E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
Rather than wait for brainstorms, retailers seed clouds of innovation with incentives.
At Bonobos Inc.'s loft headquarters in New York City, 13 members of the marketing team occupy a large open space where they regularly spin around in their rolling chairs and toss ideas back and forth. The manufacturer and web retailer of men's apparel also maintains an e-mail inbox for employees to brainstorm about everything from new marketing strategies to customer service features and product enhancements, says Richard Mumby, vice president of marketing.
Management awards Bonobos gear to teams that come up with the most creative names for pants—some stand-outs are the Photosynthepants for a leafy green-patterned pair, or Dandycanes for a red plaid variety—and even names products after star employees, like the Dennis Blancos pants.
Creativity is especially crucial for a company like Bonobos that primarily interacts with consumers online, Mumby says. (Nordstrom Inc. last month invested in Bonobos and said it plans to sell Bonobos apparel in its stores.)
"Because we are a web-only retailer, the way we introduce ourselves is exclusively through online mediums, so we need to find really engaging ways to introduce our customers to our brand," Mumby says. "That all has to be done in a way that is interesting and compelling and highlights the parts of our brand that are in sync with the way men talk, dress and live their lives."
Because new competitors are constantly emerging online, e-retailers have to be extra creative, agrees Tom McElroy, who heads the retail human capital division of Deloitte Consulting LLP. "Anybody can start up an Internet retailing business," McElroy says. "The ones that are really going to thrive and grow are the ones thinking about where they are going next." How to foster innovation? Put structures in place that encourage employees at all levels to develop new ideas, support them with the resources to bring their ideas to fruition and, most of all, acknowledge them when their contributions pan out, McElroy says.
Few retailers go as far as Google Inc., which has long allowed software engineers to spend 20% of their time working on their own projects. But many e-retailers consciously work to foster innovation, rather than simply hoping an employee will be struck by a brilliant idea.
Personalized art maker and e-retailer DNA 11, for example, has an ongoing Idea Generator program that includes all employees keeping a shared Google spreadsheet document open on their computers at all times. The document is broken down into three parts: new product ideas, process improvement ideas and free brainstorm. The e-retailer encourages employees to post new ideas, and all posts are immediately visible to everyone else in the company.
The e-retailer also has a process it calls Green Hat that brings employees together to brainstorm about ideas for new technologies, marketing strategies or new products. "You throw out ideas and nobody is allowed to talk negatively about anything, even if it breaks the laws of physics," says director of marketing Spencer Callaghan. "Everything that gets said is thrown up on the board. Some ideas may go nowhere, but others end up being something great. A lot of the product development process here begins with Green Hat."
Some of the innovations that came out of this process include a new filter, or image design effect, for Adobe Photoshop that is now one of the most popular filters the retailer uses when designing art; a different way of wiring canvases that cuts production time 30 seconds per canvas; and a crowdsourcing area of the site called DNA 11 Labs, where shoppers can recommend and vote on new product ideas. Employees are rewarded for their Green Hat or Idea Generator suggestions with free canvas prints, and the best ideas draw bonuses.
Some of the most innovative ideas the company has implemented in recent years have come from this type of internal brainstorming, Callaghan says. DNA 11's culture of encouraging employees to share new ideas is not only a way of growing the business through innovative strategies, he adds, but also a way to encourage employees to feel more connected to the enterprise, as though they have a real stake in its long-term success. This feeling, in turn, leads to more and better ideas.
The web side of office supplies retail chain Staples Inc. also puts a priority on encouraging employees to come up with new ideas. That's why managers of the online business discuss its Pet Projects program with each new employee upon hire and throughout their employment. "We encourage individuals on our teams to talk about ideas they are very passionate about," says vice president of e-commerce Brian Tilzer. "We give them the opportunity to form the idea. We then give them time so they can go off and pursue these ideas and build the plan for putting them in place."
One employee recently came up with the promising idea of an online technology recycling program, Tilzer says. Staples assigned her mentors who helped her develop her idea into a business plan and gave her time away from her regular duties and the resources she needed to put the plan in place.
Staples implemented the program with electronics recycling firm Gazelle in November. Now a shopper can go to an area on Staples.com and enter the details of the product she want to recycle, such as how old it is, the brand of the item and what kind of condition it is in. Staples then gives her a quoted value for the trade-in, asks her to ship the item to the retailer and gives her an electronic gift certificate to use at a Staples store.
For her work on the new trade-in program, Tilzer says, the employee received a S.M.A.R.T. award; S.M.A.R.T. stands for "Staples' most audacious risk-taker." Staples praised the employee in departmental and divisional meetings and gave her a Ben Franklin Bobblehead toy. "Ben Franklin is as much of a crazy innovator as one can be," Tilzer says. "It's a symbolic token of her accomplishments."