Retailers are betting that a sprinkle of Silicon Valley fairy dust will work some tech magic on its businesses.
Stores ranging from Kohl’s and Sears to Sephora are investing in so called “retail innovation labs,” several of which have sprouted in the noted technology hub and San Francisco’s neighboring cities.
Their aims reflect retailers’ new preoccupation: Modernizing stores and operations to reflect the digital revolution. It’s a goal that encompasses a variety of still-unfolding initiatives that are quickly becoming as essential to retailing as the buyers who pick the merchandise that lines shelves.
The proliferation of these retail incubators come as stores seek to keep pace with — and anticipate — the technology-driven trends reshaping retailing and shopping behavior today and in the years to come.
Labs are cooking up mobile and online innovations, new apps, omnichannel shopping solutions, grooming digitally savvy retail talent, collaborating with start-ups, and developing digital enhancements for the in-store shopping experience, among other things.
Sephora’s revamped San Francisco store, which reflects its latest vision for the beauty chain, marks the imprint of the Sephora Innovation Lab, which debuted in San Francisco’s Dogpatch neighborhood this year.
The retailer’s investment in a technology lab makes strategic sense: The retailer’s penetration of digital to physical retail sales is double that of the prestige beauty industry.
The re-imagined Powell Street store is built around three concepts: teach, inspire and play, echoing Sephora’s efforts to push services and better leverage its beauty expertise.
The piece de resistance of the store is the Beauty Workshop, a 12-station hub for group classes that’s flanked by The Beauty Board, a shoppable online gallery that also broadcasts user-generated content via a big digital screen.
“We knew there was a demand for classes while the store is in operation by first testing the Beauty Workshop in its Innovation Lab,” Calvin McDonald, president and CEO, told Retail Dive during a press breakfast.
Indeed, the lab affords Sephora the ability to experiment with ideas and concepts designed to bring a new ease, added value and fun to its “clients shopping journey,” Bridget Dolan, vice president of Innovation Labs, told Retail Dive.
And several of those experiments are now being implemented in store.
For example, “In this inaugural year at the lab, we launched Pocket Contour on mobile, which helped women determine their face shape and showed them where to contour on their own face,” she said. “It demystified a massive trend in beauty through a seamless and smart approach to app technology, plus empowered our beauty advisors to teach clients using their own mobile devices in store.”
Working in the lab before launch, Sephora also experimented with a number of augmented-reality stories and service models for in-store experiences, such as how to’s, brand-founder storytelling and shop-able trends.
“Ultimately our time in the lab enabled us to test emerging technology in new applications, including our subscription service, SEPHORA Play! which débuted this summer,” Dolan said.
Tapping tech talent
Sears, which has been battling obsolescence in recent years, losing sales and market share to retailers from Target to Macy’s, launched the Integrated Retail Labs in 2012. Its aim was to analyze data from members of its Shop Your Way loyalty rewards program, its best customers, and come up with technology-driven solutions to suit their needs.
These include “industry-firsts” such as In-Vehicle Pickup, which enables customers to pick up their online purchases at any Sears store within five minutes of arrival, without leaving their car; Reserve It, whereby shoppers can reserve items online to try on in store, and the recently launched Meet With An Expert, which connects shoppers eyeing major appliance purchases with Sears product experts, Leena Munjal, senior vice president, customer experience and integrated retail for Sears Holdings, told RetailDive.
“Given that Shop Your Way members in Sears and Kmart stores were 74% of our eligible sales, it’s clear we’re continuing to build capabilities that are focused on our members,” she said.
Soaking up Silicon Valley
A number of these retailers are banking on the premise that in order to hatch meaningful technology innovation, they need to be where the action is.
Kohl's opened its Digital Center in Milpitas, Calif. in 2013 for numerous reasons, Julia Fennelly senior manager of public relations and corporate communications, told Retail Dive.
“The office provides increased proximity to numerous technology partners that we work with, as well as additional technology start-ups,” she said. “The office also provides a presence in Silicon Valley, one of the country’s leading technology hubs with a strong, specialized talent base. Having a presence there allows us to tap into an additional diverse pool of talent.”
Like many retailers these days, Kohl’s is investing big in digital technology as mobile and online channels, platforms, and perks increasingly influence purchasing decisions.
Fennelly cited the redesign of Kohls.com and the retailer’s mobile app as two key projects that incubated at the Digital Center, with input from the corporate office team.
The hub was “critical to nurturing the growth of Kohls.com and to advance its omnichannel initiatives to ensure Kohl’s customers have a seamless shopping experience,” she said.
The digital center redesigned Kohl’s mobile app, which now allows customers to browse and shop by category, easily manage and redeem their Yes2You Rewards points, and conveniently scan their Kohl’s Cash and savings offers to their mobile wallet.
“Since the re-launch of Kohl’s mobile app in fall 2014, the app has seen more than nine million downloads and has gone from a half star rating to a four and a half star rating,” she said.
Product patents, mall magic
These retail labs have also resulted in an unprecedented wave of new patents from merchants seeking to protect their proprietary technology products and platforms.
In July, drug chain Walgreens was awarded a patent for a system that enables shoppers to send photos from their social networks via a mobile device to a local Walgreens for printing.
Malls are also launching retail incubators.
Westfield Labs, the digital arm of Westfield Group, which operates about 40 malls worldwide, is a San Francisco testing ground designed to help retailers summon technology innovation that will enhance the places where most of the shopping magic still happens: in store. “There’s still growth on the Internet,” Kevin McKenzie, Westfield Labs global chief digital officer, told Adweek, “but there’s more growth in fitting digital into the physical world.”