Instacart Acquires Caper AI for $350M

Instacart's Expansion into In-Store Technology

Instacart initially gained prominence by offering consumers a convenient alternative to traditional grocery shopping – online ordering with home delivery. This service experienced significant growth following the onset of the COVID-19 pandemic. However, recognizing the continued importance of physical retail spaces, Instacart is now extending its reach into brick-and-mortar stores.

Acquisition of Caper AI

The company recently announced the acquisition of Caper AI, a startup specializing in smart cart and cashier-less checkout technology. Caper AI utilizes computer vision and advanced techniques to identify items and process payments for shoppers.

Instacart’s investment in Caper AI is valued at approximately $350 million, comprising both cash and company shares.

A "B2B2C" Retail Technology Strategy

This acquisition aligns with Instacart’s broader “B2B2C” strategy, focused on developing retail technology solutions. Beyond its core delivery service, valued at $39 billion as of March, Instacart is creating a suite of products for stores to enhance customer experiences.

This move follows the recent acquisition of FoodStorm, which aids stores in managing larger, catering-style food orders.

Meeting Retailer Needs

According to Instacart CEO Fidji Simo, the acquisition directly addresses the evolving needs of retailers. She emphasized that modern shoppers increasingly expect and utilize digital services, necessitating adaptation from businesses.

“We are unlocking what we believe is the future for our retail partners,” Simo stated. “We are catering to the changing demands of customers, both online and offline, and enabling retailers to create unified, seamless offerings.”

Competitive Landscape and Expansion Plans

Instacart’s expansion into in-store technology is occurring amidst intense competition, particularly from Amazon, which has its own cashier-free systems and is actively expanding its physical store presence.

The plan is to continue Caper’s current operations, including existing partnerships with Kroger and Wakefern in the U.S., Sobeys in Canada and Auchan in France and Spain. Instacart will also offer Caper’s technology to its extensive network of grocery partners.

Caper AI's Vision and Integration

Lindon Gao, co-founder and CEO of Caper AI, expressed pride in the company’s technological advancements. “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.

Integration with the Instacart app is planned, allowing shoppers to create in-store shopping lists via the app and then utilize Caper technology for automated checkout.

A Measured Approach to Hardware

While the acquisition brings hardware expertise to Instacart, the company intends to adopt a cautious approach to hardware development, prioritizing refinement and widespread adoption of existing products – the Caper Cart and Caper Counter.

“It’s important to get the tech absolutely perfect and adopted globally,” Simo explained. “There is a lot of work to do to get to scale.”

Strategic Acquisition for Caper AI

Caper AI had previously raised $13 million in funding from investors including Lux Capital and Y Combinator. Instacart proactively pursued the acquisition while Caper was fundraising, aiming to integrate its intellectual property, talent, and existing business.

Facing significant competition from companies like Amazon, Trigo, and Standard Cognition, Caper AI’s acquisition by Instacart provides a strong foundation for future growth.

Cost-Effective Technology

Instacart was drawn to Caper AI’s smart cart solution due to its ease of implementation and relatively low cost compared to other cashier-free technologies. Caper’s approach avoids the need for extensive store retrofitting.

“We were attracted to the smart cart solution, the form factor that retailers will already understand,” Simo noted. “And that doesn’t require a big investment.”

Labor Implications and Future Considerations

The implementation of cashier-less technology raises concerns about the potential impact on employment for cashiers. This acquisition also occurs as Instacart faces scrutiny regarding its labor practices.

These issues require careful consideration by Instacart, retailers, and consumers as the technology evolves and becomes more widespread.