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An inside job: Internal tech hubs

Retailers are changing their internal structures and introducing tech labs to make sure they get full value from their technology and stay ahead of rivals.

Retailers can test and implement new technologies much faster if they have an internal team completely focused on innovation. For this reason, US-based fashion etailer Zappos launched Zappos Labs - which experiments with new shopping technologies - just over three years ago in San Francisco. Director Will Young says the goal was to have a team that could experiment with the different ways people might want to engage with the business, rather than being focused on the core shopping experience: “Retail and ecommerce is changing incredibly quickly. The Labs team is focused on keeping on top of - and hopefully ahead of - a few of the shifts we’re seeing in ecommerce.”

Alex Sbardella, product strategy director at digital agency Red Ant, agrees having a separate team can allow businesses to set aside budgets specifically for technical research and development, enabling them to track successes and failures and rationalise the risks taken in the name of innovation. Although a third party can be used, he believes there are many advantages to carrying out the work in-house: “On one hand it means [companies] don’t have to outsource every exciting new development; on the other, where using a partner is preferable, having a home-grown team of technically aware people makes the external relationship with technical partners much more strategic and efficient - and ensures that when the technology becomes crucial to the business, knowledge and support is not tied to a third party.”

This year more UK retailers have followed this trend, with Shop Direct setting up an in-house user experience (UX) lab in January and John Lewis launching the JLab this month. Jonathan Wall, group ecommerce director at Shop Direct, says the UX lab is central to its experimentation work and allows the business to trial and test - while keeping the customer at the heart of what it does.

The UX Lab comprises 30 people and sits within the wider ecommerce team reporting to Wall. It has two rooms - one for customer testing and the other to view this testing as it happens - which Wall describes as similar to a police interrogation set-up. This means they can see exactly how customers are engaging and interacting with the technology and enables them to follow the entire customer journey.

The lab teams at both Zappos and Shop Direct employ individuals with a variety of skills, from developers and designers to usability experts and project managers. Sbardella says the technical hub in any business should draw its talent from all departments and report to the chief executive or the chief commercial officer. He adds: “To get the best from the team, it should not carry any baggage from existing business silos - the IT department, for example, is likely to be too restricted by existing systems and thought processes. The hub should be free to focus on improving customer experience with a cross-channel remit, and should comprise developers, tech leads, UX experts and product strategists, rather than business analysts, marketers or sales people.”

Sbardella also says individuals’ attitudes and personalities are the key to building a successful and innovative team: “Above all, the hub should be made up of skilled, passionate people who are evangelists about technology and are prepared to spread the word to internal teams, external partners and the industry as a whole. They should also have the internal clout to ensure that innovation will not be stifled by departmental politics or systems overhead.”

Once a successful team has been put together with the essential skills, the results can be seen pretty swiftly. Wall says the most successful change to have come via the UX lab so far has been the implementation of review flags on product pages. When more than 90% of users say they would recommend a product, a message is added on that product page to highlight this. This small addition has resulted in a 2.7% uplift in conversion on these pages.

Wall also says the UX lab has been instrumental in allowing the team to find out why customers are leaving the site on particular pages: “We could see customers were exiting on product pages, but couldn’t work out why. By bringing them into the UX lab we could follow their journey using eye tracking and videoing.

“We quickly found that when customers hadn’t picked a colour [for a particular item], the message was not clear that this was necessary, so they couldn’t continue their journey and left the page. We developed a light box pop-up to make this message clear, which resulted in a 2.5% increase in conversion.”

Zappos Labs also has a number of successes under its belt, including Pinpointing (a Pinterest recommendation engine allowing customers to get Zappos recommendations based on a Pinterest user’s pins) and #nextootd (a hashtag started by Zappos encouraging users on Twitter to tag a product their ‘next outfit of the day’).

There is a concern that where an internal team is introduced with an emphasis on innovation, it could take this focus away from the rest of the group.
Young disagrees: “Every team has the opportunity to work on innovative things. We have separate mobile and website teams that are always thinking of innovative ways to make the core shopping experience better.

“We also have an innovation incubation function within Zappos that helps anyone with a great idea get it off the ground.”

It is clear to see how these in-house labs can improve productivity - and at a much faster pace. Wall says Shop Direct has gone from carrying out one to two tests a month to an average of 35 - and plans to increase this to 100 by the end of the year. Zappos Labs is growing its team, with a number of developer and product roles available.

Sbardella says: “Ultimately, the tech hub should help the business to deliver a better customer experience. It’s their job to be innovative, disruptive and to run projects that stand outside ‘business as usual’, taking calculated risks to deliver improved cross-departmental results.”

He says retailers should model themselves on the best tech companies rather than their direct competitors - citing Apple (which “has just recruited Burberry’s Angela Ahrendts and Yves Saint Laurent’s Paul Deneve for exactly this kind of thing”), Microsoft, Facebook and Google as good examples of companies using their in-house teams to take calculated risks to make experiences better for their users.

“Retailers should look to recreate the ‘start-up’ mentality within the team, combined with the security of operating within an established business, for the best results,” Sbardella says.

Readers' comments (1)

  • Retailers also need to become more accessible and available to listen to new tech ideas from 'start ups'.

    JLAB was refreshing. Hopefully other major retailers will follow suit...

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