s Dash Cart). When shoppers toss items into the cart’s basket, they’re recognized by an algorithm trained on a database of over 20 million images and analyzed to provide personalized recommendations and nearby deals via a screen mounted to the cart. The cart automatically measures item weight and will soon provide location-based services that let customers search for and receive directions to items in the store.

Above: A rendering of the Caper Cart.

The Caper Counter also employs AI and cameras to scan items barcode-free, replacing a traditional self-checkout counter with a device that scans items from five different angles to complete transactions. The counter offers promotions and provides digital receipts through a digital display and also lets staff monitor activity to prevent theft, as well as add images of unfamiliar items to Caper’s image recognition database.

Caper’s carts — which were the first in the U.S. approved by the federal government’s National Type Evaluation Program (NTEP), which certifies that they can accurately sell items priced by weight and measures — are currently deployed at Kroger and Wakefern, Sobeys in Canada, and Auchan in France and Spain. That’s in addition to Caper’s smart checkout counters in convenience stores.

Above: The Caper Counter.

Image Credit: Cape AI

Caper had raised $13 million in venture capital from Lux Capital, FundersClub, HCVC, First Round Capital, Red Apple Group, Redo Ventures, Precursor Ventures, and Y Combinator prior to the acquisition.

“[W]e’re thrilled to welcome the Caper AI team to Instacart. We share the same goal of equipping retailers with new and innovative technologies that help them succeed in an increasingly competitive industry, while also providing customers with the best possible experience. We’re excited to bring Caper’s leading smart carts and smart checkout platform to more retailers around the world, as we all reimagine the future of grocery together,” Simo said. “We’ll continue to deepen our investment in our suite of enterprise technology services, unlocking new solutions that help power the comprehensive ecommerce platforms of retailers across North America.”

Smart retail boom

Instacart’s purchase of Caper comes on the heels of its acquisition of FoodStorm, which offers an order-ahead and catering solution for retailers. It’s the latest in a series of investments in Instagram’s enterprise technology services, which the company began offering to partners like Aldi, Costco Canada, Heinen’s, Kroger, Publix, Sprouts, The Fresh Market, Walmart Canada, and Wegmans in 2017 as it looked for new lines of business beyond delivery.

Instacart is one of the largest online grocery platforms in North America, with over 600 retailers delivering from 55,000 stores in over 5,500 cities. (The company estimates its service is available to over 85% of U.S. households and 90% of Canadian households.) Recently, Instacart closed a $265 million funding round at a valuation twice what it was worth last October: $39 billion.

But delivery is an expensive venture, given the challenge of maintaining a dedicated network of shoppers, delivery drivers, and cashiers. This week, the Gig Workers Collective — a network of about 13,000 of Instacart’s 500,000 shoppers — organized a strike protesting the company’s low pay and lack of communication with its laborers. Instacart reportedly turned a profit in the second quarter, netting about $10 million. But as recently as 2019, the company was losing $25 million every month — despite the fact that online grocery purchases have jumped during the pandemic to $1 trillion.

To boost revenue, Instacart has expanded its enterprise offerings including Instacart Advertising, a tool that lets consumer packaged goods companies promote their products to users of the Instacart app. In July, the company launched a new fulfillment solution with Fabric, a startup offering robot-powered “microfulfillment” services designed to operate in dense metropolitan areas. And following the acquisition of FoodStorm, Instacart said it would begin to provide ways for retailers to offer prepared foods for preorder, which are typically more profitable than groceries like produce and packaged goods.

Instacart previously said that expects to grow its corporate headcount by 50% in 2021 as part of its planned expansion initiatives.