Computer Vision in Retail: Q1-Q3 2021

This market research report was originally published at Woodside Capital Partners’ website. It is reprinted here with the permission of Woodside Capital Partners.

Woodside Capital Partners is pleased to release this first edition of our new Corporate Finance Newsletter: Computer Vision in Retail, authored by senior bankers Rudy Burger, Jon Shalowitz, and Ryan Phipps. This newsletter is focused on companies at the intersection of Computer Vision, Retail, and Artificial Intelligence. This is one of the most exciting and high growth sectors in retail and e-commerce today.

Summary

Purpose

Computer vision (CV) technology has a multitude of vital applications, from self-driving cars to factory automation. In this newsletter, we focus on a subset of CV applications that are specifically for the Retail Value Chain. A common underlying technology foundation to these products is their leveraging of Artificial Intelligence (AI) to bring new levels of scalability, accuracy, and speed to this application.

The tumultuous impact that Covid has had, especially on the retail industry, has led both physical and online retailers to accelerate their adoption of CV and related automation. Retailers who are embracing these new technologies are coming out of the pandemic with greater operational efficiency and levels of customer service, while those who are not are facing an increasingly steep uphill battle to remain competitive.

Audience

This report is targeted toward the key stakeholders across the CV in retail ecosystem. These stakeholders consist of traditional retailers, large technology platform companies, startups and growth stage companies focused on applying computer vision to the retail sector, venture capital and private equity groups injecting capital into the space and industry experts/commentators.

Focus

In this newsletter, we first focus on defining the market map for this sub-market. Next, we provide a snapshot of financing (IPO, fundraising, M&A) for the year to date as well as summaries of key articles during this time period. Finally, we provide WCP’s detailed segmentation of this submarket with key metrics for each company. In a future report on this submarket, we will provide a detailed snapshot of key startups in this space.

Market Map

Overview

This newsletter is focused on companies at the intersection of Computer Vision (CV), Retail, and Artificial Intelligence (AI). While this may seem like a very specific niche, this overall submarket has a combined estimated market value of $8.4B with a total of 173 companies in this space worldwide.

We further divide this submarket into 4 categories: Retail Automation, Warehouse Automation & Fulfilment, Online Personalization, and Enabling Technology.

Retail Automation: This category consists of CV technologies used for both instore and online retail for store optimization and automation. We further subdivide this category into 6 subcategories:

Self or Zero Check Out: 31 companies, including AWM Smart Shelf, Mashgin, AiFi, and Bite
Instore Virtual Try-on and Customization: 29 companies, including Matterport, Tekion, and True Fit
Foot Traffic/Layout: 20 companies, including Placer.ai, and Nucleus Vision
Security, Safety, Staff, Merchandising Compliance Management: 17 companies, including Chooch.ai, DeWaste, and Signifyd
Instore Robotic Assistance: 8 companies, including Vici Robotics, Takeoff, and Streetbees
Shelf Inventory Management: 10 companies, including Bossa Nova Robotics, Zippedi, Simbe, and Wisy

Warehouse Automation & Fulfillment: This category consists of CV technologies used for automating warehouse operations as well as autonomous delivery. We further subdivide this category into 2 subcategories:

Robotic Warehouse/Stockroom Inventory and Picking: 33 companies, including FellowAI, Liftians, Vimaan Robotics, Coros, and ThirdWave AI
Last Mile Autonomous Delivery: 15 companies, including Cartken, Nuro, and Serve Robotics

Online Personalization: This category consists of CV technologies used for customizing product by utilizing smartphone cameras:

At Home Virtual Try On & Customization: 13 companies, including Bold Metrics and 3DLook

Enabling Computer Vision Technology: This category consists of CV technologies that assist in identifying, labeling, and categorizing products:

5 companies, including iMerit, Lily AI, Video++ Technology Group, and Vion Technology

Observations and Analysis

Market Outlook, Future Financing and M&A Activity

The application of computer vision technologies is critical to the success of the retail industry, and therefore, we expect capital investment and M&A to accelerate in the short and medium term.
However, the market is still in its early innings. According to the 2021 Gartner Retail Tech Hype Cycle, most retail technologies are still classified as either 2-5 or 5-10 years away from reaching their respective plateaus.
We expect additional start-up companies to enter the market in 2021-2022 disrupting incumbents and growth stage companies alike.
COVID-19 heightened the need for new technologies and will continue to be a catalyst, driving adoption and investment in the market.
Financing deal value through Q3 2021 has eclipsed $2.8B, already surpassing the deal values for all of 2020. This growth has been driven by retail automation, warehouse automation & fulfillment, and personalization technologies, respectively.
Given the importance of the industry, we expect that financing values may double in 2022, reaching levels upwards of $6B.
We expect M&A transactions to track closely behind financing activity as companies hit scale and their technologies become more widely adopted. Additionally, many mature and declining retailers continue to lack robust digital capabilities. They will find themselves playing catch up in order to survive, which will also drive future acquisitions. We anticipate that M&A activity will also accelerate in 2022, exceeding the aggregate 2021 transaction value of ~$1B.

Capital Markets Spotlight

Relative to M&A, financings disproportionately outweighed the deal activity for retail technology companies in 2021. Given the early stage of the market, this is to be expected as emerging companies continue to raise capital in order to invest in R&D, validate their respective technologies, and achieve scale.
However, one category has experienced a flurry of M&A activity in 2021:
- At Home Virtual Try On & Customization: As omnichannel retailers are increasingly relying on e-commerce traffic to drive transactions. Gap (Drapr), Neiman Marcus (Stylyze), and Walmart’s (Zeekit) respective acquisitions signal that there’s an increasing importance for retailers to deliver a personalized customer experience while shopping virtually. Retailers are not the only ones. Snap’s acquisition of Fit Analytics, signals that social media may also have an appetite for this technology. By leveraging their existing technology and user base Snap can now offer e-commerce services to retailers, helping diversify revenue outside of their core ad business.

Relevant News

The remainder of Woodside Capital Partner’s report, covering the following topics:

Public Markets Analysis
Financing and M&A Activity
Notable Private Placements
Notable Mergers & Acquisition
CV In Retail Market Map
Company Universe

can be found in this PDF.

About the Authors

Rudy Burger (Partner, Managing Director) is a leading expert on M&A transactions within the technology sector. As the founder of Woodside Capital, he focuses on computer vision and imaging companies within the autotech, security, retail, consumer electronics, and digital health sectors. Prior to Woodside Capital Partners, Rudy was the founding CEO of the MIT Media Lab Europe, a joint venture between MIT and the Irish government. He currently serves on the board of Seeing Machines plc (AIM: SEE) and the advisory board of AutoSens. Rudy has founded five companies in the digital imaging and vision sector. Rudy holds degrees from Yale (BSc and MSc in EE) and Cambridge (PhD in Digital Imaging).

Jon Shalowitz (Managing Director) has worked in the infrastructure software space for more than 25 years. He is a 5-time CEO and had 5 successful exits. He created and ran new CX division at CallidusCloud (SAP) and grew multiple product categories and companies generating $250M+ of revenue. Most recently, he was the CEO of an AI-driven marketing analytics company He has an MBA from Stanford and a Bachelors from Duke University.

Ryan Phipps (Managing Director) advises Software and Ecommerce companies on M&A and strategic financing transactions. He brings over 10 years of successful investment banking experience, including over 50 capital raise and M&A engagements, to the firm’s clients. With extensive transaction experience in software, internet, e-commerce, and technology-enabled services, Ryan is able to provide best-in-class insights and advice to each company he engages with. Prior to joining WCP, Ryan led the Western region for Neptune Financial (NepFin), a venture-backed and tech-enabled investment platform. Ryan earned a Bachelor of Science from the University of Pittsburgh.

About Woodside Capital Partners

Woodside Capital Partners is the leading corporate finance advisory firm for tech companies in M&A and financings in the $30M-$500M segment. The firm has worked with the best entrepreneurs and investors since 2001, providing ultra- personalized service to select clients. Our team has global vision and reach, and has completed hundreds of successful engagements. We have deep industry knowledge and extensive domain experience in the following sectors: Autonomous Vehicles and ADAS, Computer Vision, Artificial Intelligence, Cloud/Enterprise Software, Cybersecurity, Digital Entertainment & Lifestyle, Health Tech, Internet of Things, Marketing Technology, Networking / Infrastructure, and Robotics. Woodside Capital Partners is a specialist in cross-border transactions, with extensive relationships among venture capitalists, private equity investors, and corporate executives from global 1000 companies. More about Woodside Capital Partners here.

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