Innovating with Startups in Retail—Lessons and Opportunities for Retailers

Retailers today face a rapidly evolving landscape, shaped by shifting consumer expectations, technological disruption, and ongoing economic pressures. To stay ahead, many are looking beyond their own walls and turning to startups as engines of innovation. While consumer products (CP) companies have long partnered with startups to accelerate digital transformation, retailers have unique challenges and opportunities that demand a tailored approach. This page explores how retailers can harness the power of startup collaboration—drawing on lessons from CP, but with a clear focus on the distinct needs of the retail sector.

Retailers are under pressure to deliver seamless omnichannel experiences, optimize supply chains, and create differentiated in-store and digital journeys. The pandemic accelerated digital adoption, but also exposed gaps in agility, profitability, and customer engagement. Startups offer retailers a way to:

• Access cutting-edge technology and new business models—often faster and more flexibly than building in-house.
• Experiment with emerging solutions in areas like in-store automation, returns management, and data-driven personalization.
• Tap into entrepreneurial talent and a test-and-learn mindset that can be difficult to foster in large, established organizations.

As seen in the CP sector, the most successful partnerships are not about chasing the latest technology for its own sake, but about solving real business problems and driving measurable impact for customers and the bottom line.

While CP companies have focused on data enrichment, digital asset automation, and synthetic media, retailers are finding value in startup partnerships across several distinct domains:

1. Supply Chain and Returns Optimization

Returns are a trillion-dollar problem for retailers, with online sales driving higher return rates and increased costs. Startups are helping retailers:

• Leverage data to predict and minimize returns—using customer behavior, product fit analytics, and AI-driven recommendations.
• Streamline reverse logistics, including dynamic routing of returned goods to the optimal location (warehouse, store, or even direct to another customer).
• Experiment with new models, such as peer-to-peer returns or incentivizing in-store returns to reduce shipping costs and drive additional sales.

Retailers that use data to identify serial returners, optimize product information, and personalize the returns experience are seeing both cost savings and improved customer loyalty.

2. In-Store Technology and Automation

With labor shortages and rising wage pressures, retailers are piloting startup solutions in:

• Contactless checkout and cashierless stores, leveraging computer vision and IoT to reduce friction and reallocate staff to higher-value tasks.
• Smart kiosks, digital signage, and responsive merchandising that adapt in real time to customer profiles and inventory levels.
• Kitchen and back-of-house automation in food retail, from voice ordering to robotics, to make more with less.

These innovations not only address operational challenges but also create differentiated, memorable experiences that drive foot traffic and brand affinity.

3. Omnichannel and Customer Experience

Startups are enabling retailers to bridge the gap between digital and physical, offering:

• Unified commerce platforms that provide a single view of the customer and inventory across all channels.
• Personalization engines that use AI to recommend products, optimize promotions, and tailor content in real time—both online and in-store.
• Social commerce integrations, livestream shopping, and influencer-driven experiences that tap into new customer segments and drive impulse purchases.

Retailers that partner with startups to deliver seamless, data-driven journeys are better positioned to capture loyalty in an era where brand switching is just a click away.

Drawing on lessons from CP and leading retailers, several best practices emerge for making the most of startup partnerships:

• Start with the problem, not the technology. Define clear business challenges and desired outcomes. Avoid falling in love with a solution before understanding the use case.
• Provide a single point of contact and reduce bureaucracy. Help startups navigate your organization, set clear expectations, and remove unnecessary barriers to speed.
• Set measurable objectives and KPIs. Align on what success looks like, and be prepared to scale pilots that deliver value—or quickly move on from those that don’t.
• Foster a culture of experimentation and learning. Encourage teams to take calculated risks, learn from failure, and celebrate wins. Change management and internal storytelling are critical to scaling innovation.
• Curate and integrate multiple solutions. Many retail challenges require a combination of technologies. The real magic often comes from integrating several startups’ offerings into a cohesive, customer-centric solution.

Several retailers are already seeing results from startup-driven innovation:

• Returns Optimization: Retailers are using data platforms to identify serial returners, personalize product recommendations, and dynamically route returns—reducing costs and improving customer satisfaction.
• In-Store Personalization: Fashion and footwear retailers are piloting smart mirrors and digital displays that adapt content based on customer demographics and behavior, increasing conversion and basket size.
• Unified Commerce: Grocery and big-box retailers are investing in composable, API-driven platforms (often in partnership with startups) to enable real-time inventory visibility, flexible fulfillment, and seamless omnichannel experiences.

For retailers looking to accelerate digital transformation through startup partnerships, consider the following steps:

1. Identify your most pressing business challenges—whether in supply chain, in-store experience, or customer engagement.
2. Scan the startup landscape for partners with proven solutions and a willingness to co-create.
3. Start small, with focused pilots that have clear success metrics. Be ready to scale what works—and learn quickly from what doesn’t.
4. Invest in the organizational enablers: data infrastructure, agile ways of working, and a culture that rewards experimentation.
5. Look for opportunities to integrate multiple startup solutions, creating differentiated experiences that competitors can’t easily replicate.

As the lines between digital and physical retail continue to blur, the ability to innovate at speed and scale will separate the leaders from the laggards. By embracing startup partnerships—not as a silver bullet, but as a core component of a broader transformation strategy—retailers can unlock new sources of value, delight customers, and build resilience for the future.

Ready to explore how startup-driven innovation can accelerate your retail transformation? Contact Publicis Sapient to start the conversation.

Relevant Links

• Innovating by Tapping Startups
• Innovating by Tapping Startups
• Regional Spotlight—Startup-Driven Innovation in EMEA and APAC Consumer Products
• La Nueva Realidad de las Fiestas: Cómo los Retailers Latinoamericanos Pueden Prepararse para la Temporada de Mayor Desafío (LATAM)
• Les Fêtes 2024 : Préparer le Commerce de Détail Européen pour une Saison de Tous les Défis (Europe)