How Target Identifies the Hottest Retail Tech 18 Months Before It’s Cool

Its innovation lab in S.F. has shifted from learning to making

When Target opened its San Francisco innovation lab in 2012, the goal—as with most brands—was to work closely with tech startups to apply digital smarts to retail. With two years of learning under its belt, Target now aims to make a bigger splash in the innovation lab space by hatching digital projects.

"I'd say [being close to startups] is a secondary purpose now that we've shifted much more towards a build mentality and we're investing more time in prototyping," said David Newman, director of the lab. 

Target is tight-lipped about projects to come out of its innovation lab but is focusing on four main areas: virtual reality, robotics, the so-called Internet of things (which includes wearables and connected devices) and digital activations—including beacons and location technology.

In the case of virtual reality, Target has tested technology that creates a 3D experience to furnish a dorm room. And a promo tied to Universal Picture's Despicable Me 2 challenged shoppers to find minions featured on products, and store signage used augmented reality.

The lab zeroes in on tech that's about 18 months away from mainstream adoption, according to Newman. Projects are divided into pods made up of one to six people, depending on how developed something is.

Newman also noted that Target's approach isn't about acquiring startups, acknowledging competitor Walmart's strategy in nearby San Bruno, Calif. Walmart's @WalmartLabs has acquired 14 startups since 2011. Target's strategy for the future is "less about acquiring a technology as it is today, and it’s working very closely and very hands-on to evolve [a technology] to really explore different use cases," Newman said.

As part of that hands-on approach, Target will start running its innovation center as a stand-alone lab in January, after two years of leaning on agency SapientNitro. Target's innovation center was built in partnership with Sapient in 2012, and the two share an office space in San Francisco's historic Folgers Coffee Co. building.

Newman is quick to point out that although Sapient will not be involved in the day-to-day operations, the agency will still work with Target's lab, although it's unclear in what capacity. "The agency approach helped us acquire the talent and stand up the office quickly," Newman explained. 

This article is the final installment of a series profiling seven brands' innovation labs. Click here to read more.