How an Inventory Robot Solves a $100 Billion Dollars “Retail Shrinkage” Storm?

An Interview with Brad Bogolea, Simbe Robotics Co-Founder & CEO

From the ancient bazaars to modern malls, the retail trade has been woven into the fabric of human existence for centuries. However, this age-old industry is currently facing a massive, billion-dollar storm: “retail shrinkage.”

According to Statistics, shrinkage has caused a staggering profit loss exceeding $100 billion for the retail sector. If you’ve followed the quarterly earnings calls of major U.S. public retailers over the past year, the term “retail shrink” was undoubtedly a constant refrain, widely blamed for declining profits and gloomy outlooks. 

Retail Shrinkage: A Billion-Dollar Storm Beyond Shoplifting

But what exactly is retail shrinkage? It refers to the myriad inventory losses retailers incur. Digging deeper into the data reveals U.S. retail companies absorbed a whopping $142 billion in shrinkage-related losses in 2023 alone, up a significant 25% from the previous year, accounting for 2% of total sales.

Over the past year, many retailers attributed their profit woes to external theft or violent robberies. However, the causes of shrinkage are quite complex, and simply pinning it on shoplifting is misleading.

The statistics show that while “external theft” accounts for only about 36% of losses, “internal operational errors” by retailers themselves make up a staggering 63%. These range from employee theft, to customers resorting to online purchasing when products are not found in-store, to excessive inventory leading to markdowns and losses.

Furthermore, shelf vacancies leading to customer attrition and profit erosion are one of the retail industry’s primary challenges today.

The damage of “out-of-stock” situations to brands is direct and far-reaching, with surveys indicating that after three such incidents, a customer may never return to that store again. Ensuring shelves are correctly stocked and replenished at all times is paramount.

Underscoring this issue, Simbe’s Co-founder and CEO Brad Bogolea said, “For retailers who have not implemented technology solutions, the cash register may be the only basis for observing sales.”

He stated, “For many retailers, what is happening on the shelves is a complete mystery – a ‘data desert’ that poses immense challenges. Without technology assistance, they find it difficult to know why certain items aren’t selling well. Even many times, products are just sitting in the backroom without anyone noticing the need for immediate replenishment.”

The survey figures also support this. Inaccurate inventory management has always caused inefficiency. In fact, most retailers’ inventory accuracy is only around 65%. Overstock and stock-outs result in inventory distortion that, according to IHL Group, causes an average 7.2% revenue loss for retailers yearly – nearly $2 trillion in losses annually.

Today’s most important consumer decisions are made at the shelf, and top retailers are turning to computer vision technology to capture true visibility into demand that they don’t have anywhere else and power accuracy and execution across their entire business. In fact, Coresight research recently found that over 80% of retailers are planning to invest in in-store technology in the next year.

Meet Simbe

Simbe’s Store Intelligence platform streamlines inventory management and store operations, while elevating store teams and shoppers’ experiences. The platform leverages cutting-edge AI and robotics and includes the world’s first autonomous, item-scanning robot, Tally, which identifies exact product location, stock level, and pricing & promotion information using market-leading computer vision.

Tally has become an indispensable ally to numerous large chain retailers globally. The charm of Tally extends beyond its functionality—when children spot it for the first time, they often burst out with a delighted “So cute!” and gleefully hug this robotic ’employee’.

When Bogolea, the founder of Simbe Robotics, shared his personal shopping experiences, it resonated with many consumers. “As a consumer, it’s really frustrating when I can’t find what I’m looking for when I’m shopping,” Bogolea recounted, highlighting one of the key motivations behind his decision to establish Simbe Robotics in 2014. 

He astutely observed, “The most common questions retailers ask are: Why didn’t this product sell? Is it because no one bought it? Or is it because it’s not on the shelf?” Bogolea asserted, “These are basic and simple questions that the global retail industry could not answer without Tally.”

Tally, the brainchild of Simbe, effortlessly navigates store aisles, accurately remembering the location of each item, deciphering various price tags, and detecting barcode errors. This diligent robot also ensures that items are synchronized with their price tags, guaranteeing a match. 

On high-turnover shelves, Tally acts as a vigilant reminder for stores to replenish high-margin items promptly. It swiftly sends notifications when items are misplaced or shelves are left unused, prompting store associates to take restocking action. Remarkably, Tally is 10 times more efficient than manual inspection, a testament to its revolutionary impact on retail operations.

Not only is Tally diligent, but it is also exceptionally “polite” in its conduct. Moving at a pace one-third that of an average human walk, Tally prioritizes minimal disturbance to shoppers as it patrols the store. Its quiet operation and flash-free scanning process ensure that customers remain unperturbed. Furthermore, Tally is entirely self-sufficient, autonomously handling its charging needs by docking with the charging station without human intervention.

With more accurate information in-hand, store teams can refocus their time on fixing inventory problems instead of finding them, as well as prioritizing higher-value tasks – like helping customers.

For shoppers, this creates better-quality customer service throughout the store, including delivery experiences, accurate pricing information, more accessible associates, and fuller shelves stocked with products that are in the right place.

Tally’s Dozen: The Camera Crew Revolutionizing Retail Shelf Analysis

After delving deeper into its capabilities, this compact yet powerful robot has proven to be quite remarkable. Tally is equipped with an array of over a dozen cameras, complete with autofocus, auto-exposure, and HDR functionalities. These cameras, powered by Intel Realsense 3D technology, provide a clear and comprehensive view from the store floor right up to the top shelves, ensuring even items tucked away in freezers are visible.

The latest model, Tally 3.0, integrates advanced computer vision with RFID tag scanning, allowing it to swiftly identify and locate obscured or misplaced items, such as a T-shirt hidden under a pile. Powered by NVIDIA’s robust GPU platform, Tally efficiently processes vast amounts of data, both locally and via cloud computing, achieving an impressive accuracy rate of up to 99%.

In just one hour, it can scan between 15,000 and 30,000 items – a task that would typically require a significant amount of time and manpower to complete manually. This makes Tally an invaluable asset for larger stores, where inventory tasks can consume up to 100 hours a week. By streamlining these processes, Tally not only saves time but also enhances overall operational efficiency.

Furthermore, Simbe offers Tally through a “Robot-as-a-Service” (RaaS) model. This approach allows retailers to pay a monthly fee based on store size, SKU quantity, and the use of advanced features like computer vision and RFID tags. By reducing the need for a large upfront investment, this subscription model makes sophisticated inventory management technology accessible to a broader range of retailers, seamlessly integrating into their existing operations.

Tally: Enhancing Inventory Management with AI

Tally is deeply integrated with AI technology. Bogolea explains, “To autonomously navigate a physical store without human intervention, a robot needs to be equipped with AI capabilities.” For example, Tally 3.0’s built-in machine learning system not only matches a large database of products with high-resolution photos, but also further analyzes the time, location, and types of product data collected in the store, builds a predictive model, and recommends to the store which areas need to be restocked and when.

Tally can also analyze which shelves are selling the fastest, and further analyze whether the reason for the good sales is due to the placement of the products or the characteristics of the products themselves. With Tally’s help, store associates can save time and ditch pen and paper, and focus on other tasks in the store as well as on customers.

Tally Unlocks Offline Data Goldmine for Brands

The data collected by Tally is not only invaluable for retailers but also represents an untapped goldmine for brands.

In the past, brands had limited visibility into how their products performed in physical retail after the point of sale, including how they were displayed, shopping patterns, whether products were blocked by advertising signage, if high-margin items were placed on the “prime display lines” to stimulate consumer purchases, and what competitors’ products were displayed next to them. These factors were the keys to driving sales in physical stores.

Without real-time shelf data, brands were left in the dark about product performance and had to rely on “mystery shopping” audits.

Bogolea explains that with Tally automating data collection on retail shelves, brands gain visibility they never had before. “By providing real-time out-of-stock insights, Tally enables brands to optimize delivery schedules and replenishment cadences.”

In addition to subscription fees from retailers for the Tally robots, this unprecedented shelf data stream represents a new revenue opportunity for Simbe Robotics moving forward.

Second Entrepreneurship: Using the Power of Data to Disrupt Traditional Industries

Brad Bogolea is not a first-time entrepreneur, founding his first company in 2005 with a focus on the infinite sensor and energy industries, which went through two acquisitions before being purchased by publicly-traded Silver Spring Networks. At that time, Bogolea reconnected with a friend from college, and over the course of the conversation, the two agreed that automation and computer vision would bring amazing and huge opportunities to traditional industries. That’s why Bogolea decided to leave the corporate world and start his own business from scratch. Tally, a robot designed specifically for the retail industry, was born.

“After the company was founded, to be closer to the supply chain, my co-founder and I moved to Shenzhen, China, where we spent some time building the first prototypes of Tally,” he said. As the company grew, Simbe Robotics moved some of its work to Taiwan for a time, and now they’ve chosen to move their supply chain closer to the U.S. to make the production and shipping process more efficient.

After more than a decade of dedicated development, Tally gradually gained market traction, being adopted by numerous medium and large retail chains.

The 2020 Covid-19 outbreak, labor shortages and other disruptions impacted physical retail, but also catalyzed transformation, as more retailers recognized data and automation as indispensable future drivers – fueling Simbe’s growth.

In 2023, Simbe Robotics achieved record-breaking operations. In addition to securing $28 million in a new round of Series B funding, Simbe Robotics also tripled its subscription revenue compared to the previous year. The company is steadily moving towards profitability.

Meanwhile, Simbe Robotics has also secured major retail clients, including BJ’s Wholesale Club and Schnuck Markets, SpartanNash, Wakefern Food, Carrefour, Decathlon and other well-known customers.

Simbe Robotics is well on its way to expanding its business outside of the U.S. Tally robots can now be found in Europe, the Middle East and the majority of U.S. states. Simbe has identified more than 200 million out-of-stock instances and 57 million price errors for retailers.

Going International

Looking ahead, Bogolea is confident in Simbe’s continued rapid growth trajectory, stating “From day one, I was convinced this was a huge market.” “Now, I am even more convinced that Simbe is building one of the most valuable datasets for the global retail industry, which will be of great help to operators around the world.”

Brad’s confidence follows a year of steadfast growth for Simbe. In 2023, the company recorded a 3X increase in its subscription revenue base. Thus far in 2024, Simbe has introduced the industry’s first intelligence platform for wholesalers, building on a successful launch and chain-wide deployment with BJ’s Wholesale Club in four months; expanded its partnership with SpartanNash to an additional 60 locations; and announced the expansion of its leadership team with the strategic hiring of several key executives. 

In the coming years, Tally robots, with their characteristic wide-eyed blinking displays, will become an increasingly familiar sight as they gracefully roam store shelves worldwide.

This article is part of a partnership with Cherubic Ventures. Founded in 2014, they are an early-stage venture capital firm that’s active in both the US and Asia, with a total AUM of 400 million USD. Focusing on seed stage investments, Cherubic aims to be the first institutional investor of the next iconic company and back founders who dare to dream big and change the world.