There's Retail Magic in Silicon Dust

The industry’s axis is shifting to Silicon Valley, where fresh ideas come from edgy start-ups.

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Other industry giants have proved more nimble. Adjusting to competitive pressures, Walmart opened an e-commerce innovation lab in Silicon Valley last year, while Framingham Mass.-based Staples is making a similar move on the East Coast. This spring, the office products chain will debut its innovation lab in Cambridge, Mass., home to Harvard and MIT, near a cluster of high-tech offices that includes Amazon, Google, and Microsoft.

Apple, meanwhile, has emerged as a major influence on the sector. "You cannot have a discussion about this without talking about Apple," emphasizes Kilcourse. "We hear all the time when we talk to retailers that they want to have an Apple-like experience in their stores," he says. The industry marvels at Apple's retail prowess and creative use of technology in its stores "to fundamentally change the consumer interaction." Apple stores feature lots of iPads: Sales staff use them to assist customers with purchases and the tablets are mounted next to display items to dispense product details to shoppers. "Genius Bars" staffed with technicians have been heralded as an ingenious way to provide accessible tech support. Seeking to interject some of Apple's flair, Lowe's recently distributed 42,000 iPhones to sales associates and 1,725 iPads to store managers nationwide.

New faces in the boardroom tell a similar story. JC Penney's selection of its newest CEO, Ron Johnson, who took the helm in November, says a lot about retail's direction. While Johnson has extensive experience as a former top executive at Target, he spent the last 11 years as a senior executive at Apple. He's now applying Apple's zeal for bold ideas and unconventional thinking to the struggling 110-year-old chain with plans for a dramatic overhaul that could include live demos and specialty boutiques in its stores, according to news reports.

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In fact, high-tech executives routinely get snapped up by leading big-box chains these days. Among the many examples: The co-heads of @Walmart Labs, the retailer's new research center, were previously with Amazon, while Home Depot Chief Information Officer Matt Carey formerly served as chief technology officer at eBay.

As retail chains rush to embrace e-commerce, they run the risk of neglecting their brick-and-mortar stores, which could leave them vulnerable to a new competitive threat. Underscoring the adage that the best defense is a strong offense, Internet powerhouse Amazon is reportedly contemplating a business move long considered unthinkable: It may open its first "real" store later this year in Seattle.


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