Today’s retailers face many challenges. Online competitors such as Amazon provide customers with not only low prices and lots of variety, but with convenient and engaging shopping experiences. In response, brick and mortar stores have had to adjust their businesses to simply survive. Many of the adjustments they’ve made are designed to mimic or provide benefits similar to online shopping. For example, omni-channel commerce gives customers flexibility in where they purchase and return items. Gathering data on customer shopping behavior across these different channels allows retailers to provide tailored experiences to customers.
There’s a heavy focus on improved customer experiences and retailers are eager to find technology that helps in this regard. As a result, there have been many new technology companies bringing innovative solutions to market. One such company is Shopic.
I was first introduced to Shopic at RetailNOW in Las Vegas when Bob Mallia, the company’s U.S. business lead, took the stage for a “Sharktank” contest. During the brief presentation, Mallia explained how ISV Shopic is designed to address the problem of long lines in brick and mortar stores. It’s been reported that 1 in 10 people will regularly abandon their cart in-store because of long lines. This equates to billions of dollars in lost sales in the U.S..
Shopic has created a solution that allows customers to install an app, scan items they want to purchase, and self-checkout at a kiosk when ready to complete their shopping — totally bypassing any lines at the traditional checkout stations. It was clear during the timed presentation at RetailNOW that Mallia was just scratching the surface of what Shopic was capable of, so I was eager to meet with him to discuss the company and its unique solution in more detail.
Within minutes of talking it was clear that my hunch was right. While Mallia says that solving the problem of long lines might be the feature that interests c-level retailers initially, Shopic’s other features do things many retailers can only dream of.
Startup Tip: Leverage Established Partners
Upon completing their shopping, customers using Shopic complete their transaction at a store kiosk, where they are given a receipt and confirmation of their purchases. Additionally, in stores where RFID is used, the tags for purchased merchandise are deactivated. The kiosk hardware is made by Tyco Retail Solutions. According to Bob Mallia, U.S. business lead for Shopic, the relationship with Tyco happened by chance, but has been mutually beneficial for both companies.
Shopic was founded in Tel Aviv, the second biggest startup environment in the world. As a hotbed for innovation and startup sponsorships from the Israeli government, it attracts like-minded companies. One such company is Tyco, who had its own Tyco Innovation program (now Johnson Controls Open Innovation) designed to help startups bring solutions to market. The two companies met through this program and have been working together since.
Not only does partnering with Tyco give Shopic leading hardware, it gives the startup instant clout when talking with customers. “When we go into sales meetings and bring Tyco people with us, it adds to the validity of our business model and shows how concrete our joint go-to-market with Tyco is,” says Mallia. For any startups looking to stand apart from competition when budgets are small and brand recognition is non-existent, partnering with a leading company can be extremely effective.
Dealing With Shrinkage
Every retailer struggles with shrinkage (inventory lost, stolen, or damaged). When you introduce a product that has customers performing self-checkout, there must be concerns about increasing shrinkage, whether by customers outright stealing or making errors during the self-checkout process. If you wondered this, you aren’t alone.
“It’s a layman’s question but it goes straight to the top office of any retailer,” says Mallia. “If my 14-year-old daughter and the CEO of a tier-one retailer have the same question, you know it’s the largest obstacle.”
To address this fundamental problem, Shopic’s developers have built some powerful algorithms for behavioral anomaly detection. The goal is to be able to identify irregularities while customers are shopping. During each shopping experience, the customer is given a score by the Shopic servers based on multiple factors in real-time. If the resulting grade hits a certain threshold, a store employee is notified via a management app that they need to check the transaction.
Here are some examples of what goes into a customer score. Historical data shows that customers at store X usually buy 3 items in a 15-minute visit, but the customer has been in the store for 25 minutes and is only buying 1 item. “That’s one abnormality and wouldn’t be enough to flag the transaction for assistance,” says Mallia. “It would simply be one of many data points and will contribute to a customer grade.” Shopic algorithms also know that customers who buy item X usually also buy item Y. If a customer only buys item X, it’s made part of their score. Again, this one data point isn’t enough to flag the transaction, but would contribute to the overall grade.
The score is composed of many elements, including demographics, time of day, other Shopic shopping experiences, high-cost or -high risk items, and bespoke factors for each particular retailer. “A typical shopping experience is graded in real-time using a minimum of hundreds of factors,” Mallia says. “Theoretically, it could be unlimited.”
He admits that the abnormalities detected aren’t currently 100 percent accurate in terms of whether they’re predicting loss, but over time, the machine learns (even from its mistakes) and with an increasing degree of accuracy he says Shopic will be able to determine whether a shopping experience will result in shrinkage. “At a time when the world is moving toward mobile self-checkout, we believe this is a competitive advantage and game changer,” says Mallia.
If using such algorithms seem like outside-the-box thinking, you need only look at Shopic’s founders and developers, many of which were part of the Israeli defense force Unit 8200 — a department of cyber security experts comparable to the United States National Security Agency (NSA). Mallia says their background and training results in unique thinking and natural problem-solving ability.
Clienteling, Upsells Create Compelling ROI
Not only can Shopic retailers address long lines, cart abandonment, and reduce shrink, Mallia says that store associates can gain real-time insight into who is shopping for what in their stores. This can bring clienteling (building relationships with customers based on their past purchases, behaviors, and preferences) to a new level never seen. “We can give the average store manager unbelievable amounts of information and the ability to engage customers while they’re in-store,” he says.
The upsell opportunities are huge. We all experience Amazon’s insight of “Customers who purchased this item also purchased this item.” To give retailers the ability to do this in-store and engage in upsells in real-time is very powerful.
Winning Tier-One, Tier-Two Business
In July, Shopic went live with Shufersal, Isreal’s largest grocery store chain with more than 270 stores. The go-ahead plan is to target large retailers in the U.S.. Mallia says the company is already far along in talks with one chain, which he expects will become a customer before the end of the year. “Retailers are interested in mobile self-checkout, which is a pretty compelling value proposition in itself,” concludes Mallia. “We believe that the additional benefits we provide — customer experience, ability to engage, and infinite insight never before available — is subsidized by the savings merchants will see by recouping lost revenue as a result of long lines. Our goal is to provide ROI from day one.” 
