The Norman Transcript

November 16, 2013

Retailers take on Silicon Valley

By Anne D’Innocenzio
The Associated Press

SAN FRANCISCO — Software engineers wearing jeans and flip flops test the latest smartphone apps. Walls and windows double as whiteboards where ideas are jotted down. And a mini basketball net is in the center of it all.

At first glance, this workplace resembles any Silicon Valley startup. There’s just one exception: Target’s trademark red bulls-eye at the entrance.

Target, Kohl’s and home-shopping network QVC are among a half dozen retailers opening technology test labs in the San Francisco area to do things like improve their websites and create mobile shopping apps. They’re setting up shop in modern spaces and competing for top Silicon Valley talent to replicate the creativity, culture and nimbleness of online startups.

The goal is to stay on top of tech trends and better compete with online rivals like Amazon.com that attract shoppers with convenient ordering and cheap prices. The labs are a shift for retailers, which like many older industries, have been slow to adapt to rapidly changing technology. But retailers say the labs are essential to satisfy shoppers who more often are buying on their PCs, tablets and smartphones.

“Consumers expect immediate gratification,” says Lori Schafer, executive adviser at SAS Institute, which creates software for retailers. As a result, she says retailers need to develop technology in weeks, instead of months or years.

Retailers are playing catch-up after several years of watching shoppers gradually move from physical stores to the Web.

Online sales have grown from 5.9 percent of the $2.64 trillion in total retail sales in 2009 to 7.6 percent of the $3.1 trillion in revenue last year, according to Forrester Research.

The explosion of people using smartphones to shop has pushed stores to move faster. U.S. consumers are now spending more than half of their time on retailers’ websites using their smartphones and tablets, according to the National Retail Federation, a retail trade group.

Retailers knew they needed to figure out how to create online and mobile technology to please their shoppers. So they began looking to Silicon Valley, where they hoped to tap the talent, culture and creativity that come from tech giants like Facebook and Apple.

Wal-Mart, the world’s largest retailer, was the first to open a tech lab in Silicon Valley. Since opening Wal-MartLabs in San Bruno in 2011, the company has rolled out a number of technologies that it developed there.

One of the biggest projects? Wal-Mart rebuilt its website’s search engine, which launched in 2012. It can guess a customer’s intent when he or she types a term rather than just returning specific search results. A search for “denim” yields results for “jeans” instead of products with “denim,” for example.

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