Retailers of all sectors and sizes have launched digital labs in recent years, but what tangible business benefits do they offer?
The rise of online shopping, the increasingly time-poor shopper and ever-complex supply chain logistics have made operating a retail business more challenging than ever.
The unforgiving pace of change in the industry is now recognised as the new normal and, as a result, retailers are looking for ways to keep up or even get ahead of the curve on the next big technology development.
To this end, retailers ranging from River Island to Argos have set up digital hubs to help find new technology solutions to improve their shopping and working experience.
But is a standalone lab dedicated to testing new initiatives, many of which may never be rolled out, really the best way to drive innovation?
How to hub
Bertrand Bodson thinks so. When Bodson, who last month was promoted to chief digital and marketing officer for Sainsbury’s-Argos, first joined Argos, setting up a lab was one of his top priorities.
“I joined in 2013 and one of the things I wanted to do right away was set up a digital hub,” says Bodson. He believes that creating an in-house lab is critical for retailers wanting to attract the right talent to their business to drive their multichannel propositions forward.
He says the brightest minds in tech want to work in a dynamic, creative working environment rather than a traditional retail head office.
Argos’s first digital hub was opened a year after Bodson’s arrival. It comprises eight teams all working on different projects with a keen focus on mobile commerce and is located above the retailer’s London Victoria store.
“It was key to be on top of the store because we really wanted the store team to be as influential as the engineers, product and UX developers and analysts,” he says. “It helped us to test products and initiatives in the shop very quickly.”
The model appears to have been successful as the retailer expanded the lab within a year of its opening.
Creating a head office hub
Tesco’s head of labs Angela Maurer has taken a different approach and brought its digital lab into its Welwyn Garden City head office.
The grocer’s hub was formed in 2013 and has 17 dedicated staff, who work alongside various start-ups as well as Tesco’s technology partners.
“By working closely with Tesco’s chief technology officer [Edmond Mesrobian], Tesco Labs is connected to the heart of the business, which means we understand what the biggest challenges are”
Angela Maurer, Tesco head of labs
The supermarket has also partnered with start-up co-working space Rainmaking Loft for the last three years, and works with the businesses located there.
Although Tesco’s digital lab is not directly linked to its stores, Maurer insists this does not hinder its ability to identify areas of development to focus on.
“By working closely with Tesco’s chief technology officer [Edmond Mesrobian], Tesco Labs is connected to the heart of the business, which means we understand what the biggest challenges are,” she says.
“We work very closely with our colleagues across the business, teaching them about new technologies and methodologies, and regularly sharing our latest research.”
An initiative that is hailed by Maurer as “one of our most helpful innovations as a team so far” is the grocer’s product data app, named Inform.
The Inform app is designed for Tesco’s store staff and provides real-time product information, including details on price and promotions from the grocer’s stock control system as well as stock and shelf information.
The app is available for Tesco employees to download on iOS, Android and Windows devices and was launched two years ago.
Today, it is used by more than 15,000 Tesco employees daily with up to two million product enquiries logged per week. It is regularly updated with new features by the retailer’s lab team based on suggestions from store staff.
Bringing start-ups into your business
Department store John Lewis is another retailer that uses a lab; however, its lab is used solely to bring start-ups into its business.
Unlike Argos and Tesco, John Lewis’s hub JLab is not a permanent feature of the department store business. Instead the retailer runs an annual competition, which has been going for the three years, where it invites a group of start-ups into its lab to develop products that can potentially win investment.
John Lewis works with L Marks – an innovation specialist that also runs technology incubators on behalf of retailers such as Topshop and N Brown – on JLab.
L Marks chief operating officer Libby Mawhood says working with a third-party specialist can act as a quality control to make sure that the start-ups it brings into the lab can add real value to the business.
“What they [retailers] are starting to recognise is that they don’t have the monopoly on good ideas and that actually there is this fantastic ecosystem of entrepreneurs and technologists”
Libby Mawhood, L Marks
Previous JLab winners include My Localz, a mobile location start-up that developed a service that helped shoppers locate their click-and-collect orders in-store, and web-connected security camera firm Peeple.
Mawhood says: “What they [retailers] are starting to recognise is that they don’t have the monopoly on good ideas and that actually there is this fantastic ecosystem of entrepreneurs and technologists.”
While John Lewis is using its lab to look outside its own business for inspiration, Argos’s Bodson says its biggest successes have been initiated by its own employees.
A product that came out of one of its in-house hackathons, which it runs on a regular basis, was a prototype for a kids’ Christmas wishlist app, which allows children to find and select their potential presents. The list is then emailed ‘to Santa’ and their parents.
The prototype was created in early 2014 and developed by the same team of hackers for launch in time for Christmas the same year.
“We embedded it into all of our marketing and gift guides for the season and built characters around the app,” says Bodson, who adds that the app has had “hundreds of thousands of downloads”. The My Christmas Wishlist app was updated last year and will be relaunched for the festive period again this year.
Substance over style
It has become de rigueur in retail to have your own lab, and some cynics have suggested that such investments are just for show. Mawhood says ensuring lab projects are led by the right people within the business helps ensure real results are achieved.
“We’re quite picky about who we work with, but people who come to us don’t come to us because they want a vanity project,” she says. “If you see a project that is being led by a retailer’s branding or press team without a core strategic business unit involved then that’s probably what you’re going to get.”
For Maurer, the fact that the Tesco Lab remains small means it is agile and can determine quickly if a product has legs.
“We track and measure every trial we run so we can make rapid decisions about whether to develop them further,” she says. “We’re quite rigorous about this and it enables us to quickly take an idea from prototype to trial.”
“If it doesn’t make a difference to the customer, we don’t work on it in the hub. For me, it was never meant to be an innovation hub, it was always meant to be a product hub and an extension of the core business”
Bertrand Bodson, Sainsbury’s-Argos
Making the customer the core focus of all of the projects developed in Argos’s digital hub allows Bodson to ensure the division delivers a return on investment for the wider company.
“If it doesn’t make a difference to the customer, we don’t work on it in the hub,” he says.
“For me, it was never meant to be an innovation hub, it was always meant to be a product hub and an extension of the core business.”
Whether you call it a digital lab or innovation hub, more and more retailers are investing in a standalone space to work on the weird and wonderful as technology becomes the most important weapon in a retailer’s arsenal.
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