Meet 7 Brands That Are Building the Future of Digital Retail Through Innovation Labs

These marketers think big by going small

Headshot of Lauren Johnson

At first glance, Westfield San Francisco Centre appears to be a typical American shopping mall with the usual rotation of mass-market retailers, a food court and a movie theater. But perched on the top level is an office most shoppers probably don't know about that’s designing the next generation of retail, bearing little resemblance to the current setup.

A row of glass windows tucked into the side of the mall houses Westfields Labs—the digital arm of Westfield Group, which owns and operates more than 40 shopping malls globally. The lab is tasked in rethinking how today’s consumers shop while plugged into their mobile phones and social media accounts. The mall itself is a testing ground for these digital projects that gives Westfield Labs a literal birds-eye view into the retail world.

So, it's fitting that as Kevin McKenzie, Westfield Labs' global chief digital officer, is talking about the future of brick-and-mortar retail in his office, a robot made from an iPad attached to a set of wheels zooms past the door. The robot is controlled by an employee who lives in Sydney and is using the tablet for a video conference meeting with the San Francisco crew, a scenario that appears to mark a normal day in the office.

"There's still growth on the Internet, but there's more growth in fitting digital into the physical world," McKenzie says about digital marketing.

Westfield Labs is only one of a growing number of marketers that have capitalized on innovation labs in the past few years—small offices often located thousands of miles away from a brand’s headquarters. The strategy challenges teams to develop broad digital concepts for brands while quickly churning out ideas that sometimes only require a handful of people to build.

San Francisco and its neighboring cities have become the go-to place for setting up these innovation labs because of its close proximity to the startups, Internet giants and tech talent that California is known for.

Recruiting that talent is tough though. Several innovation labs interviewed for this story said it takes legwork to pull top-tier engineers and developers away from their dream jobs at big Internet companies to work for brands that are not rooted in Northern California’s tech history.

"In my experience, a lot of the people in Silicon Valley and the Bay Area are looking to do things at enormous scale, and that is frequently the interesting technical challenge [for us]," explains Adam Goldstein, senior product manager at Zappos Labs. "Someone that wants to work at Facebook wants to build something that can serve a billion users a day. I think that makes it difficult—what’s cutting-edge for retail is not necessarily cutting-edge for engineering."

Though California is home to many innovation labs, the trend isn’t limited to the Golden State. Staples has labs in Cambridge, Mass., and Seattle in addition to its small lab in San Mateo, Calif. Nordstrom’s team is also in Seattle, and Home Depot acquired Austin, Texas-based BlackLocus in 2012 to serve as its innovation lab. Meanwhile, Sears’ Integrated Retail Labs is stationed in Chicago.

This week, Adweek is profiling seven brands and their innovation labs to look at how these small offices crank out digital ideas for some of America’s largest retailers. Check out the first three—Walmart, Staples and Zappos—below and stay tuned for four more in the next few days. 

Part 1: This $473 Billion Retailer Wants to Be the Next Ad-Tech Star

Part 2: How an Office Supply Brand Stays On the Cutting Edge of Retail

Part 3: Zappos Embraces Its Quirkiness to Stand Out in San Francisco's Tech Crowd

Part 4: Lowe's Wacky Approach to Building the Store of the Future 

Part 5: This Innovation Lab Is Designing the Mall of the Future

Part 6: Visa's Innovation Lab Lets Brands Play With Digital Payments

Part 7: How Target Identifies the Hottest Retail Tech 18 Months Before It's Cool

@laurenjohnson Lauren Johnson is a senior technology editor for Adweek, where she specializes in covering mobile, social platforms and emerging tech.