In 2013 John Lewis’ launch of JLAB put it at the Vanguard of what has now become a widespread retailer-incubator trend. Many other retailers followed suit including Unilever with the Unilever Foundry Diageo and Heineken, Sainsbury’s, Asos and N Brown Group also joining the game subsequently. By 2016 over 25 per cent of start-ups in the EU were being funded by existing businesses and the UK was in the top five countries where corporations actively engage with start-ups.
How do they work?
The purpose of retail incubators is to help breathe life into innovative business ideas while giving the retail partner the chance to benefit at the same time. JLAB for example, was started in association with L Marks which describes itself as an innovation specialist and investor. JLAB’s particular aim is to promote start-ups that ‘shape the retail experience of the future’.
Aspiring businesses compete to reach a final stage in which the top five entrants are given free office space, £12,500 initial funding, and mentorship from a handful of experienced executives. After a 12 week incubation period, the ultimate winner is chosen by a panel, given £100,000 in ongoing funding and the chance to trial their product in John Lewis stores. In 2017 Waitrose also joined the JLAB programme.
Mutually beneficial relationships
There is more to this trend than meets the eye. Non-technology businesses have increasingly been picking off some of Silicon Valley’s ideas about routes to innovation such as innovation labs, incubators and accelerators. And retailers have been focused on innovating in technology oriented areas from room visualisation tools, to tech-augmented clothing and consumer-insight technology.
As much as this gives them an opportunity to compete with the tech industry that is trying to disrupt their business model, it also opens up a new channel for publicity, a trick wisened retailers never like to miss. As well as attracting headlines in traditional newspapers and industry magazines, it offers access to trendy tech and business blogs like Tech Crunch and Wired. These important PR coups serve both the retailers and their start-up partners.
If sponsored innovation projects work then the real prize of business growth brings a host of benefits. Structures vary but they often include equity for the retailer, meanwhile sponsors from within the retailer get to participate in real innovation outside the firm and entrepreneurs that spring from labs have access to large customer bases and all the support that a major retailer can provide.
The long game
There has been a proliferation of corporate-sponsored innovation labs over the last few years. As with any venture oriented projects there have been successes and failures but the true test of the retail incubator itself is one that will take a long time to assess.