Automated Retail Beyond Food and Beverage, with Q&A from Gower Smith, Co-Founder and CEO of Swyft
Updated: Jun 9
Automated and unmanned retail refers to brick and mortar sales that remove the need for human interaction. Today, the most well known example is Amazon Go, which has 26 stores in the US and rapidly expanding, but other use cases extend beyond just convenience stores. Automated retail offers meaningful benefits to both consumers and retailers. For consumers, it provides a more convenient and pleasant purchasing experience. For retailers, it reduces human capital needs and increases visibility into inventory and merchandising. However, automation requires large investments into hardware and software, so few brands are openly committing to large investments. Nevertheless, we will likely see continued strategic M&A from tech-enabled brands like Amazon and Walmart to build out these technologies in-house.
The global automated retail market is expected to reach $18B by 2023. Today, Asia is leading the frontier of automated retail, owning 62% of global market share for unmanned convenience stores. Most automated retail solutions to date have been selling food and beverage, but there’s no limit to what types of goods we can sell in this manner. As for food and beverage, smart vending machines will face competition from increasingly fast and affordable grocery delivery.
Top Statistics Supporting Automated Retail Growth
43% of consumers will gladly pay for convenience
20% of retailers’ time is spent on merchandise planning activities, representing huge opportunity to automate and save
3-5% is the margin improvement that retail automation initiatives can create, which significantly helps existing thin retail margins
Innovative Automated Retail Solutions Around the World
JD.ID X Mart (China) developed by eCommerce giant JD.com operates stores that sell packaged food, apparel and beauty products. The store uses RFID tags and facial recognition to identify shoppers and purchased items.
MobyMart (Sweden, China) is developing autonomous driving convenience store “pods” that can drive through busy streets and arrive at consumers’ doors when called through the mobile app. Concept video here.
F5 Future Store (China) sells hot drinks and food (noodles, fish balls, etc) that are prepared by robotic arms. It can prepare drinks in 7 seconds and hot food dishes in 50 seconds.
Stockwell (USA) is a smart retail machine that sells snacks, drinks, and other essential living items. Users pay through the Stockwell app and can grab the item off the sensor-equipped shelf.
A Closer Look at Swyft
Swyft, a San-Francisco based company, is providing automated retail vending machines to some of the world’s largest retailers. Swyft’s robotic boxes sell non-conventional items and are located in airports, malls, offices, and other highly trafficked locations. You may have shopped at vending machines for CVS, Best Buy, or Benefit Cosmetics at your local airport; those are powered by Swyft. The company currently has contracts with 67 of the top 75 American airports and all the major Japanese airports.
Swyft’s product has only been in market since 2016, but the company already holds over 20 patents in automated retail technology. Some of these are around the concept of vending machines as micro-distribution centers and enabling couriers to pick up from these locations for delivery to customers. Swyft has grown its technology and customer bases organically and through the acquisitions of ZoomSystems in 2016 and Utique in 2018. The company earned over $20M in revenue in 2019, and has 111 employees today.
Fun Fact: In 2018, Angela Kinsey from the show The Office purchased a Uniqlo jacket from a vending machine (powered by Swyft) and fell in love with it. She even started an Instagram account for her jacket and baked cookies inspired by the vending machine and jacket.
How Swyft Differentiates
Not Just Food and Beverage: Swyft partners with brands selling non-conventional items like electronics, clothing, cosmetics and razors, so it does not compete directly with traditional vending machines.
No Retail Inventory: Swyft does not acquire the inventory sold in the machines from clients, but merely provides retailers the tools they need to build out the automated retail solution. Additionally, Swyft does not want to compete with the brands themselves as retailers.
Customizable Store Aesthetic: Swyft works with customers to develop its machine “concept”, and this has resulted in some innovative, eye-catching vending machines.
Strong Maintenance Network: Swyft has an extensive network of break/fix engineers, and can deploy engineers to all customer sites around the world within 4 hours.
Q&A with Swyft CEO
I got the chance to catch up with Gower Smith, CEO of Swyft, and he shared some additional insights on the business.
Can you break down the revenue model?
We charge customers for our hardware, software and services. We focus on delivering double-digit EBIT to our clients. If we can achieve that, we find that clients are satisfied and we can scale across the organization.
Hardware: The hardware is the customizable retail machines, which customers can buy or rent.
Software (SaaS): The software component is our advanced analytics platform, which includes supply chain management, network monitoring, and demand forecasting. This is really the key to customers gaining meaningful insights and becoming more and more efficient at unattended retail.
Services: Our services are optional and include store design, location procurement, technical servicing, warehousing, and fulfillment.
How do you scout and secure the best store locations?
Our clients typically have a sense for what locations they would do best in, so we work with them to find the best locations and negotiate contracts. Swyft stores are extremely efficient in high density areas and travel locations. We learned from our operations in Japan that train stations are also very coveted. As a company, we have more data on unattended retail than probably any other company in the world and we also acquire 3rd party data to make informed decisions about store locations. We use this data to optimize customers’ and our own operations, but we never resell any customer data.
Is your hardware proprietary?
The first generation of our machines was built by Sanyo Panasonic and we made some modifications to it. The second generation is completely designed by us with our own technology stack, and we work with contract manufacturers to create it.
How has the business been affected by Covid?
Most of our Swyft locations in malls and airports have seen significantly less traffic during the pandemic. However, we are fortunate that we did not go through any layoffs during this time and are happy that we retained our talented team. As for new business, we’re already seeing huge demand for our contact-less unattended stores for health solutions and personal protective equipment with partners like CVS. We are forecasting strong MRR growth in the second half of 2020 as deployments that got delayed start to roll out.
Founder Fun Facts
1. Live Crabs are the strangest thing that Gower has purchased from a vending machine
2. Playing Pool is his favorite indoor activity during shelter-in-place
3. Ideale Italian is a family-owned restaurant in San Francisco that he highly recommends
About the Founder
Gower Smith is the Co-Founder and CEO of Swyft. He previously founded ZoomSystems, another automated retail company that Swyft acquired in 2016. As Founder of ZoomSystems, he raised over $100 million in equity capital and built the business to profitability by 2011. Gower previously founded a number of successful tech startups. These include technology retailer Computerland, an Australian distribution for Apple Computer Products; Archives Computers, a networking and software company (sold to Impact Systems in 1987), and Boomerang Imaging Supplies (sold to TCR in 1997). Gower has studied Radio Engineering and Microprocessor Technologies at New Zealand Broadcasting Corporation and Monash University, respectively. He has also toured as a sound engineer for high profile New Zealand and Australian bands.
Swyft is seeking investors for a few million in additional funding as an add-on to its recent insider round. Swyft is hiring for roles in sales, marketing and location services. Interested candidates can view open roles here.
About the Author
Bonnie Young runs the Amplified blog. She shares her insights on market trends from US to Asia and interviews founders that are shaking up the tech scene. Please reach out to her on LinkedIn with your questions and feedback. She is currently looking for a growth equity or VC role in the Bay Area.