The State of Digital Grocery & Checkout Dissatisfaction

In Grocery Doppio's "State of Digital Grocery Performance Scorecard," 77% of grocery shoppers express dissatisfaction with the checkout process, identifying it as the most disappointing in-store experience. Additionally, 94% of shoppers are concerned about their biometric data security when interacting with grocers. In a forward-looking trend, approximately 9% of grocers are positioned to embrace smart cart solutions by 2024. This signifies a growing acknowledgment within the grocery industry of the potential benefits of smart-cart technology in addressing checkout challenges and other industry dynamics. This shift occurs when grocers maneuver through a fiercely competitive market with narrow profit margins while grappling with the challenges posed by inflationary pressures.

Cust2mate’s Hybrid Approach to Smart Cart Technology

Cust2mate's smart cart solution is at the forefront of integrating security infrastructure and innovation, integrating a comprehensive array of advanced technologies such as scanning, AI, RFID, and security scales. By adopting a hybrid approach, the company maximizes the unique strengths of each technology. While AI holds immense promise for the future, its limitations, such as intensive training and resource requirements, are acknowledged. Cust2mate's strategic approach entails incorporating AI capabilities as the technology matures. Leveraging over three decades of domain expertise, Cust2mate draws upon its history of designing sophisticated systems for Israel's security and law enforcement sectors. The company's hybrid smart cart solution is poised to address crucial pain points for grocers and retailers, offering an all-encompassing answer to their evolving needs.

In this exclusive interview, Guy Mordoch, CEO of Cust2mate, provides insights into the transformative smart cart with integrated security features. This innovation enhances the shopping experience for customers, tackles retailer shrinkage concerns, and streamlines operational efficiency for retailers.

Grocery Doppio: Tell us about yourself and what inspired the inception of the company.

Mordoch: I am Guy Mordoch, a 53-year-old Israeli executive with extensive management expertise spanning 25 years across the US, Japan, and Singapore. My proficiency lies in business transformation, encompassing startups, scaling operations, and propelling companies forward. The conversation with Joseph Ben Tsur convinced me to step into the CEO role, driven by the blue ocean potential in smart cart solutions within the grocery sector. Cust2mate is the vanguard of digital transformation in grocery retail. With a market keen on impactful solutions, I am enthusiastically at the helm of this transformative journey, harnessing the company's capabilities to address retailers' challenges effectively.

Grocery Doppio: What is your company's mission, and what does it strive to achieve?

Mordoch: Our primary objective is to establish ourselves as the leading global provider of smart carts and associated technology solutions. We focus on delivering a data-driven, superior customer experience and a state-of-the-art platform for digital value-added services. Our ultimate goal is to address the challenges faced by the retail industry. We are dedicated to identifying the core pain points within the retail sector and providing innovative solutions for them. With this vision, we aim to lead the market by selling hundreds of thousands of smart carts and dominating the market in the grocery retail sector.

Grocery Doppio: Can you explain the architecture of your AI-Powered smart cart?

Mordoch: Our Smart Cart concept involves a kit installed onto standard shopping carts, consisting of two key components. The first is a panel featuring a large screen, with the upcoming generation boasting a sizable 13.5 by 23.5-inch display. The second component is a security scale positioned at the cart's base. The installation takes place on the customer's site.

From an architectural perspective, the Smart Cart encompasses several crucial elements. It includes a scanner, AI-based cameras for item identification, a security scale for accurate weight measurement, and RFID capabilities for higher-priced items. This multi-tiered security approach ensures that items scanned, identified, and weighed adhere to accuracy and integrity standards, minimizing theft risks.

This robust security solution not only safeguards items on the cart but also aids retailers in curbing shrinkage effectively. Complementing this security infrastructure is a tablet with a large screen that enriches the customer experience. The screen is divided into segments, with one portion dedicated to retail media and advertisements. Retailers can promote their products, and we also offer CPGs the opportunity to advertise. The remaining screen real estate provides valuable information to customers, including their basket's contents, product ratings, nutritional facts, and even in-store navigation assistance.

Grocery Doppio: Please elaborate on your smart cart’s features that address the grocer’s major pain points.

Mordoch: I identify four overarching pain points that are prevalent in grocery retail across the globe.

Firstly, the challenge of shrinkage remains a pervasive issue. Grocery retailers typically incur losses of about 1% to 2% of their turnover due to shrinkage. Through our innovative security solution, as detailed earlier, we can markedly mitigate this concern.

Secondly, pursuing revenue augmentation and heightened profitability is a shared objective. Smart Cart holds the potential to address this by leveraging advanced data capabilities to personalize promotions, aligning with customers' preferences, behaviors, and real-time shopping activities. This approach optimizes conversions and allows retailers to endorse their products strategically.

Thirdly, operational efficiencies come to the fore as a critical concern. Smart Cart's impact in this realm is significant. It reduces reliance on cashiers, a space-intensive and operationally complex retail aspect. Our solution streamlines the checkout process and facilitates efficient restocking through real-time updates.

Smart Cart offers a more enjoyable and frictionless shopping experience backed by data that shows a high percentage of returning customers. With the Smart Cart evolving into a versatile platform enabling on the cart payment and connected to various applications, including retailers' loyalty programs, we aim to elevate customer engagement through gamification and innovative features.

Grocery Doppio: Can you explain how the insights from smart cart data help a grocer optimize shelf-stocking and follow planogram compliance?

Mordoch: While planogram compliance might not be our primary focus with smart carts, we can optimize retailer's shelf-stocking strategies. Leveraging the heat maps generated by our Smart Carts, we provide retailers with insights to enhance their decision-making regarding product placement. Through a thorough analysis of customer traffic patterns, we can pinpoint areas requiring adjustments and recommend changes to attract more footfall. Additionally, our consumption data equips us to precisely evaluate inventory levels and initiate replenishment orders, offering retailers an effective solution for shelf management.

Grocery Doppio: What implementation challenges and integration capabilities does your technology face in the grocery sector?

Mordoch: One of the most significant challenges we face in the market is the inherent conservatism of the retail industry. Unlike other industries I've worked in, such as telecom, cybersecurity, and fintech, retail is notably conservative and not very tech-savvy. Many branch managers, need more familiarity with technology, making adopting tech solutions a gradual process.

Additionally, the retail sector operates on narrow profit margins, making spending decisions, especially on solutions like ours, a tough call. We need to be highly effective in showcasing the clear ROI of implementing our smart cart technology, which can be quite challenging given retailers' conservative nature and limited tech proficiency.

To address these challenges, we're refining our approach. We're working diligently to demonstrate the ROI, ensuring the value proposition is compelling and tangible for retailers. To make it easier for retailers to adopt our solution, we've shifted our business model from selling the carts outright to a subscription-based model. This approach reduces the upfront capital investment and aligns with retailers' financial considerations.

While we aspire to provide the smart carts at a lower cost eventually, we're also exploring the possibility of forming revenue-sharing agreements with retailers based on the incremental value our solution brings. Though this concept is gaining traction, it's still evolving, considering the initial costs and the emerging nature of the smart card domain.

Grocery Doppio: Considering the fierce competition in the industry, what is your company’s unique proposition? What makes it stand out from others?

Mordoch: One standout feature that sets Cust2mate apart is our hybrid solution. Unlike our competitors, who may solely rely on either scan-based devices or AI-driven solutions, we've taken a best-of-breed approach. Our smart carts encompass a variety of technologies, including scanning, AI, RFID, and security scales. This hybrid approach ensures that retailers benefit from the strengths of each technology. While AI is undoubtedly the future, its current maturity level poses challenges, such as time-consuming training and computational demands. Our strategy involves integrating AI as it matures. Already, we've incorporated AI capabilities into our smart carts, and as the technology becomes more advanced, we can gradually expand its usage for broader recognition tasks.

Moreover, our smart carts equipped with RFID offer valuable benefits for specific products like alcohol, cigarettes, and even meat. While RFID technology is expensive, its potential impact on reducing shrinkage in high-value items is significant. For instance, we're collaborating with an Israeli customer to address meat shrinkage by incorporating RFID stickers during the barcode printing.

Grocery Doppio: Please elaborate on the key areas and success stories where Cust2mate solutions have proven beneficial for grocers. 

Mordoch : Our prominent success story revolves around our partnership with one of Israel's major retail chains, Yochananof, which ranks among the top three in the country. Launching initially with 600 smart carts, the number swiftly escalated to 1,300 across their 34 branches, demonstrating the immense impact even in a compact market like Israel. This success has led to an additional order of 1,700 smart carts, a testament to the value they recognize in our solution.

We've gathered invaluable insights and made product enhancements through this collaboration, and Yochananof's proactive feedback has been instrumental in refining our offering. Beyond Yohananof, we're also working with Morton Williams, a more minor yet significant 16-branch chain in Manhattan, USA. These two key customers anchor our success, while our global footprint includes ongoing pilot programs in Texas, France, Mexico, and Singapore.

With over 1,300 smart carts in operation, we've solidified our position as a solution provider. The comprehensive success and positive customer feedback reaffirm the substantial impact our solution is making in the retail landscape.

Grocery Doppio: What new products or services does your company plan to release?

Mordoch: Towards the end of September, we will introduce our 2.8 carts, a transitional version. By the year-end, we're launching our advanced 3.0 carts, showcasing them at NRF in January. While the 3.0 carts will encompass our full vision, the 2.8 carts are a stepping stone to meet current market demand before the complete launch. This roadmap captures our main focus for now.

Grocery Doppio: What do you envision for your company's future in the next five years?

Mordoch: Regarding our go-to-market strategy, we're shifting our primary focus towards the US market. We're set to announce the formation of Customer US shortly and have already brought on board our General Manager and VP of Sales. Our emphasis will be on the US market, and we've made enhancements to the card design, including a detachable panel launching in September. This feature caters to the specific needs of US customers, aligning our offerings with their preferences. The US market holds immense growth potential for us, aligning well with our data-driven approach and expansion plans. 

A Little About Yourself

Grocery Doppio: Tell us about your creative side when you're not developing solutions.

Mordoch: I enjoy spending time with my family, including my three daughters. Traveling and reading books are also among my interests. While I may be seen as old-fashioned for preferring books over movies, I enjoy mentoring young Israeli entrepreneurs. While I wish to dedicate more time to sports, I'm involved in reading, traveling, and mentoring. 

Grocery Doppio: What advice kept you going in tough times and can motivate new entrepreneurs?

Mordoch: Two key strategies come to mind. First, prioritize hiring the best talent available. This cannot be overstated - assembling a top team is paramount. Secondly, maintain an unwavering focus on your convictions. Even in the face of adversity and naysayers, stick to your beliefs. Remaining steadfast in pursuing your goals, regardless of distractions or challenges, will ultimately lead to realizing your dreams.