Are traditional retail stores dead … or being invented in the lab?
To paraphrase Mark Twain: "predictions of death of the retail store might be premature". Some of the largest and well known retail brands have purchased or created innovation labs. What are retailers cooking up in those labs that will get us, as consumers, back in store?
Retail Innovation Labs … could almost sound like an oxymoron!
The definition of an oxymoron is: "two things that on the surface don't seem to fit together". Often cited examples of an oxymoron include: "airline food", "adult male", "dry martini", "smart bomb" … or "retail innovation". And, the list goes on and on. While e-tailers like Amazon and eBay constantly get press for innovating and changing the consumer experience, the big box retail stores almost seem the antithesis of "innovation".
Actually, there has been a lot of retail innovation in the last couple of decades, but most of it is not seen by consumers. Most of the large chain and retail store innovation has been in the areas of technology and supply chain. In the last couple of decades, retail stores have shortened the supply chain, taken out weeks of inventory, and improved profitability (GMROII) in spite of declining margins on products. But, consumers vote with their plastic and phones, and retailers are realizing the need to change experience in store before they loses sales to online a swipe at a time.
Thinking outside the box … The reason for standalone retail labs
Retailing has literally been around for hundreds of years. It is steeped in traditions. The biggest and more successful retailers of the last century are often locked into the traditions of running stores. More importantly, they are "product centric", focused on "racking and stacking" merchandising in aisles, waiting for the consumer to come to the store. The problem of course is that the consumer changed! YOU expect to be able to shop omni-channel, anytime, anywhere … and you expect to be entertained.
The challenge with trying to innovate within retail stores is you get caught up in the day to day mechanics of operating stores. I lived this first hand as a consultant working with Circuit City on their attempted turn around. It is interesting to note that today's prominent retail innovation labs tend to be startup companies purchased and kept separate to maintain their culture and creativity, or new labs created in a different place than corporate headquarters. A few labs are in fact completely new stores designed as the whole store being a lab. The key to retail innovation seems to be literally to shake off the shackles of the box that has been the traditional retail model.
Retail Innovation Labs – The growing list may surprise you!
At over $425 BILLION in annual revenue, Walmart is arguably a power house of retail and one of the most successful companies on planet earth. But, even the "Whale of Retail" has realized the threat of Amazon to their core consumer franchise. Walmart has also discovered the potential and reach of social media. Like many of the new retail labs, Walmart's actually began with some acquisitions and new teams focused on leveraging both ecommerce and social media. While Walmart and Nordstrom labs have received more press, there are a number of retail labs cropping up around the US.
Some major Retail Innovation Labs worth exploring:
Walmart Lab It's definitely not in Arkansas!
While Walmart is the world's largest retailer by a wide margin, they currently generate only about 20% of Amazon's sales through ecommerce. First thing you will notice on their lab site in the header is: Social, Mobile, and Retail. And, one of their Lab tag lines pretty much says it all; this is serious business: "Building platforms that connect our customers … Regardless of how they find us."
Nordstrom Lab Design Thinking, Lean Startup, Agile & Lean Process
Definitely looks like a "think tank" with post-it notes all over the walls and white boards. Nordstrom continues to be a pioneer in consumer experience and omni-channel execution, and technology. Their lab just might be one of the reasons why.
Staples Velocity Lab "ecommerce innovation center" pretty much says it all
Many do not realize that Staples is #2 in online sales after Amazon. It opened a new facility appropriately named "Velocity Lab" in a facility separate from Corp Headquarters. Their mission is to remove "pain points" and "create a place to test, learn, and iterate as rapidly as possible around technologies." Staples must be doing something right. Rumor has it that Amazon has just opened an office in the same location.
Home Depot Lab With a name like "Black Locus" this is not your dad's Depot store
Here's another case where a retailer bought a company to acquire expertise, and then kept it as a standalone lab. Black Locus was an Austin Texas startup focused on data mining and pricing decisions. They are reportedly becoming the headquarters for the Home Depot Innovation Lab to be based in Texas.
Sport Chek Tech heavy flagship as a live lab store
Much like REI, here's a case where the flagship store for a Canadian retailer has literally been turned into an experience laboratory. Technology dominates this live lab through tiles, tablets and over 140 digital screens. This lab store includes the biggest names in sporting goods brands, as well as tech manufacturers in order to implement experiences like "augmented reality".
Labs are the new cool in retail … but Results still Count
Who wouldn’t want to work in a cool think tank versus a dingy retail store! The Retail Innovation labs are definitely designed to attract the young, cool, hip and creative talent needed to reinvigorate the stores for today’s consumer.
"It's one thing to talk about 'rapid experimentation' and 'validated learning' as abstract concepts. It's quite another to see them in action, in a real-world setting." Eric Ries, Startup Lessons Learned
But more importantly, it's seeing innovation labs yielding measurable results that count on the bottom line ... especially for all those struggling bricks and mortar stores.
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Resources:
Photo Sources:
- Test Tubes: Digital Art; Freedigitalphotos.net
- Nordstrom
- Boston.com
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