SAN FRANCISCO -- Target unveiled a new technology and innovation office here Friday, giving the retailer a foothold in Silicon Valley and positioning it to grow its mobile and digital shopping services.

Target's Technology Innovation Center in San Francisco's financial district will be the retailer's West Coast hub for mobile app, online search and social media development -- pillars of the retailer's e-commerce expansion. It also marks the latest effort by a major U.S. retailer to challenge e-commerce giant Amazon and remake its image from that of an outdated brick-and-mortar store to a tech-savvy, multichannel shopping experience.

"Retail is undergoing a major revolution, and technology is key," Beth Jacob, executive vice president and chief information officer for Target Technology Services, said during a media event at the new office Friday. "You have to be able to operate at warp speed, and innovate very quickly."

Target hopes its snazzy San Francisco outpost will help it do just that. The office is outfitted with all the elements of a Silicon Valley startup -- dry erase walls, movable desks and chairs, pods for brainstorming and lots of open space.

"It allows us to be really visual," said Anna Veit, chief of staff at the lab since February and a Stanford University graduate.


Advertisement

Target has hired almost 20 employees for the new office, a diverse group that includes not only developers but also designers, data scientists and marketing experts. It shares some employees with SapientNitro, a digital marketing agency that shares the office and collaborates on many of Target's e-commerce initiatives.

Target is trying to follow Walmart's lead into the digital shopping space, and both retailers are in a relentless pursuit of e-commerce giant Amazon. David Newman, Target's director of the new tech center, said the company is working on an image-recognition feature that would allow customers to call up information about a product, such as nutritional information for a cereal brand, just by capturing the image on their phone. Target also said it is expanding its maps and geofencing software, technology that allows retailers to send deals to customers who are in stores or nearby by tracking their whereabouts through their mobile phone.

"We're trying to be out in front of digital innovation," said Nate Swanstrom, vice president of multichannel and marketing in Target technology services.

Marshal Cohen, an analyst with The NPD Group and a national expert on the retail industry, said these innovation labs help retailers keep up with changes in customer shopping habits, as people have less time to shop but more of them own smartphones.

"It's real-time retailing," he said. "It's about being able to get consumers products as quickly as they want it."

While the San Francisco office, which occupies the third floor of the historic Folgers Coffee headquarters, is Target's first corporate outpost in the Bay Area, the retailer has long-standing relationships with several Silicon Valley heavy weights. Target partners with Google (GOOG) and eBay (EBAY) to offer same-day delivery, and this month, it partnered with Facebook to launch Cartwheel, a service that uses the social networking platform to offer and share store discounts and drive more shoppers into stores.

Target executives said the San Francisco office also offers the opportunity to develop new partnerships with startups and venture capital firms. Target employees will visit startups around the valley and invite entrepreneurs and investors to the tech lab to collaborate.

Target also has a tech center in Minneapolis, where the company has its headquarters. But the San Francisco office "fulfills a need for us to be just present where a lot of things are going on," Jacob said.

Target has been making strides into the digital space, and last fall rolled out free wireless Internet in all stores to give customers a better experience using Target mobile apps while shopping. The company also will start testing in-store pickup for online purchases and more mobile checkout features.

Target has 1,784 stores nationwide -- less than half the number of Walmart stores -- and had about $73 billion in sales last year.

But among the big-box stores, Target is late to the e-commerce game, and still trails rival Wal-Mart, which has a robust technology lab in San Bruno that has produced store checkout and product scanning mobile apps that are already in testing or available to shoppers. And Wal-Mart announced this week it acquired two Bay Area startups and plans to hire another 150 or so employees as it continues to grow its e-commerce division.

Cohen said innovation labs allow retailers to experiment with new products without worrying about losing money, and test them on small groups of customers. The Bay Area will become Target's testing ground, as it has been for Wal-Mart. Target executives say they are already testing new digital products on shoppers at the San Francisco city Target, trying to perfect them before offering them to shoppers worldwide.

"Then when they finally do roll it out, that investment has proof in the pudding," Cohen said.

Contact Heather Somerville at 925-977-8418. Follow her at Twitter.com/heathersomervil.