Retail labs and accelerators were everywhere a few short years ago. What happened – and are retailers still innovating?
- Many retail labs have moved behind the scenes where they are now delivering value
- Innovation divisions allow retailers to identify “big wave trends”
- Sponsorship at leadership level is key
- It is not about “tech for tech’s sake” but finding real problems that need solving
For a while, ‘retail labs’ felt like a buzz phrase, with some embracing the trend purely for the positive image it projected. But what has happened to the digital innovation labs since then? And did they ever truly produce innovation?
“It became very in vogue. A lot of organisations were sponsoring accelerators and saying they were in innovation, but there wasn’t a lot of thought behind it,” says Daniel Saunders, chief executive of global innovation specialist L Marks.
“It was just theatre, a bit of fun. I think where things have changed for the better is in actually delivering value and seeing the implementation of technologies.”
Archie Mason, director of innovation at retail and consumer-focused investment and innovation firm True, agrees there has been a significant shift. “Ten years ago, labs were a cultural beacon to attract talent and showcasing that innovation was important to an organisation – perhaps manifesting in a ‘cool’ look and feel of a place to get people thinking outside the box.”
“Ten years ago, labs were a cultural beacon to attract talent and showcasing that innovation was important to an organisation”
Archie Mason, True
Today, however, Mason says innovation has evolved into being a core capability, with retailers increasingly relying on partnerships to achieve it. “Large corporates recognise they can’t transform the business alone, so are looking for a range of partners to succeed. We have also started to see more corporates using M&A as a way to drive innovation.”
The labs and accelerators themselves have evolved, with some disappearing to be replaced by new strategies or projects.
At John Lewis, for instance, the annual JLab competition, launched in 2014, came to a close in 2019. Since then, innovation has been led by Katie Papakonstantinou, director of commercial development and innovation, whose team works with others across the business on key strategic projects.
Other lab initiatives are still driving innovation in their businesses. Jo Hickson, head of Tesco Labs, says: “We work across the innovation horizons to identify, develop and implement trials or proof-of-concept initiatives. As such our core purpose has not changed.”
However, Tesco has added to its innovation efforts with a new team formed in 2019. The group innovation team was established to find new products, ideas and emerging technologies with the potential to cause disruption in the future.
“The team brings functional knowledge from across the business and is looking for innovators to work with Tesco in areas beyond our day-to-day operation,” says Hickson.
Homeware and furniture retailer Made.com has a particular focus on product innovation, and chief customer officer Dan Elton says evolution has been crucial in this area too.
“At Made.com our approach to innovation is constantly evolving,” he says, adding that the brand’s network and ecosystem are the most important part of this. “As well as our internal team we work with a broad scope of specialist industry experts to create products.”
The retailer launched TalentLab in 2017 to offer aspiring designers guidance and access to an online platform to sell their products. Elton says: “It connected the Made.com design team to a wealth of emerging talent and enabled consumers to get their hands on original designs that can’t be found elsewhere.”
While some tech incubators or accelerators have evolved from their initial iterations, others are going from strength to strength on their initial premise. In July 2022, luxury fashion retailer Farfetch launched this year’s iteration of its Dream Assembly Base Camp, a ‘Web3 accelerator’ run via a strategic partnership with Outlier Ventures.
The accelerator enables the brand to work with start-ups shaping the future of Web3 luxury commerce; previous alumni include eco fashion information app Good on You, repair service The Restory and second-hand fashion site Thrift+.
Carol Hilsum, senior director of product innovation at Farfetch, says the accelerator is the culmination of years of honing its approach to innovation, with the focus being the development of suitable processes.
“We solidified our approach to open innovation around four years ago, building up programmes and pathways to ensure we could support early-stage start-ups and also partner with them.”
At Walmart, the Store No. 8 innovation scheme started in 2017 and is still going strong. Vice-president of the team Jaya Balasubramaniam says: “Our fundamental operating model to run our investments as self-contained start-ups remains the same. We collaborate very closely with business units and associates across Walmart.”
Making it work
L Marks’ Saunders says close collaboration with the business is crucial if innovation projects are to have a real impact, and if both start-ups and retailers are going to realise value from it.
“You won’t get any benefits from putting some start-ups in a cool space and hoping something happens. It’s about implementing, trialling and using resources to put a start-up through their paces. It’s about real collaboration.”
Having a clear focus is another important step. “It can’t just be where a retailer says ‘I want to work with start-ups.’ You have to know why,” he says.
Hilsum at Farfetch agrees: “It’s not about having tech for tech’s sake. We need to put the consumer first and solve a real problem that exists.”
Having a clear strategy and vision of the problem being solved is also crucial, says Saunders. “Start with the problem, or challenge, instead of ‘innovating in the metaverse’ – that’s just jumping on a trend. In any other part of an organisation there’s a proper strategy behind it. Innovation is the future of the business; it needs strategy and structure.”
A lot of the best innovation, Saunders adds, is in behind-the-scenes, incremental changes that improve how something is done – but that can have a significant effect on sales.
“It’s not about having tech for tech’s sake. We need to put the consumer first and solve a real problem that exists”
Carol Hilsum, Farfetch
Hickson at Tesco agrees: “It’s important to stay ahead of what’s happening, but technology is only ever the enabler to a good idea.”
Mason adds that sponsorship at leadership level is key and says teams need an open-minded rather than single-minded approach to collaboration. Plus, he says: “The team in charge of looking after innovation needs resourcing, focus and investment, requiring a specific budget to fund pilot schemes, otherwise significant positive outcomes can be few and far between.
“Further to this, there needs to be alignment from the outset on how a successful idea will be implemented or scaled up after pilot. This is where many ideas fail because neither side has thought through the requirements of what is needed.”
But for those approaching it in the right way, as Elton says: “The benefits of innovation are endless.”
Hickson says innovation gives the business the “ability to keep track of what is happening at the leading edge of technologies that could materially influence what we do or how we do things, and fundamentally deliver step-change improvements for Tesco.”
It’s a similar story for Walmart, where Scott Eckert, senior vice-president for Next Generation Retail at Walmart and Principal at Store No. 8, says the division allows the business to see around corners and identify ‘big wave’ trends.
“Retail is a dynamic business with constantly changing customer needs and emerging technologies that can enable new ways of serving our customers,” he explains.
“Store No. 8 helps Walmart to make strategic investments by building new capabilities so when the future arrives, we’re not only ready for it, but we’re also leading it.”
New areas of focus
So which areas are retailers innovating around today and how are they measuring success? At Tesco, Hickson says, the team is exploring several applications for computer vision with the goal of greater operational efficiency.
“Last year we launched our London GetGo store, which uses computer vision to allow customers to shop in the store and ‘just walk out’, working with technology start-up Trigo.
“We’re also interested in applications of the Internet of Things, for example in ensuring optimal availability of products in store. We have a few robotics projects and we’re supporting group innovation in robots for grocery deliveries, in partnership with Starship.”
The retailer is exploring how the Internet of Things, such as sensor technology, could provide a flow of data about its physical operation, in the same way it gets a stream of actionable data about its online operation. “Over the years our focus has shifted, as technologies have advanced,” Hickson adds.
At Walmart, meanwhile, Balasubramanian says the areas the company is focused on include conversational commerce, mixed reality, in-store digitisation and the future of food.
For Farfetch’s Hilsum, the focus is always on customer experience. “Areas of innovation and focus evolve and emerge as consumer and tech trends change and progress over time, but we are always focused on a key question, which is: ‘How does the customer want to experience luxury today and tomorrow?’”
Avoiding ‘innovation theatre’
Every project should be measured, L Marks’ Saunders says, because it will help justify investment for future projects. While each project will be different, there are some common KPIs. “Cost versus return is often easiest, but net promoter scores are also used for customer-facing projects,” he says.
Market value can even be used as one indicator of success: “People want to be seen to be innovative because that will increase their market value – although investors will see through ‘innovation theatre’. If you’re delivering real value, the value of the company will increase,” he adds.
“People want to be seen to be innovative because that will increase their market value – although investors will see through ‘innovation theatre’”
Daniel Saunders, L Marks
True’s Mason says KPIs for these projects can often look quite different from other more established initiatives and adds it is as important to be aware of what failure looks like as it is a success.
“Measuring ‘success’ is obviously important, but so is being aware and aligned from the outset what failure looks like, and then pausing or stopping a partnership as soon as it becomes apparent that it is not adding value.”
While innovation labs might not have the glitz of newness they enjoyed several years ago, for many, the benefits they bring have increased. As they move more behind the scenes, retailers become more serious about innovation – and generate more value as a result.
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