Recently, Amazon (AMZN 3.15%) announced it was buying 3D modeling start-up Body Labs, for what sources say is close to $70 million. Body Labs makes software that models true-to-life 3D depictions of people's bodies. The product is most likely to be used in Amazon's nascent apparel businesses, but it could also be applicable to other fields as well. Here's what investors need to know.
The background on Body Labs
Body Labs was formed in 2013, when it received $2.2 million in seed funding, with an $11 million follow-on Series A round in 2015 that included Intel's venture investing arm. The company was formed by Michael Black, Eric Rachlin, and Alex Weiss, along with venture capitalist and entrepreneur Bill O'Farrell.
According to O'Farrell's description, Body Labs is, "focused on delivering the human body as a digital platform for creating and acquiring goods and services." While "delivering the human body" sounds like an oddly morbid description for a business, the company's technology enables the further blending of the physical and digital world, which is right up Amazon's alley. To give a better sense of the products and goals of the company, it helps to know that the founders studied at the Max Planck Institute, which describes its research approach as "highly interdisciplinary ... \ combin[ing] mathematics, computation, material science, and biology."
Of particular use to Amazon's retail ambitions could be Body Labs' SOMA Shape API, which can, "accurately predict and measure the 3D shape of your customers using just a single image." That's important because most people wouldn't be able to scan their entire bodies live and in-person (like an airport security scanner), but most people could definitely upload a full-body photo or video into the Shape API.
The technology could meld nicely with Amazon's new Echo Look device, which includes a built-in camera that can take full-body images. It's not too big of a leap to see how a combination of Body Labs' technology could create an augmented reality environment in which one could virtually try on a suit or dress before deciding to make a purchase. The offering could also potentially be used by apparel retailers looking to hone their size and fit, or perhaps as a mass-customization tool for Amazon's emerging private-label clothing brands.
Not only would that help customer satisfaction and interest, but according to Flo McDavis, head of business development at Body Labs, one-third of all apparel purchases made online are returned. Since online is the primary way Amazon reaches consumers, any reduction in the number of returns will save the e-commerce giant significantly in return shipping costs.
The other segment likely to benefit from the Body Labs acquisition is Amazon's burgeoning gaming division. Though video games may not first come to mind when you think of Amazon, the company has been very actively building out a vertically integrated gaming studio in-house. Amazon bought Double Helix Games and video game streaming app Twitch in 2014, and hosts developer tools in AWS such as Lumberyard, as well as back-end development service GameSparks.
Given the seriousness of Amazon's intentions here, it is not hard to envision an integration of Body Labs' technology in these service offerings to make more photo-realistic avatars for developers.
Other potential uses
Beyond fashion and gaming, there could be many other uses for the Body Labs technology, such as in health, where Amazon is looking to expand. Beyond that, the Body Labs team is clearly very smart and accomplished, and this acqui-hire will add to Amazon's technology talent bench (the company has made several other high-profile appointments this year). Given the talent acquisition and broad potential uses for Body Labs' technology, the $70 million price tag seems like another smart purchase by the e-commerce giant.