Target Corp.’s online sales increased 30% in its fiscal third quarter ended Nov. 1 and projects 40% growth in the current quarter.
Web sales accounted for half of the 1.2% increase in U.S. comparable-store sales growth in the third quarter, Target reported yesterday. That 60-basis point contribution to comp-store sales was double the web’s contribution during the same period last year. For the year, online sales are boosting comparable-store sales 50 basis points while Target’s stores are dragging that metric down by 20 basis points, Target reported.
Target, No. 18 in the 2014 Internet Retailer Top 500, did not disclose online sales in dollar terms. Analyst Matt Nemer of Wells Fargo Securities LLC estimates the web accounts for 3-4% of Target’s sales and that Q3 e-commerce growth was about $160 million. Internet Retail estimates Target sold $2.3 billion online in 2013.
Target executives emphasized that the retailer is growing in large part by better meshing Target.com with the company’s stores, and that Target plans to invest more heavily in that kind of “omnichannel” strategy.
“Target’s digital sales are growing much faster than the industry, and they have been accelerating all year and we are planning for even faster growth in the fourth quarter,” chairman and CEO Brian Cornell told analysts yesterday on a conference call. “But our omnichannel journey is just beginning. As we plan for the future, we will take a channel-agnostic view of our growth allowing our guests to interact with us where and when they want, online, in stores and on their mobile device. And because an increasing number of Target visits begin on a digital platform, we will continue to push ourselves to innovate and build capabilities and features into our digital experience that will inspire guests while removing friction from their daily lives.”
Kathee Tesija, chief merchandising and supply chain officer, detailed some of the ways cross-channel programs are impacting sales online and in stores.
She noted that Target rolled out buy online, pick up in-store about a year ago across all its U.S. stores, and that this year about 15% of web orders have been picked up in stores “with more than 80% of orders ready within an hour.”
“Based on last year’s results, we expect in-store pickup orders will become a much higher share of digital traffic in the days leading up to Christmas as consumers increasingly value the certainty this service provides compared with the potential risk posed by weather related shipping delays,” she said, according to a transcript from Seeking Alpha. “And we continue to explore potential enhancements to flexible fulfillment like our curbside test, pickup test in 10 San Francisco Bay Area stores and our same-day delivery test in Minneapolis, Boston and Miami.”
She noted that Target also completed in October a nationwide rollout of a ship-from-store program, which allows 136 Target stores in 38 to fulfill online orders on some 60,000 products. “The ability to access stores inventory to fulfill online orders improves our digital in-stocks and drives incremental sales in situations where we are out of stock in our fulfillment centers. And while shipping from stores significantly lowers shipping costs, most importantly it allows us to get items into guests’ hands more quickly.” She called analysts attention to a story on InternetRetailer.com Sept. 25 that reported on a StellaService survey showing Target.com was delivering items the fastest among major U.S. online retailers.
Tesija said Target is seeing good results from its Oct. 22 announcement that it would offer free shipping on all online orders through Dec. 22. Previously, a shopper had to buy $50 online to get free shipping. “Since this announcement, our guests have responded enthusiastically,” Tesija said. “We’ve seen a meaningful increase in both orders and conversion compared with trends prior to the announcement.”
She also noted that Target had added devices in stores that let consumers scan tags to add items to a wish list or order from inventory available only on Target.com.
Tesija also touted Target’s Cartwheel mobile coupon app, which the retailer introduced in May 2013. It has now been downloaded 11 million times, Tesija said, and it was ranked the fourth most-popular retail mobile app in a survey by Internet Retailer and App Annie, a mobile app analytics firm.
Cartwheel figures prominently in Target’s plans for the Thanksgiving holiday weekend, she said. “We already offered early access to Black Friday deals for one-day only on Nov. 10. We’ve announced a presale on Wednesday, Nov. 26, and Cartwheel will feature access to additional Black Friday deals between Nov. 23 and Nov. 29,” Tesija said.
Target, which has been rebuilding Target.com since moving off a platform provided by Amazon.com Inc. in 2011, has developed a new personalization engine for its e-commerce site, Cornell said. While still in a testing phase, he said it is providing a higher conversion rate than the tool from a vendor Target.com previously used. He did not identify the vendor.
Target also plans to boost spending on digital media this holiday season by 50%, Tesija said.
For the fiscal third quarter ended Nov. 1, Target reported:
- A 30% increase in online sales over the same period a year ago. The company did not provide dollar figures for web sales.
- Total sales increased 2.8% to $17.732 billion from $17.258 billion in the same period a year earlier.
- Net earnings of $352 million, an increase of 3.1% from $341 million.
For the first nine months of its fiscal year, Target reported:
- Total sales of $52.188 billion, an increase of 2.2% from $51.081 billion.
- Net earnings of $1.004 billion, down 30.8% from $1.451 billion a year earlier.