Table of contents

• Key takeaways
• Funding
• Partnerships
• Product updates
• M&As
• Appendix

Key takeaways

Funding

• Funding hit a low, as investments shifted toward Digital Retail Enhancement Platforms: The Retail Tech sector continued to experience a subdued funding environment, with this quarter marking the lowest funding levels since 2020. Overall funding declined by nearly 96% YoY (down 86% QoQ) to just USD 24.8 million across three rounds, compared with USD 613 million in 13 rounds during Q3 2023. However, the Digital Retail Enhancements Platforms sector maintained funding levels from the previous quarter. Investments were primarily focused on Crisp, which secured funding to enhance its competitive optimization solutions. Overall, funding for Ecommerce Platforms seemed to have leveled off, contributing to the subdued funding environment observed since the beginning of the year. Investor interest appeared to be shifting toward early-stage investments in newer technologies that enhance customer experience and operational efficiency, driven by the rise of hyper-personalization and continued retail labor shortages.

Partnerships

• Incumbents led with sales partnerships to automate stores via smart carts and self-checkouts: Sales partnerships stood out as the bulk (77.3%) of all Retail Tech collaborations this quarter, driven by incumbents like Amazon, Ocado, and A2Z. Most partnerships were in the Automated Stores sector, led by incumbents that continued to deploy smart carts, while incumbents and startups deployed self-checkout solutions. The ongoing adoption of smart carts, primarily driven by incumbents, reflected trends from the first half of the year. Given the growing disinterest in self-checkout systems among certain retailers, it appears that industry incumbents are shifting their focus toward the accelerated deployment of smart carts, which are increasingly favored by consumers and pose fewer theft-related concerns.  In the Retail Industry Robot sector, startups and incumbents focused on enhancing and deploying inventory robots and micro-fulfillment centers, signaling a rise in commercialization.

Product updates

• Limited product launches with key updates in Automated Stores centered around Amazon: Product updates this quarter were lower than in the first half of the year and primarily driven by Amazon's advancements in self-checkout technology across its Amazon Go stores. While Amazon remains confident in its self-checkout solution, many retailers are phasing out checkout-free systems based on customer feedback and retail shrinkage concerns. This suggests that the shift toward full automation is not one-size-fits-all, leading retailers to adapt their strategies accordingly. Meanwhile, GenAI integration continues in retail, particularly to develop AI-powered shopping assistants. Amazon's Rufus, along with L'Oréal and Walmart, are among the growing adopters of this tech. This shift suggests that while self-checkout automation faces challenges, AI-driven solutions aimed at personalization and operational efficiency are gaining ground. In the long term, more retailers are likely to prioritize customer-centric AI technologies over fully automated systems, balancing innovation with practical considerations.

M&A

• Scandit acquired MarketLab to advance its retail shelf management and analytics solution: M&A activity in Retail Tech has remained low, with only one deal this quarter, matching the single activity from the first half of the year. Both deals occurred in the Automated Stores sector, highlighting a trend toward consolidating expertise to enhance store automation solutions. While Cantaloupe's deal in 1H 2024 focused on expanding its self-checkout technology, Scandit's acquisition this quarter is aimed at improving automated shelving technology.

Outlook 

• AI-based smart carts to be preferred over self-checkout systems: The retail industry is moving toward advanced automation, with smart carts emerging as a key solution, while self-checkout systems may slow down, particularly in larger retail chains. Concerns over theft and customer experience are prompting retailers to phase out self-checkouts. Instead, established players and disruptors are investing in and actively working to enhance the functionality of smart carts and accelerate global deployment. A key trend to look out for is the AI integration in smart carts. Retailers are prioritizing AI-enabled carts that provide personalized recommendations while integrating seamless payment options. As smart carts become more sophisticated in these areas, they are likely to solidify their position as a preferred automation solution, while self-checkouts decline.

• Growing demand for micro-fulfillment centers and inventory management robots: As retailers face rising consumer expectations for fast delivery and convenient shopping experiences, micro-fulfillment centers (MFCs) present an effective solution. Integrating inventory robots further boosts operational efficiency. We continued to see major international retailers such as Kroger, Coles, HEB, and Northeast Grocery adopting automated warehouses, fulfillment centers, and inventory management robots. Furthermore, tech advancements have made MFCs a cost-effective solution, making them more accessible to a broader range of retailers. This economic feasibility, combined with the ongoing trend of urbanization and the growth of ecommerce, is expected to drive further adoption across the retail industry. As more consumers shift toward online shopping, the demand for localized fulfillment solutions and management robots capable of efficiently handling high volumes of orders will continue to rise.

• Investor interest shifts to Digital Retail Enhancement Platforms: Digital Retail Enhancement Platforms are beginning to attract investor interest, with funding primarily directed toward players like Crisp, which has secured investments in recent quarters for its competitive optimization solutions. Further GenAI integrations in Digital Retail Enhancement Platforms are likely. Product updates in the GenAI space, with companies like L'Oréal, Amazon, and Walmart exploring the implementation of shopping assistants and virtual shopping technologies to improve the customer experience, suggest that Digital Retail Enhancement Platforms supporting such technology could attract even more investor attention. The integration of GenAI into these solutions is likely to become more prevalent in the coming quarters, facilitating personalized customer engagement and delivering valuable consumer insights, enabling retailers to create immersive shopping experiences that drive customer loyalty and boost sales.

Funding: Lowest funded quarter despite investment in Digital Retail Enhancement Platforms 

Analyst Take: The Retail Tech sector saw little funding since the start of the year, with this quarter marking the least since Q1 2020. Funding declined 96% YoY (down 86% QoQ) to USD 24.8 million across only three funding rounds in Q3 2024 (USD 613 million across 13 rounds in Q3 2023). Digital Retail Enhancement maintained its funding compared with the previous quarter though it had no funding in the same quarter last year. Historically, this segment has been one of the lowest-funded segments (~19% of total funding from 2020 to 2023). Funding in Automated Stores too was down 94% QoQ, but up 4x compared with Q3 2024 and almost in line with the historical average (18.5% of total funding over 2020–2023). Investments centered around Crisp, which secured funding to advance its competitive position optimization solutions. It appears that funding in Ecommerce Platforms is stabilizing, shifting seed and early-stage investments to newer technologies that enhance customer experience and operational efficiency. The rise of hyper-personalization, along with retail labor shortages, has fueled interest in these tech solutions, driving investment despite the broader funding slowdown in more established sectors like Ecommerce.

Retail Tech Q3 2024 funding summary

• In Q3 2024, Retail Tech companies raised USD 24.8 million across three funding rounds. The total was 95.9% lower YoY (down 86.2% QoQ), while the number of rounds dropped 76.9% YoY (USD 612.5 million across 13 rounds in Q3 2023) and 62.5% QoQ. The decline was due to an absence of funding in the Ecommerce Platform and Retail Industry Robots industries, which had collectively raised USD 611.1 million in Q3 2023, accounting for nearly all of the funding that year. 

• Despite the downward trend in funding, Digital Retail Enhancement Platforms maintained its funding compared with the previous quarter (down only 3.5% QoQ). The segment, which raised no funding in Q3 2023, secured USD 17 million this quarter, solely from Crisp’s Series B round from new investors Wellington Management, Toshiba Corporation, and DNX to expand its reach into the consumer packaged goods (CPG) and retail sectors.

• Automated Stores funding too was down 94% QoQ though it was up 4.1x YoY, as there was no funding in smart carts this quarter (last quarter retail biometrics and technology provider Aisles secured USD 130 million to enhance AI capabilities and enter new markets). Automated Stores funding this quarter was largely driven by full-automation solution provider AiFi, which secured USD 6.7 million in an undisclosed round to enhance its AI-platform.

• During Q3 2024, venture capital funding rounds were the most common, accounting for two of the three funding rounds, including AiFi's and AWS Smart Shelf’s USD 1.1 million raise. However, early-stage funding led in value, driven by Crip’s USD 17 million Series B round. Notably, there was no seed or growth-stage funding this quarter, which may indicate reduced investor interest during this period, or suggest that companies who have already secured funding are now focusing on product development and partnerships, as evidenced by the rise in partnership activities during the quarter.
• The Retail Tech industry’s overall average deal sizes declined 82.4% YoY to USD 8.3 million, reflecting the downturn in the overall funding environment.

Partnerships: Incumbents lead with sales partnerships to automate stores via smart carts and self-checkouts

Analyst Take: The Automated Stores sector accounted for most of the partnerships (64%) this quarter, driven by incumbents like A2Z, Instacart, and Amazon. Most of these companies focused on expanding the adoption of smart carts and enhancing self-checkout solutions. In the Retail Robotics space, activity was relatively lower, though micro-fulfillment adoption continued to grow, with partnerships signaling increased uptake. This was primarily led by incumbents like Ocado, which are bringing these solutions to major retail stores and supermarkets. Meanwhile, startups were more involved in sales partnerships, indicating that their solutions are also gaining traction in a market mostly led by strong incumbents.

• We observed 22 partnerships in Q3 2024 (vs. 15 in Q2 2024), with incumbents such as Amazon, Ocado, and Sensormatic leading collaboration activities (~81%). Automated Stores saw the most partnerships (14), followed by Retail Industry Robots (6) and Ecommerce (2) with, sales partnerships (17) being the most common.

Notable incumbent partnerships in Retail Tech during Q3

Notable disruptor partnerships in Retail Tech during Q3

• Automated Store partnerships focused on sales collaborations to accelerate the global adoption of smart carts and checkout-free solutions
  • Sales partnerships accounted for most of the Automated Stores partnerships during the quarter, as incumbents predominantly drove partnerships with major grocery chains to scale automated retail technologies such as smart carts and checkout-free solutions globally. This push is driven by the growing demand for efficiency and convenience in high-traffic environments, including supermarkets and stadiums. Key partnerships included the following:
    • A2Z Smart Technologies partnered with French grocery chain Franprix to deploy Cust2Mate smart carts at a Paris store.
    • Instacart teamed up with Aldi South to roll out Instacart's “Caper Carts” smart cart solution across the US and Europe.
    • Amazon, Sainsbury's, and Megasuper prioritized checkout-free solutions. Amazon is launching its Just Walk Out technology across 10 additional on-campus convenience stores and expanding its partnership with the NFL to launch 14 new Just Walk Out stores at three stadiums. Meanwhile, Sainsbury’s signed a seven-year agreement with NCR Voyix to enhance its self-checkout systems in the UK, and Costa Rican retailer Megasuper partnered with Toshiba Global Commerce Solutions to install its "Self Checkout System 7" technology at Megasuper locations, enabling customers to scan their purchases.
    • Although startup activity was limited, they too are making notable progress in self-service checkouts. AiFi partnered with the Chicago White Sox for a checkout-free store at Guaranteed Rate Field and Trigo teamed up with REWE Group to open a cashier-less supermarket in Hamburg.
  • Notable product development partnerships by incumbents focused on automation in retail through smart carts and inventory management solutions.
    • A2Z partnered with US-based IT firm Level 10 to accelerate smart cart rollouts across the US while collaborating with Nayax to develop an integrated smart card payment system for retailers. Level 10 will manage installation, deployment, and support, positioning A2Z for significant market expansion. Nayax’s automated mobile payment system will be combined with A2Z’s Cust2Mate 3.0 smart carts.
    • Google Cloud partnered with Parallel Dots to deliver advanced retail shelf monitoring solutions to CPGs and retailers globally by leveraging image recognition and AI to deliver real-time retail execution insights and shelf KPIs.
• Retail Industry Robots partnerships were primarily driven by sales collaborations aimed at deploying micro-fulfillment solutions
  • Incumbents also led the Retail Industry Robots partnership activities this quarter. They were centered on embracing micro-fulfillment solutions to enhance operational efficiency, boost productivity, and scale operations in the grocery and broader retail sectors. These included the following:
    • Ocado Group received an order from US retailer Kroger to integrate its automated warehouse technologies, including On-Grid Robotic Pick and Automated Frameload, into Kroger's customer fulfillment centers to boost online operational efficiency. Additionally, Ocado partnered with Australian retail chain Coles to open two customer fulfillment centers (CFCs) in Australia as well as with Aeon Retail to establish a third robotic warehouse in Japan to further improve logistics efficiency.
    • Startup Simbe Robotics continued its expansion, partnering with Northeast Grocery to deploy Tally, its autonomous inventory robot, in select stores. It also extended its partnership with Wakefern Food Corp. to roll out Tally robots across more locations in the US.
  • We only saw one product development partnership, with incumbent Sensormatic Solutions partnering with HappyOrNot to launch the Brand Vitality Meter. This tool integrates customer feedback from Smiley devices with Sensormatic’s traffic data, enabling retailers to analyze customer satisfaction, alongside store performance, optimizing in-store experiences, and brand health. 
• Amazon collaborated to provide retailers access to its ecommerce platform for business growth
  • Activity in the ecommerce B2C space was limited to Amazon leading through sales and product development partnerships. 
    • Amazon teamed up with Feedonomics to enable brick-and-mortar retailers to showcase their in-store inventory on Amazon.com, leveraging Feedonomc’s product feed management capabilities.
    • Amazon also formed a product development partnership with Empower SPC Free Zone members to sell their products on Amazon.ae, helping them leverage the platform’s capabilities and tools for business growth.

Product updates: Amazon Go stores launch Just Walk Out, as others phase out checkout-free systems; GenAI adoption continues

Analyst Take: Product updates this quarter were low compared with the first half of the year, with most activity coming from Amazon in the Automated Store sector. Amazon introduced a GenAI model to improve its self-checkout technology and expanded its use across Amazon Go stores. While Amazon remains confident in its self-checkout solution, several other retailers have shown disinterest, joining a list of those phasing out checkout-free systems over feedback from customers and minimizing retail shrinkage. This divergence signals that full automation is not one-size-fits-all and retailers are rethinking their investments based on operational realities. GenAI adoption continues, as more retailers are exploring its integration into their operations, with a focus this quarter on AI-powered shopping assistants. Amazon's Rufus, Walmart, and L'Oréal are among the latest to integrate this tech. The trend suggests that while self-checkout automation may face short-term hurdles, AI solutions focused on personalization and efficiency are set to grow. In the longer term, retailers are likely to prioritize customer-centric AI over full automation, balancing innovation with practicality.

• We observed a sharp decline with only four updates (two product updates by incumbents) in Q3 2024 (55% decline QoQ), solely in the Automated Stores sector. 
• Amazon advanced its “Just Walk Out” checkout-free solutions while expanding launches
  • Amazon announced an update to its “Just Walk Out” checkout-free technology, introducing a new multi-modal foundation model GenAI system. It is trained on a 3D store map and an image catalog of merchandise for visual recognition that simultaneously analyzes data from cameras and sensors, processing inputs like weight sensors, making “Just Walk Out” faster, easier to deploy, and more efficient for retailers.
  • Just before this product update, Amazon opened a new Amazon Go store powered by this tech in Bellevue, Washington. As of the end of Q3 2024, Amazon operated 22 Amazon Go stores in the US. Despite recently removing Just Walk Out technology from some Amazon Fresh grocery locations, the company plans to continue its deployment at Amazon Go stores and select Amazon Fresh locations in the UK as well as third-party venues, such as sports arenas and airports.

• Self-checkout systems are losing popularity among a few other retailers in the US and UK due to customer concerns and theft issues
  • Morrisons and Asda, two UK supermarket chains, are modifying their self-checkout systems based on customer feedback and concerns about theft. Morrisons plans to eliminate self-checkout tills in select stores, replacing them with manned checkouts. Initially, the company will reduce self-checkouts in about 20 stores, having already removed four at a location in Brough, Yorkshire.
  • In the US, Dollar General has removed self-checkouts from nearly 12,000 stores, a move announced in December 2023 to boost sales and minimize retail shrink. Similarly, discount retailer Five Below also plans to eliminate self-checkout options at certain locations to address retail shrink.

• GenAI product updates focused on improving virtual shopping assistance
  • Recent developments in GenAI highlight a growing trend among retailers to enhance customer experiences and optimize operations by improving shopping assistance and ensuring accurate customer searches.
    1. Amazon has introduced its GenAI-powered shopping assistant, Rufus, in the UK after an earlier launch in the US. Initially available to a limited group of customers on the mobile app, Rufus is trained on Amazon's product catalog and web information, allowing it to address various shopping inquiries.
    2. Walmart has used multiple large language models (LLMs) to enhance over 850 million catalog data points, improving data quality and reducing labor costs. This upgrade also streamlines inventory management and enhances customer search accuracy. 
    3. Beauty brand L'Oréal introduced GenAI-driven tools, including the Beauty Genius personal assistant, to provide tailored recommendations and support.
    4. UST, a digital transformation solutions company, launched its UST Retail GenAI platform at the London Innovation Lab. The platform combines established business models with key GenAI capabilities like search, summarization, automation, and creation to transform retail operations.

M&As: Scandit makes acquisition to advance its retail shelf management and analytics solution

Analyst Take: M&A activity in the Retail Tech space remained low, with only one major deal this quarter, similar to the single activity in the first half of the year. Both deals took place in the Automated Stores sector, indicating that players are looking to consolidate expertise to advance and expand the adoption of their store automation solutions. While Cantaloupe's earlier deal focused on geographically expanding its self-checkout technology, Scandit's acquisition this quarter is aimed at improving inventory shelving capabilities.

• We observed one acquisition in the Automated Stores sector this quarter, where growth-stage startup Scandit acquired shelf audit automation technology assets from MarketLab (a Polish image recognition and AI company) for an undisclosed sum. This acquisition is likely to enhance Scandit's automated stocking and shelving solutions, as it integrates MarketLab's fixed camera shelf recognition, complementing the former’s mobile-based data capture. 

Appendices

01. Notable partnerships across Retail Tech