Retailers Open Technology Test Labs in Silicon Valley

Software engineers wearing jeans and flip flops test the latest smartphone apps. Walls and windows double as whiteboards where ideas are jotted down. And a mini basketball net is in the center of it all.

At first glance, this workplace resembles any Silicon Valley startup. There's just one exception: Target's trademark red bulls-eye at the entrance.

Target, Kohl's and home-shopping network QVC are among a half dozen retailers opening technology test labs in the San Francisco area to do things like improve their Web sites and create mobile shopping apps. They're setting up shop in modern spaces and competing for top Silicon Valley talent to replicate the creativity, culture and nimbleness of online startups.

The goal is to stay on top of tech trends and better compete with online rivals like Amazon.com that attract shoppers with convenient ordering and cheap prices. The labs are a shift for retailers, which like many older industries, have been slow to adapt to rapidly changing technology. But retailers say the labs are essential to satisfy shoppers who more often are buying on their tablets, PCs and mobile devices.

"Consumers expect immediate gratification," says Lori Schafer, executive adviser at SAS Institute, which creates software for retailers. As a result, she says retailers need to develop technology in weeks, instead of months or years.

Retailers are playing catch-up after several years of watching shoppers gradually move from physical stores to the Web. Online sales have grown from 5.9 percent of $2.64 trillion in total retail sales in 2009 to 7.6 percent of the $3.1 trillion in revenue last year, according to Forrester Research.

The explosion of people using smartphones to shop has pushed stores to move faster. U.S. consumers are now spending more than half of their time on retailers' Web sites using their smartphones and tablets, according to the National Retail...

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