Do retailers need middle men to match them up with tech startups?

Photo: Target
Mar 28, 2017
Laura Heller

Build, invest or buy? That is a question being asked among retailers today who are increasingly turning to middle men to help evaluate startups and disruptive technology.

Macy’s, Target and Walmart famously opened technology incubators in Silicon Valley, but there are third parties out there vetting and funding ideas, then matching them with retail partners.

And both groups benefit from the translation and mitigation, according to a panel on the subject at the Shoptalk event in Las Vegas.

“Retailers are bombarded on all sides. We’re the middle ground between corporations and startups,” said Ryan Broshar, managing director of the Techstars Retail Accelerator. “We help startups learning to interact and work with corporations and bring corporations down to a level where they can talk to startups.”

One big problem is that technology and need are changing more quickly than most big companies move. Target is working with Techstars and was “stunned by how quickly startups work,” shared Broshar. “The pace of play can work in the favor of the retailer; it’s the pace that retailers need to be at.”

“Retailers are now being asked to be technology companies, but the things they do every day aren’t going away,” said Lila Snyder, president and EVP of global commerce at Pitney Bowes.

Companies such as Pitney Bowes, Techstars and Simon Venture Group — all panelists on this topic — are acting as these middle men. Meeting with thousands of startups, evaluating technology and investing in the ones that make the cut, then matching them with retail companies.

Blueprint Registry and AddStructure have already benefited from these programs. Both received funding and mentorship from retailers as part of the Techstars program. As Blueprint’s founder Lizzie Ellingson told FierceRetail, the learning curve for both the startups and retailers was quite large. The program didn’t just assist with funding, but helped the startups better understand the company’s needs and culture, and helped keep a corporation the size of Target from crushing a small business before it’s even begun.

Walmart has chosen to take a different path by launching its own incubator — Store No. 8. The initiative will operate under and nurture startups.

DISCUSSION QUESTIONS: Should retailers look outside for technology solutions or build them in-house? Can third parties help legacy retailers move more quickly? How can retailers push these solutions through their organizations? 

"The hard part is looking at a new concept and determining if it will work in retail. This takes someone with real experience and vision."
"These are questions that prompt the response; “It depends.”"
"One great opportunity is for retailers to get involved in retail tech-focused accelerators early on."

Join the Discussion!

17 Comments on "Do retailers need middle men to match them up with tech startups?"

Sort by:   newest | oldest | most voted
Jon Polin

As retail technology is still emerging, most retailers are better off outsourcing tech development. Until it reaches a stage at which that technology becomes a core competency, retailers simply won’t do it as well as outsiders. Third parties can play a key role in these early days in bridging the cultural (and pace) gap between fast-moving tech companies and slow-moving retailers. On all tech-related fronts, from build vs buy to partner selection to integration, retailers need to reinvent themselves for a world in which consumers are embracing technology and retailers need to provide it or risk atrophying.

Kate Munro

Jon makes a good point. Retailers are good at what they do, and they know the ins and outs of the retail industry. Retailers do best when they focus on their business and allow technology companies to implement the appropriate solutions to enhance their offerings — and the best scenario is when that tech company is also savvy on retail. Retailers should take care to ensure they are working with the best in breed — companies that understand their industry and don’t recommend a one-size-fits-all solution.

Top technology companies know the industries in which they play, and are constantly adapting their offerings to meet the needs of their customers, giving them valuable expertise they can share with retailer clients. Imagine the effort it would take to bring that knowledge in-house, and the potential churn of that knowledge due to employee attrition. Bottom line: Retailers will see efficiencies by working with tech companies who know their space and can adapt to their needs quickly.

W. Frank Dell II

If you look at the history of technology and retail you will find most mainstream software did not work for retail. Item counts, transaction counts, random weight, etc. were far greater than most software could handle. This created software vendors only working with retail customers. The demise of many retailers has resulted in a reduction of potential clients for these vendors. Much of the new technology being developed will never see the light of day. It looks good in theory but does not work, is too costly or the technology has not caught up with the concept. The hard part is looking at a new concept and determining if it will work in retail. This takes someone with real experience and vision. Retailers must monitor development so it is just a question of how.

Nir Manor

New retail technologies have emerged in recent years at a growing pace. Brick-and-mortar retailers face threats from online players and must adopt technology and innovate in order to remain relevant. There is a large variety of retail tech solutions that aim at solving pains and improving processes from supply chain, inventory and shelf management to loyalty and personalization, in-store customer service, seamless checkout and more. Most retailers don’t have the knowledge to choose the right technology and need help from external experts. Retail veteran advisors that understand technology can facilitate matching retailers with the right technology they need at the time that they are ready to adopt them and help them prioritize, analyze ROI and make the right decisions. These “middle men” can have huge value for retailers in saving time and costs and can generate quick wins that show fast results and significantly impact the retailers’ present and future business.

Peter Sobotta

Large retailers like Target and Walmart are wise to look beyond their inner circles for new innovation and opportunities. The seeds of innovation often start as humble ideas that do not seem relevant until they are. That’s the vision large organizations often have difficulty seeing. From an ROI perspective, the amount of capital deployed to support such programs is trivial compared to the upside. I think we will see more of these programs as modern retailers demonstrate their value.

Sterling Hawkins

Retailers of all sizes are and should be reaching into new circles for innovation and innovation opportunities. There is both the benefit of the innovation itself (technology) as well as the “innovation thinking” (culture) that can permeate into a traditional retail operation. The value of both of those things cannot simply be brought in-house effectively; these third parties are a very helpful addition to move the industry forward.

Lyle Bunn (Ph.D. Hon)

Resourcing your priorities is fundamental to success. As retailers seek innovations their priorities must be discovery, rapid assessment and effective integration into operations. Providers have an ongoing frustration at getting a hearing while retailers can be guilty of having limited means of being able to trial of a new approach or having a limited assessment framework. When retailers seek in a purposeful way, they will find innovations which are readily available from companies hungry to supply. Endusers do not create innovation, providers do. Endusers create application for enabling capability.

Kim Garretson

One of the dangers of these programs is the stage of the startups. Since unfunded startups that have not launched fail, in my view, about 90 percent of the time, these programs improve those odds only marginally. But there are programs such at the Sprosty Network RetailXelerator that take second-stage startups and accelerate them to larger retail partners and networks. These companies are funded and launched. If they have physical products they usually are selling online, and if they are software they usually are working with small e-tailers.

Ron Margulis

These are questions that prompt the response; “It depends.” In a lot of cases, the out-of-the-box point solutions will do just fine for the applications they are addressing. Need a POS software solution? A dozen vendors have one that will work perfectly fine. Want to automate ordering? Same thing. For applications like pricing, forecasting, loyalty and category management, which are all deployed to create a competitive advantage, the retailer is likely to want to customize the solution for its own go-to-market strategy.

As for third-party consultants and systems integrators, again, it depends. Some are amazing and really have the retailer’s best interest in mind when sourcing technology. Others, not so much. They are either in bed with select vendors or try to extend the engagement well beyond the original purview to milk the retailer.

Ashwin Ramasamy

We are a different kind of middleman between retailers and tech companies. We are a predictive analytics firm that helps tech companies (and others) discover relevant prospects with ecommerce/retail segments.

There are close to 2000 companies that exclusively create and sell tech for retail and ecommerce verticals. The scale of innovation and change of technology is mind-boggling. These companies have to reach the right audience within the retail and ecommerce organizations because the other way around (retailers discovering these tech companies) isn’t easy.

What we’ve also seen is that such companies, when they target retailers, get a 15% response rates or even more — signaling a huge interest among retailers to try new ideas.

Our customers (retail/ecommerce tech companies) say that retailers are running tech pilots all the time to stay ahead on the technology curve.

Anna Tolmach

One great opportunity is for retailers to get involved in retail tech-focused accelerators early on. Not only is it a great opportunity for the founder and the startup, but instead of getting an off-the-shelf software that doesn’t work, the retailer can be a critical partner in early development and get a product that’s made for their needs. The team can then take the product and scale it beyond the retailer, but that’s the only way to develop great software. Too often, products are made in a silo without enough consideration of the end-customers’ needs. So ultimately outsourcing R & D can work, but it needs to be done thoughtfully and as a true partnership.

Ricardo Belmar

The fact is most retailers are not the size of a Walmart, Target or Macy’s and they just can’t allocate the resources needed to develop and nurture the technologies they need for the future. Retailers are being asked to transform into something they are absolutely not suited to being — not just a tech company, but an agile tech company. Most companies the size of a typical retailer are struggling to do that in today’s cloud-first, mobile-first, applications-first world. Not just in the retail industry. Outsourcing this activity can be of significant benefit to retailers, however, they still need to be managed by in-house resources, and any final solutions need to be properly integrated back into the retailer’s organization for ongoing sustainability. Therein lies the challenge for many retailers. Relying on these tech incubators to create new in-store experiences for them is one thing, but sustaining those experiences in the store is quite another. That’s something that cannot be outsourced.

Mohamed Amer
If retail wasn’t tough enough already, are we now expecting retailers to be experts at vetting early stage technology startups? The key to success is how the company understands time and customer value. In retail this translates to speed and agility in identifying customer trends and in creating a strategy to deliver a defensible value proposition that is highly desirable by the target market. From my experience over the last 30 years and due to the nature of resource limitations, companies are good in doing a set of activities that are closely related with high organizational and cost synergies. For retailers, that means focus on delivering value to their shoppers to keep them coming back again and again. Technology companies can help retailers better understand and expand their option horizon, by asking “what if?” Retailers, and business, need to understand how well the technology applies to their existing and emerging situations as well as feasibility at scale. Bottom line for me is that retailers can, should, and need to leverage technological advances to improve the… Read more »
Kelly Coughlin

In our industry, we are seeing many former retail and CPG leaders that have retired and have now re-entered the industry in order to consult for and/or guide technology company processes. This is often a win-win between new and emerging companies that have technological capabilities (but not necessarily successes within the industry), and “middle men” that have contacts, industry expertise, and are able to guide the technology toward a meaningful direction that is useful at the retail level.

Stefan Weitz
I think that retailers and brands don’t necessarily need to look to startups to succeed, but they definitely need to outsource their technical roadmapping to someone who has deep industry expertise and experience in matching consumer and market demands with ways to capitalize on them. Every day I talk with retailers who have an idea of why they are struggling, but to map those challenges to solutions eludes most of them — especially in the mid-market. Even if they can find a match between a problem and technology, stitching a number of disparate systems together in a way that provides a frictionless customer experience is too high a hurdle for all but the most advanced retailers and brands. These entities need to work with companies that have proven track records on understanding challenges and blending solutions that have direct business outcomes that correlate to improvements. I see far too often companies launch things just to say “they have omnichannel” with very little correlation to a positive business driver. I fear that partnering with startups blindly… Read more »
Vahe Katros

I am speaking to a party of one here (perhaps) first, this: “Acqui-hiring (a portmanteau of “acquisition” and “hiring”) or a talent acquisition, is the process of acquiring a company to recruit its employees, without necessarily showing an interest in its current products and services—or their continued operation.”

Ok, so remember retailer(s,) you are an “exit” for a start-up (and the middleman), so the post acquisition motivation and culture changes — I don’t care about the contract.

Silicon Valley or whatever valley — true culture and motivation can’t be purchased. So if you want the culture, you’ve got to give firms a reason to stick it out for more. But you know that. So, matching-up is not the problem.

Kai Clarke

No. Retailers need to focus on the key fundamentals of managing products at retail, both online and onground. Advancing the growth, maturity and often failure of a tech startup, is usually not part of a retailer’s DNA. Proven technologies, with proven models and tools can find their way to a retailer. The basics of managing out-of-stocks, logistics, pricing, product placement, communication with their customers, and bridging the online gap are enough hurdles for retailers to focus on without worrying about the viability of a tech startup.

"The hard part is looking at a new concept and determining if it will work in retail. This takes someone with real experience and vision."
"These are questions that prompt the response; “It depends.”"
"One great opportunity is for retailers to get involved in retail tech-focused accelerators early on."

Take Our Instant Poll

Do you think retailers should look for tech solutions with the assistance of third parties or should they handle it in-house?

View Results

Loading ... Loading ...