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SandStar leads small stores into the future of smart retail: Startup Stories

The company says its AI analytics can reduce restocking costs by 40% and increase profits by at least 30%.

SandStar smart store illustration. Photo courtesy of SandStar.

Consumer retail may be permanently changed by the pandemic. In the past months, people around the world have used web portals and apps to order everything between groceries and items to help pass time at home. Out of necessity, we’re now more willing to buy stuff online. A recent joint report by Facebook and consultant firm Bain & Company found that this habit will most likely stick even when movement restrictions and cautionary social distancing become things of the past.

That’s not to say brick-and-mortar retail is being written off. In-person shopping isn’t going away anytime soon, but the experience may change. We may see cashless and contactless shopping become more common, and that means many retail businesses will need to upgrade their stores with new hardware and software.

Enter SandStar, originally named Yi Tunnel, a company founded in 2016 by a group of Tsinghua University alumni who already had significant experience working for tech companies.

The company’s CEO, Yili Wu, worked in sales for Oracle and IBM for around eight years. At some point, he identified that brick-and-mortar operations could provide a better shopping experience if they underwent digital transformations.

“They are lacking a lot of data and have a lot of pain points,” said SandStar’s chief marketing officer Andrea Wang to KrASIA in a recent interview.

Most retailers have no data about their customers’ preferences and behaviors, meaning it was impossible to make data-driven decisions. And for the consumers themselves, personalized shopping experiences were rare.

The company has set out to address these shortcomings by using artificial intelligence computer vision solutions. SandStar’s products include smart kiosks, data analytics, and automated store equipment that make grab-and-go shopping possible.

Four years after the startup’s launch, its products are being used in 12 countries. Seventy percent of their clients are overseas, spread across the United States, Japan, Thailand, the UAE, and France. Around 2,000 of its smart kiosk machines are used by global giants such as Coca-Cola, which place vending units in retail locations.

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Read this: Southeast Asia’s convenience stores play catch-up with China on digitization

Beginning with a global vision

Since its inception, SandStar had plans to go global. Countries such as the US and Japan have a larger demand for automated and contactless shopping. “They are willing to pay more for this technology,” said Wang.

This vision shaped SandStar’s operations. The company established its second headquarters in Charlotte, North Carolina, to complement its head office in Beijing. Its rebranding from Yi Tunnel to SandStar made its name easier for clients to pronounce—and remember.

Wu’s previous line of work gave him a pool of potential customers, but SandStar’s clients are mostly from two channels. The first, according to Wang, is the accelerator programs that SandStar joined in its early years. The company was enrolled in Microsoft Accelerator Beijing’s 11th cohort and Baidu Accelerator, which granted them access to work with the tech giants’ existing partners.

To build upon that momentum, SandStar participated in global trade shows, such as the US-based National Retail Federation’s Retail Big Show in 2018. “That year, we were the only one using AI for retail. The show was a huge of success for us, we got a lot of inquiries,” Wang said, adding that there was plenty of media exposure for the company afterward.

SandStar’s dual headquarters supported its business strategy: pitching from top-down. Instead of showcasing their systems at local offices, SandStar preferred to go straight to the top. They visited shot-callers in headquarters, which are mainly located in Europe or the US, then branched out to regional offices. “It’s not like starting from Chin, then going global, it’s the other direction,” said Wang.

The strategy has paid off already, as demonstrated by SandStar’s contract with Coca-Cola. In 2018, Wu and his team went to the soft drink giant’s headquarters in Atlanta, Georgia, in the United States to demonstrate the contactless and automated smart kiosks at a conference organized by the company for chief innovation officers. SandStar was then commissioned to provide smart soft drink stands, which are now available in the US, Europe, Japan, and China.

But SandStar hasn’t lost sight of potential business in China. It provides smart kiosks that are set up in Wanda Group’s shopping malls, CFS’s supermarkets, as well as at the gas stations of Sinopec Group.

Read this: Tencent bolsters overseas presence in smart retail with investment in Australian payments firm Afterpay

Technological advantages over competitors

Smart retail has yet to proliferate in malls, supermarkets, and other locations where we spend money, but there are a few players that are defining the operations in this space. For instance, Tencent-backed cashier-free convenient store chain Bianlifeng saw rapid growth last year. And in the US, Amazon Go operates more than 20 stores in Chicago, New York, San Francisco, and Seattle.

Wang claimed that SandStar has an edge over the competition. “The technology is different. They use radio frequency identification (RFID), which from our experience is not a really good way for operation,” she said. The system requires a small chip, usually embedded in a tag or label, to be scanned. Wang said this leads to two shortcomings. First, the labels cost at least 40 cents each (in USD), which adds up to hefty overhead. Secondly, pilferage is far too easy. “In real operation, people can cheat by taking off the stickers or switch them with labels from cheaper items,” she explained.

SandStar deploys dynamic computer vision for item recognition, with an accuracy rate that the company clocks at 99%. After all of a customer’s items are scanned by a smart kiosk, the bill’s total is automatically deducted from their mobile wallet or bank account.

SandStar smart shop. Photo courtesy of SandStar.

The startup can also fold a store’s existing infrastructure into its analytics suite, linking security cameras to its servers to generate customer profiles, identify hot zones, and evaluate operational efficiency at checkout points. All of this information is displayed on a dashboard that is accessed by store management personnel, and the system sends out alerts to restock items. SandStar has also developed smart advertisement machines, which are screens that are typically placed near checkout points to encourage upselling.

“Customers can get a more personalized and customized shopping experience. So, for example, if the person is a young female, the advertisement will be yogurt or healthy products,” Wang explained, “But for a 30–35 male, the ad will show more shaving products or coffee. Just like Amazon knows what you might like, only this time it’s offline.”

Importance of data

The future of retail may be automation. However, Wang emphasized that the key to taking smart retail to the next level is data about consumers. “It’s very valuable and will boost business,” she said, adding that stores implementing SandStar’s technology saw boosts of at least 30% in sales.

In Thailand, where SandStar works with local conglomerate CP Group, the case of one convenience store located near an elementary school showed how this can make a difference. The store originally stocked a lot of snacks and drinks for children, but sales were lackluster.

“We see that people touch the products a lot, but the sales are not good, the conversion rate is really small. There might be something wrong,” Wang said. “So we check the people profile, and actually most who visit are parents of the students. They touched the product a lot without buying because those products are not targeted at them.”

The store then restocked with drinks and snacks that were geared toward adults. In the same month, sales increased by around 30%. Restocking costs dropped by 40%, as the analytics suite indicates how many items need to be shipped in to pack the shelves.

With a recent Series B+ investment from True Digital Group, an affiliate of CP Group, SandStar is eyeing expansions in Southeast Asia, Japan, South Korea, Europe, America, and the Middle East in the next two years.

“They feel the contactless retail is very well-received by customers and they’d like to have these automated products,” Wang said.

This article is part of KrASIA’s “Startup Stories” series, where the writers of KrASIA speak with founders of tech companies in South and Southeast Asia.