This story has been edited with an updated statement from Target.
Target is using its startup accelerator programs to improve the company’s in-house data analytics.
This week, Target announced the 18 startups that will be participating in its two upcoming accelerator programs this year. The Metro Target Retail Accelerator, Certified by Techstars, is in its fourth year and for the first time is happening in partnership with German wholesale retailer Metro AG to involve global startups; the other, the Target Incubator, is new this year and will host startups that promote “better for the world” ideas, according to Target.
Target will take lessons learned from these startups to adopt new tools and technologies that solve for pain points like connecting customer data between online and in-store, real-time product recommendations and personalization. It’s a better alternative than outsourcing this work to vendors, which separates the retailers from their customers, risking security and a loss of control.
In its accelerators, Target has the power. For participating startups, the accelerator comes with a $120,000 investment from Target and Metro AG, an eight-week program and a Demo Day pitch to Target executives. The Target Incubator offers a $10,000 stipend and space to work on Target’s campus. Selected startups get to pilot their technology in Target stores following the accelerator, but formal partnerships aren’t guaranteed. The startups chosen touch on a variety of retail problems to be solved, including chatbots, AI, inventory and merchandising management and analytics, last-mile delivery, mobile payments, customer insights and retargeting. All of these solutions operate off required customer data, including insight into how often customers visit stores versus shop online, how they’re using the Target app, how fast products are selling and what customers are searching for.
“Working with startups gives Target the opportunity to consider testing outside innovations that might someday help us enhance our assortment and guest experiences,” said a Target statement. “In exchange, the startups get access to many of our resources — including mentorship, expertise and programming to help them ultimately learn how to scale their business to reach mass retail.”
A Target spokesperson added, “We use our accelerators to access a wide range of products, services and technologies that can further enhance our assortment or guest experience.”
More specifically, Target’s partnerships with the startups it chooses to work with after the accelerators end help it improve its own in-house data technologies. Target’s data and analytics teams are all in-house: The company doesn’t share its first-party customer data without outside vendors that would need access to that data to work with a retailer, like a CRM company. So long as Target builds out new retail solutions around evolving customer needs and behavior, it’s doing so on its own, with companies it acquires (like the last-mile delivery provider Shipt) or partners with through its accelerator programs.
“We protect our customer data, meaning we don’t partner with outside vendors if it means we need to share that data,” said a Target employee speaking on background. “Security plays a big role in our data strategy, which can make it hard, because we have to do it ourselves. So we look to our accelerator startups to fill that role.” However, Target said that no data security-specific startups have been involved in its accelerators to date.
Increasingly, retailers want to stake a bigger claim in technology companies rather than simply hire them as service providers. It’s a competitive advantage to own tech solutions, rather than outsource them to vendors who have a laundry list of other clients. Companies like Walmart, Nordstrom, Kroger and McDonald’s have acquired technology companies over the last three years that speak to their own strategies, and what’s worth buying versus building in-house or outsourcing. In acquisitions, customer data plays a central role in the tech services provided: Earlier this year, Walmart bought an AI solutions company that mines customer reviews for product recommendations, while McDonald’s bought Dynamic Yield, a marketing analytics platform. Nordstrom last fall acquired two customer service messaging systems that can connect employees directly to shoppers.
In addition to Shipt, which it acquired in 2017, Target acquired same-day delivery management platform Grand Junction the same year.
“These types of acquisitions reinforce the point that retailers of all shapes, types and sizes are trying to leverage technology as a competitive advantage and use it to close the elements around customer experience gaps,” said Brian Cleary, vp of marketing at RedPoint Global, a customer data platform. “But there’s a lot of experimenting behind the scenes of acquisitions — retailers are setting up startup labs to evaluate technology they might want to invest in. Whether they’ll build or buy it doesn’t really matter, but what these labs do is help retailers to operate in new areas, like personalization.”
Target’s accelerators bring retail-tech startups closer to the company’s chest, letting it see new technologies in action and then decide whether or not to formalize a partnership. Last year, six companies of the nine that went through the summer accelerator went on to pilot their technologies in Target stores. Those included Sozie, a user-generated content platform that specializes in helping customers find the right size online, and Satisfi Labs, an AI response platform that sends real-time answers to customers shopping in Target stores.
The Target employee said that the startups Target works with in both the accelerators and following pilots help it to incorporate new types of technology into its data strategy, and target new types of customers.
“It’s about new customer acquisition and closing the loop while still owning all of our own data,” the employee said.
Subscribe to the Digiday Retail Briefing: An email with news, quotes and stats covering the modernization of retail and e-commerce, delivered three times per week.
Why HelloFresh struck an ad deal with StreamElements to reach the gaming community
StreamElements’ plug-and-play interface creates a lighter lift for brands looking to reach the gaming community, eschewing the protracted negotiations and production time that can come along with brand partnerships with prominent individual streamers.
What these latest consumer affinity trends tell us about marketing in 2023
Video views could guide marketers on where consumers will shop after watching content on social networks.
Sam’s Club wants to ‘broaden awareness’ in cinemas with a faux-movie trailer starring Kevin Hart
For the holiday season, Sam's Club has teamed up with Kevin Hart to help launch its ad featuring a movie trailer style and is hoping to connect with moviegoers by boosting brand awareness for the holiday season.
SponsoredPublishers are adapting advertising strategies for a privacy-first world
Tina Iannacchino, senior publisher director, Seedtag So much of the attention around the death of third-party cookies and its impact on the digital advertising industry is focused on the implications for brands and consumers, which is far from the complete picture. The digital publishing industry in the U.S. is massive and set to be shaken […]
‘Time to go on the offense’: In a choppy ad tech M&A market, strategic investors eye deals
For many strategic investors, it's a good moment to put their corporate development teams to work.
Member ExclusiveDigiday+ Research: 60% of brands, retailers say holiday revenue will increase this year — slightly
Despite the current economic climate and perhaps not surprisingly following a record-breaking Thanksgiving shopping weekend, Digiday's survey found that the majority of brands and retailers expect revenue to increase during the holiday season over last year -- albeit only slightly.