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Is failure the new success story?

There’s been a flurry of announcements from retailers and brands this year about investments in start-ups, accelerators and UX labs. Emma Herrod investigates what’s driving innovation in the industry and how retailers are connecting this with customers.

The pace of change within the retail industry is accelerating as large corporates endeavour to put the customer at the heart of their business by involving them in every part of the digital design process. As ecommerce has grown, so too has the test and learn way of working. This enables every aspect of the customer experience to be measured and tweaked using methods such as multivariate testing or eye tracking.

The industry rule is that every change on a website has to be proven relevant to the customer before it goes live. As Kyle McGinn, Head of Digital Labs at Marks & Spencer , comments: “Why wouldn’t you run a test if it’s possible?”

The M&S Digital Lab team, which McGinn heads, can work through issues in different areas of the business – online, mobile, in-store or tablet – and test technologies that aren’t on the digital roadmap, either to prove that they’re worth inclusion or that they should be discarded. The personalised clothes styling guide from Dressipi is one such technology that has moved from being validated and bolted onto the site to being woven into it. The M&S Style Board is another success story for the Digital Lab, as is the Cook with M&S mobile app which was tested through messaging from the company’s Facebook page.

“We’re always looking for dials we can turn up,” says McGinn.

But testing doesn’t always produce the expected result, and while it provides the numbers that show whether or not something works, it doesn’t explain why. Sometimes understanding why something succeeds or fails is just as important, and it’s better for it to fail fast so a project or team can move on. When M&S investigated clothing shape and fit guides for customers, McGinn’s team looked at almost 25 different technologies. These ranged from avatars which gave a true representation of the customers’ figures (which some did not like) to techniques that compared their current wardrobe to new clothes and the Dressipi-style personal profile and advice. “It always has to be relevant to the customer base,” explains McGinn.


Being relevant to the customer is at the heart of innovation at Shop Direct, which has ambitions to become a “world class digital retailer” as it moves away from its catalogue beginnings, according to its Group E-Commerce Director, Jonathan Wall . Every decision is made with the customer in mind, and that extends to every change on the firm’s websites. “We draw on a comprehensive UX research toolkit to assess the ways our customers shop our websites, from card sorting and usability testing to surveys and ethnography,” says Wall.

“As a pureplay etailer, what we were lacking until recently was the ability to observe and interact regularly with our customers face-to-face,” he says. Therefore, the company decided to develop its own UX research facility at its headquarters. The UX lab comprises two rooms: the customer room – a relaxing space where customers can carry out tasks set by Shop Direct’s usability researchers – and the viewing room, which includes one-way glass through to the customer room.

Every idea or change goes through the UX lab first, explains Wall, before being tested on a number of visitors to one or other of its six ecommerce sites. “It’s all about improving the customer journey. Live tests give us the numbers and UX explains why customers are reacting as they are.”

He adds: “We have 900,000 users every day to the sites so we can find out quickly if something will succeed or fail.” Sometimes the results can be proved in 1 or 2 days.

In fact, the first test paid for the UX lab with a 1% increase in conversions. If a customer didn’t select a garment size or colour, a message appeared in red when checking out, reminding them to do so. However, eye tracking showed that customers weren’t seeing the message “so we saw a high exit rate,” says Wall.

The UX lab is running 35 – 40 tests per month and plans to ramp that up to 160. As the scale of testing increases, Wall expects the number of failures to rise as well since “we’ll be testing more stuff we couldn’t have tested in the past”. The ratio of failures, neutral tests and successes is currently evenly split at a third each, he explains.


One aspect of the site that has been worked on recently is the customer journey for buying men’s shirts. Most men know their neck size, what type of collar they want and the sleeve length, explains Kyle McGinn, Head of the company’s Digital Labs, but going through the navigation to choose those has not been as straight forward as it could have been. Over a period of one and a half months, a new path was developed which differentiated the category from others and made shirt buying simpler. User experience tests were then run by siphoning off some traffic from the site to the new navigation.


As well as acting as a space to test existing features, the UX lab also acts as a hub for collaboration and innovation on future web technologies. Shop Direct recently formed commercial partnerships with two Israeli start-ups – Cimagine Media and yRuler – after successfully trialling their ecommerce technologies with customers in-house. “Israel is undoubtedly the world’s hotbed for emerging ecommerce technology,” says Wall.

Retailers are increasingly looking to the start-up community for stimuli, believes McGinn. M&S is helping the start-up community by interacting directly, coaching and mentoring, and through its strong relationship with incubators such as Seedcamp. In turn, they are helping M&S

improve the way it does business with their relevancy and swifter pace of change, provoking ideas and ways of thinking and working in people who may have been with the retailer for 15 years. “The nature of the channels means we can innovate,” says McGinn. “We’re all watching new players.”

Paul Coby, IT Director at John Lewis, is also trying to find the “uncut diamonds” amongst the plethora of cold-calling start-ups and technology providers all claiming to have a great product. As part of its 150th year celebrations – during which it is looking back over the core values upon which the company was founded – the retailer has launched its first technology incubator, JLAB. This has been created in partnership with entrepreneur Stuart Marks, and aims to identify and develop technology innovations that will shape the shopping experience of the future. It’s a way of “dealing with all that noise in a structured way,” explains Coby; it’s also “about doing the right thing and helping the business at the same time”.

From the hundreds of applicants, 30 were chosen to pitch to the JLAB team and 5 were selected for the 12-week incubation programme, which started on 9 June. During that time, the 5 finalists – Localz, Musaic, SpaceDesigned, Tap2Connect and Viewsy – will have access to desk space at JLAB in Canary Wharf, the full team of John Lewis and external mentors, and each receive £12,500 in funding.

The winning company will receive up to £100,000 in further investment and the chance to trial their solution in store. If it’s a success, their solution may be implemented across the John Lewis estate.

Marks comments: “I believe a fundamental part of JLAB’s success will be down to the quality of mentoring that the companies receive, both from this external team and the John Lewis mentors. Being able to assemble this hugely talented and diverse group of entrepreneurs is what will make JLAB unique.”

It’s early days yet, explains Coby, but all of the technologies were chosen on the basis of being able to add value for customers. Where necessary, they will be tested with customers, since technology is just the servant of a customer-focused omnichannel business such as John Lewis. Regardless of whether JLAB runs again in its current format or is replaced by something based on it, he says John Lewis will “continue to scan the horizon” but won’t get carried away with having technology for technology’s sake. “It’s all about what’s going to make a difference to the business and customers.”


As part of its 150 year celebrations, John Lewis has launched its first technology incubator ‘JLAB’ in partnership with technology entrepreneur Stuart Marks. The purpose of JLAB is to identify and develop technology innovations that will provide the retailer with future strategic advantage with customers’ needs – whether by helping customers shop, simplifying their lives, knowing each other, or other technology – at the core of each idea.

Andy Street, Managing Director of John Lewis, said: “The Partnership’s founder, John Spedan Lewis, was a radical entrepreneur and so adopting a novel approach to business and retail innovation is not new to us, it’s a fundamental part of our DNA.

“Our 150 year anniversary not only gives us the chance to reflect on our history, but to look forward at how we shape the next 150 years. We have been ahead of the game in omnichannel retailing and through our JLAB incubator we will nurture the next generation of technology start-ups while helping ensure we remain on the cutting-edge of retail change.”

The five finalists chosen for the 12-week incubation period, which commenced on 9 June are:

Localz – An in-store digital engagement system which uses proximity and iBeacon technology. Currently, retailers don’t know when their best online shoppers arrive at a real life store. Localz is designed to let retailers know they have arrived as they walk through the door.

Musaic – A wireless sound system designed to integrate fully with today’s smart home. Founders Matthew Bramble, Simon Grabowski and Carolyn Van Dongen have created a wireless Hi-Fi system that can stream music from any platform to multiple rooms in a house.

SpaceDesigned – An online app which allows consumers to accurately create and view virtual 3D versions of rooms in their house. They can then add potential new furniture purchases and see how they might fit in.

Tap2Connect – An after-sales service that uses smart labels to increase customer engagement. Smart labels enable consumers and retailers to track a product’s lifecycle and make on-going service or repairs easier to handle.

Viewsy – An in-store digital engagement system designed to help retailers better understand their customers. In-store sensors track customers’ behaviour as they move through the store, allowing retailers to better understand them and make better decisions.


Rather than collaborating with the start-ups themselves and running through proof of concept and whether it works for their own retail organisation, 40 retailers and brands have joined US-based Iterate Studio. Together, they have access to Iterate Studios’ global knowledge of ecommerce technology start-ups, its experience of test and learning, and help in taking relevant solutions through to proof of concept and testing live with customers.

“We find, curate and then prove something works or doesn’t and then remove ourselves since we don’t get involved in the deal,” says John Grech, Co-Founder of Iterate Studio. “It’s about getting to the proof of concept quickly without retailers having to use their own resources in terms of people’s time,” he explains. “We launch the experiments for them.”

The company is always seeking new technologies, the best solutions for ecommerce problems and the most disruptive start-ups, which results in them working with 3 – 5 per cent of start-up companies.

As technology has become easier to build and deploy and more and more software is being deployed in the cloud, the number of solutions and companies calling on retailers for their attention and business has mushroomed. For each issue there are around 100 companies that can solve it, so the pace of innovation is far faster than that of deployment and a lot changes in terms of technology in 6 months. Says Grech: “Who knew that we would need to work on ibeacons a year ago?”

Innovation is nothing new, says Dr Jonathan Reynolds of the Oxford Institute of Retail Management at Saïd Business School, University of Oxford. Retail has always been about change. “Any retailer that was growing was doing this anyway but privately,” he adds.

In retail, innovation is generally more incremental and done in a way that is hard for competitors to copy, since retailers need to keep ahead as markets change. “Consumers get bored,” says Reynolds, so they are pushing for innovation and other retailers are innovating and experimenting. “If you don’t do it, someone else will,” he warns. “Innovation provides competitive advantage.”

“The companies that are betting on innovation – such as Amazon – are moving forward faster,” comments Grech.

It’s part of the culture at Amazon which, for example, spent $6.5bn on R&D last year. It’s a larger budget that many retailers’ turnover at a time when few have any spare cash to spend on R&D. “As a result it is moving faster than its competitors,” warns Grech.


Amazon continues to show an incredible commitment to innovation. Last year, the company spent $6.5bn on R&D; more than the $4.5bn spent by Apple, but less than Google’s $8bn. Large organisations such as Walmart have responded with the rumoured $300m purchase of Kosmix in 2011 which became Walmart Labs, its tech accelerator and r&d centre. With a focus is on being one of the top technology companies in the Silicon Valley and the world, Walmart Labs endevours to “bridge the gap between what’s next and what’s best”.

In the past year alone, it has hired 1,000 employees in Silicon Valley.

“Meanwhile, hidden in plain sight is the world’s largest Innovation Lab on the planet, the startup community, and they’re also working on these themes, but with the passion to win you can only find in an entrepreneur,” says John Grech, Co-Founder of Iterate Studio.

“Making it even more compelling, is that it’s funded by other people’s money – $10 billion worth of Venture Capital last year alone. There are over 10,000 ecommerce startups with 2,000 new ones emerging every year. The challenge is the optionality, geographic disparity, and varying stages (safety) of these companies.”

“Retailers have now recognised the value of innovation and are talking about it to investors and consumers,” says Reynolds. But innovation is as much about people and operations as it is about technology. Tesco has a track record of innovation, such as its £1 price zones and acquiring new businesses such as Giraffe. Retailers can also be quite open as innovators, launching private label ranges, working with customers to crowd source innovation as well as working with innovation labs or setting up their own.

By putting technology into the hands of customers, you find out what could happen were it to be rolled out, explains Reynolds, who recently chaired a cross-EU group researching the nature of innovation in retail.


In March, Unilever announced the launch of The Unilever Foundry, a platform that will provide a single entry-point for innovative start-ups seeking to partner with Unilever. The Unilever Foundry will enable the company’s global brands to experiment with and pilot new technologies more efficiently, effectively and speedily. It will also provide start-ups and entrepreneurs the opportunity to develop and work on global projects, access mentoring from marketing professionals, and tap into a new source of funding through Unilever Ventures.

Keith Weed, Unilever Chief Marketing and Communications Officer, explains: “We strive to be at the forefront of marketing and media innovation; to have our brands engage in the most creative, efficient and effective ways with the people we serve. Although we have been working with start-ups for years, we now want to scale up our efforts and, ultimately, embed this as a way of working throughout our organisation.”

In May, MasterCard launched MasterCard Start Path, a commerce-focused accelerator for early stage European startups. Through Start Parth, MasterCard will help accelerate startups toward long-term success by offering customised support, operational mentorship and the potential to secure pilots with key global players, including Asos and Capital One, amongst others.

While Reynolds and the expert group recommend raising awareness of innovation, reducing regulatory controls to enable it to thrive and increasing openness, he is also conscious that there’s a limit to consumers’ capacity to accept change, in the same way that there are only so many times that they can cope with a supermarket altering the location of the tinned peas, for example. “While consumers like innovation, they also like stability,” he says “so we will reach a level of equilibrium.”

While agreeing that retailers have to follow the iterative route that test and learn development provides, with its lesser disruption for customers, McGinn warns against solely adhering to the process where every small step is led by the customer. In the same way that start-ups can be nimble and disruptive, coming up with solutions to problems that others don’t yet realise exist, so too retailers have to look at their business afresh and ask how they could do it differently… and better.

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