The past three years have seen a surge in retailers investing in innovation hubs, but why?
Consumer habits are changing at an unprecedented rate and advancements in technology are coming ever faster. E-commerce and m-commerce are the channels of choice today, but what’s in store for tomorrow? S-commerce (shopping through social networks) is firmly on the horizon, and we could see the rise of v-commerce with virtual reality. Those best placed to navigate the future are experimenting now, and nowhere is it better to take inspiration from than startups.
“Startups have become ‘agile adaptors’: not only can they can see a problem and fix it straight away, but a lack of shareholders also means they’re great at being innovative because they have no one to answer to,” explains Nicole Yershon, director of innovative solutions at Ogilvy & Mather.
“If these startups sit and have an open and honest conversation with a mentor, they may be able to identify and fix problems the bigger business never knew it had – it’s all about collaboration.”
The Drum catches up with three retailers all working with startups who have each taken very different approaches.
All eyes turned to John Lewis two years ago when it launched startup incubator JLab. The 150-year-old bricks and mortar retailer was, like many other high street businesses, facing a myriad of challenges in catering for the digital needs of its customers while still managing to get on with the daily business. The solution? Bring in the startups.
“As a business there’s no shortage of ideas internally,” says innovation manager John Vary. “But there are so many companies doing new things, creating new technologies, new software, new applications. We just wanted to be a part of that.”
Last year, the programme – which promises £100,000 funding plus mentorship – attracted 165 applications. This year 183 applied. After pitching, five are chosen to enter the incubator before one is selected to work with John Lewis.
The cliché of startups fostering a ‘fail fast, learn fast’ attitude to innovation is no different for John Lewis. But beyond that, Vary says opening up the business to startups has encouraged its own partners to pitch their ideas as well as attract new talent. “If you’re constantly pushing boundaries and innovating, people want to be part of that. It gives people the courage to think like a startup, think differently, dream, and express themselves. Promoting those behaviours is important in innovation.”
A stalwart of the British high street, Argos has been on an innovation drive since late 2013. It has gradually overhauled a number of its stores while a digital hub has been established above an Argos store in London’s Victoria as a test bed for new ideas.
Startups have played their part, but not in the same way as they do at John Lewis and currently Argos works with them on a project by project basis.
“Big business is not always easy to navigate,” explains Neil Tinegate, Argos’ head of innovation. “But we’re changing some of our internal processes so that we can move more quickly to engage with startups, make decisions and trial quickly.”
Thus far, Tinegate says he prefers working with those whose proposition is “70 or 80 per cent” ready giving Argos the opportunity to help refine the service or sharpen the product.
However, Tinegate adds that startups must also “do their bit” and that means taking the partnership seriously.
“They have to show up, be prepared and have their pitches ready and understand who they’re talking with and what they want to get out of it,” he says.
Westfield is facing a rather different problem to the likes of John Lewis and Argos. The retail behemoth operates 40 malls around the world housing over 7,000 retailers, which are visited by over 430 million customers each year. But its need to innovate remains the same.
“The management team realised early on that the consumer was changing and it was a real opportunity for Westfield to think about mobile differently,” says Kevin McKenzie, global chief digital officer.
In a bid to better connect its retailer and shoppers through technology, McKenzie set up Westfield Labs, which comprises a team of about 60 people based in its San Francisco mall. It has worked with startups on a number of projects, but the most significant investment to date into fostering collaboration is the creation of Bespoke.
“In San Francisco there are a lot of startups innovating around retail technology and so we decided to create a co-working facility where they could be in a shopping environments, build products, and test them in front of real shoppers,” explains McKenzie.
The Bespoke space sits in the fourth floor of a mall that gets 20 million visitors a year. Conference rooms convert into shop fronts while huge screens in the common area of the mall allow startups to demonstrate ideas in the real world within hours of creation
“We made a decision that we weren’t going to wait for retailers so we’re in an interesting position to innovate and to share that knowledge,” McKenzie explains. “We can’t build the technology ourselves so we work with startups, invest in them and plug their technology into our platform.”
It’s clear, then, that no matter how retailers choose to work with the startup community, if they open themselves up they have everything to gain from greater agility and new ideas to help with navigating their relentlessly evolving business models.
This feature was first published in the 22 July issue of The Drum.