Retailers across a range of industries are beginning to act more like tech companies. For some, this means turning to in-house retail incubator programs to help identify, invest in, and nurture a wide range of products and startups that reduce operational inefficiencies and transform the customer experience. They’re aiming to bring on board, at an early stage, what would otherwise be potentially costly third-party innovations. In return, the startups selected gain access to the retailer’s vast industry resources and expertise.
Here’s a look at how five large retailers are leveraging accelerator programs to help them define the future of retail.
Target: Target Accelerators
Background: Target Corporation is an American retail corporation. The eighth-largest retailer in the United States, and the company is ranked number 37 on 2020 Fortune 500 list of the largest United States corporations by total revenue.
Target Accelerators predominately supports retail-related start-ups. In a relatively short amount time, the participants of this program could acquire specific and insightful knowledge about the retail industry. The program provides opportunities to work with industry experts, program mentors, and high-level executives who will challenge and support the participants to do better. Participating start-ups will be given chances to pitch business ideas at industry conferences and high-profile seminars. In terms of financial obligations, no fee or investment exchange is required to participate in the program, and Target will not take ownership of the entrepreneurial idea.
There are three programs under Target Accelerator: Target Forward Founders, a virtual, eight-week program for start-ups and new entrepreneurs that are seeking to learn how to better take the first step in retail businesses; Target Takeoff, which is suitable for mature retail companies focusing on expansion and getting their products qualified to be listed at Target stores; and lastly, a program designed specifically for India, an extended headquarter of Target. Target Accelerator Program India complements the Target global innovation strategy. This program has a specific focus on mature, tech-driven solutions in various aspects of retail such as returns, sustainability, 3D designing and supply chain optimization.
Past participants include FMCG brands and retail technology firms (details at: https://targetaccelerators.com/alumni/?sort=&years%5B%5D=&category%5B%5D=2). To name a few: Afresh, a retail tech firm that provides solutions to grocery retailers on fresh ordering, forecasting, and store operations; Bybe, a digital platform that helps with online alcohol promotions for retailers; and CB4, an AI tech firm that specifically addresses and upgrades in-store operational issues for retail stores.
Foot Locker: Greenhouse
Background: Foot Locker, Inc. is a specialty athletic retailer that operates in approximately 3,000 stores in 27 countries.
Greenhouse, Foot Locker’s in-house incubator program, is designed to offer the footwear retailers early distribution channels to an array of newly emerged product categories. Foot Locker has put in more than $140 million in qualified startups since the early 2018, and more recently, the company focuses on brands that are new in the product development cycle. This is an attempt to track consumer needs and taste more spontaneously and provide a differentiated product line in the backdrop of fast-moving fashion trend and production cycle.
Moreover, Foot Locker plans to release an e-commerce platform specifically to showcase products made by Greenhouse startups—a showroom for exclusive products that are designed to capture customer attention in ways a whole catalogue of wholesale big-brand sneakers cannot. The Greenhouse initiative involves three key facets: Collaborations, Concepts and Think Tank. Collaboration is designed to offer opportunities to work with creators and connect with talents that are familiar with youth culture. Concepts first and foremost represents brands and give them access to work with vendor partners outside of traditional framework for better innovation. Think Tank is an idea-based approach that provides a platform to think forwardly and creatively without the constraints of current product lines.
The first set of collaborators for Greenhouse included Los Angeles streetwear brand Diet Starts Monday, designers Dao-Yi Chow of Public School, and Nicole McLaughlin formerly of Reebok. Moreover, NYC based brands VFiles, Alife are also included. Consumers enjoy a distinctive collection of products that are created by Greenhouse from footwear, apparel, art and more regardless of gender and age. This was only available on the Greenhouse APP and was renewed regularly.
Kroger: Zero Hunger Zero Waste Innovation Fund
Background: The Kroger Company is an American retail company founded in 1883. It is the second-largest general retailer (behind Walmart), and the fifth-largest retailer in the world.
U.S. consumers, businesses and farms annually spend more than $200 billion on food that’s never eaten, and grocery stores are at the center of the issue. However, Kroger, one of the world’s largest grocery chains, has made it a top priority to eliminate food waste across its stores by 2025, and has invested heavily in tech startups to help achieve its goal.
Kroger’s Zero Hunger Zero Waste Innovation fund provides grants of up to $250,000 for entrepreneurs working on emerging technology projects geared toward eliminating food waste. One such company whose products are already on Kroger shelves is Apeel, makers of an edible coating that can be applied to produce, such as avocados, to reduce evaporation and prolong shelf life, thereby reducing food waste.
Recently, in May 2021, the Kroger Co. Zero Hunger Zero Waste Foundation announced the second cohort of its Innovation Fund. Within more than 145 applicants, the Innovation Fund chose 10 of these start-ups to receive a total of $2.5 million to launch innovative consumer products that are manufactured with surplus food or food byproducts and technologies to expand and enhance the up-cycled food industry. The ten creative innovators include Grain4Grain, which utilizes patent pending technology to “up-cycle brewers spent grain into a low-carb, high-protein and high-fiber flour”; Husky Beverages, is a newly founded business specializing in the healthy super fruit of coffee, and released in early 2021 with a sparkling tea made from the “husk” of organic, up-cycled coffee fruit; and, NETZRO is a food tech platform for “recovering industrial byproducts at scale that would otherwise be wasted into new up-cycled ingredients”.
L’Oréal: Open Innovation
Background: L'Oréal S.A. is a French personal care company. It is the world's largest cosmetics company and has developed activities in the field concentrating on hair color, skin care, sun protection, make-up, perfume, and hair care.
L’Oréal as a large beauty product retailer faces obstacles when the company tries to meet the rapidly changing tastes and customer demand. Therefore, L’Oréal opens its Open Innovation incubator program for innovative and cutting-edge beauty products, devices and digital services to “cater for the needs of our customers around the world and invent the future of Beauty.”
Typically, L’Oréal supports beauty and tech start-ups through acceleration, business partnerships, and investment. Acceleration: for new tech ventures and business models that propose innovative beauty experiences to customers. The company runs six-months of acceleration program in partnership with Station F and Founders Factory. The start-ups participate in upskilling sessions that involve mentorship from experts from L’Oréal and gain exposure to growth platforms. Examples include AdAlong and né à. Business partnerships: For fairly mature start-up businesses that are ready to provide new digital services at scale. The company runs pilot projects that connects entrepreneurs to L’Oréal brands teams internationally. Examples include Riuiter and Sampler. Investment: For start-ups with promising growth potential to develop innovative business models in marketing, digital, communication, retail, supply chain and packaging. L’Oréal launched BOLD – Business Opportunities for L’Oréal Development – a corporate venture capital fund that empowers start-ups through first round investments & business insight mentorship. Examples include Sillages Paris.
Walmart: Walmart Labs & Store No. 8
Background: Walmart Inc. is an American multinational retail corporation that operate a chain of hypermarkets, discount department stores, and grocery stores. Walmart is the world’s largest general retailer, and also the largest company by revenue.
Walmart has taken two different approaches towards in-house innovation. The first approach is Walmart Labs, a retail incubator that focuses on solving immediate and urgent customer needs. The second approach, Store No.8, which is designed for long-term prospects and forward thinking. The core mission of the Store No.8 is captured by its slogan, “transforming the future of retail”.
Store No. 8 was launched in 2017 and has been constantly seeking game-changing solutions to retail problems, including streamlining conversational commerce and adopting scalable virtual reality technology that simulates first-person shopping experiences with in-store services and products.
As for investment and incubating support, Walmart places an emphasis on the Walmart customer. The company is constantly developing new capabilities that put customers at the center of the experience. Some key areas Walmart Store No.8 works on include: conversational commerce (shop like you’re talking or texting a friend), mixed reality (get immersed in shopping's new reality), next generation Agriculture (in pursuit of sustainable sourcing), perpetual inventory (inventory intelligence in real-time), and shopping automation, etc.
Some examples include Aspectiva, shopping using the wisdom of the community. This company mines customer reviews with its natural language processing and machine learning technologies to aggregate customer sentiment, rate each product feature, and enable search by customer intent. Another example is IRL, Artificial Intelligence for the real world. This company brings the power of computer vision, AI, machine learning, and sensor fusion to physical stores, so stores can create operational efficiencies and further improve the customer and associate experience in the future.
With competition intensifying, more and more major retailers will resort to game changing innovations as a strategic move to ensure their future success. Retailers’ incubators are here to stay.
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