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Competition to AmazonGo hails from unlikely source

Shufersal, Israel's biggest supermarket chain, is partnering local startup Trigo Vision to make all its stores cashier-less

Tel Aviv

AMAZON.COM Inc set off a global race to automate grocery shopping. The latest entrant comes from a nation not known for state-of-the-art retail experiences: Israel.

Shufersal Ltd, Israel's largest supermarket chain, is partnering local startup Trigo Vision Ltd to eliminate the need for cashiers in its 272 stores, the companies said in a statement Tuesday. Trigo's platform uses a feed from ceiling cameras to identify items in a customer's shopping cart, which are tallied to produce the bill.

It's surprising Israel would be among the first countries to say farewell to the supermarket checkout line, as its startups traditionally pay little attention to the domestic market. Israeli tech entrepreneurs generally aim for clients in bigger markets, and many consumer-facing industries here lag behind technologies used in other developed economies.

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"In providing pure commerce technology, I'm not sure Israel has a lot to offer," said Danny Peled, managing partner at Israeli venture capital firm KDC Media Fund. "The local industry is not really developed, and you need a size and a magnitude to create the kinds of products that are world-beaters." Shufersal is trying to make supermarket shopping one of the few exceptions. According to the company, online sales account for 14 per cent of its roughly 12 billion shekels (S$4.6 billion) of annual revenue, which it says is one of the highest levels for major chains worldwide. E-commerce will account for about 2.5 per cent of the US$1 trillion US food and beverage market this year, according to Coresight Research.

Technology plays "a big role" in customer satisfaction, Shufersal's chief executive officer Itzik Abercohen said in the statement. Working with Trigo "will also drive efficiency and minimise costs across our operations". The company didn't specify how many jobs it would cut as a result of the new partnership.

Trigo says its technology has a 99.5 per cent accuracy rate. Founded in 2016, the startup offers grocers two models. One replicates the AmazonGo experience, where a customer self-identifies with her smart phone and leaves with her items, and the chain bills her credit card. The other allows anyone to enter the store, grab his goods and check out at giant screens that have already catalogued the contents of his shopping cart.

Trigo, which has raised US$7 million from investors, is working with two other "large international supermarket chains" and plans to add more clients by the end of the year, CEO Michael Gabay said. The cost - between US$20,000 and US$30,000 per store - is significantly lower than what Morgan Stanley estimates Amazon will spend on each cashier-less shop, as much as US$1 million.

"Every supermarket that adopts this technology will have a leg-up on the competition," Mr Gabay said in an interview at the company's Tel Aviv office, where the firm tests its technology in a mock supermarket. "If you're in the neighbourhood and there are two supermarkets - one with a line and the other not - which one are you going to go to?"

AmazonGo first opened in Seattle in 2016 and the company plans to open 3,000 more stores by 2021, people familiar with the matter told Bloomberg in September. Competitors aren't standing pat - Alibaba Group Holding Ltd is experimenting with similar technology in China, and rival enterprises have begun sprouting in Japan.

"Amazon sets the benchmark for the industry," said Mr Peled, whose fund also invested in Syte.ai, an Israeli startup that uses machine-learning technology to help consumers search more effectively for items. "Now everyone is running like crazy to match it or beat it." BLOOMBERG