Target Corp.’s stores will play a bigger role than ever in fulfilling Target.com orders this holiday season.
The number of stores from which the retailer ships orders has more than doubled in the past year to more than 1,000, or at least 55%, of its 1,802 stores compared with 460 during the 2015 holiday shopping season, chief operating officer John Mulligan told analysts Wednesday on the retail chain’s third quarter fiscal 2016 earnings call.
“This [ship from store] capability reduces shipping times given the proximity of these stores to the vast majority of the U.S. population,” he told analysts, according to a transcript from Seeking Alpha. “With that proximity to guests, we also save on shipping, helping to relieve the pressure from shipping growth in our P&L (profit and loss statement). It also allows us to balance our inventory across our store and network, maintaining in stock [goods] while reducing markdowns in store locations with heavy inventory.”
Target, No. 22 in the Internet Retailer 2016 Top 500 Guide, said online sales accounted for 3.5%, or $575.4 million, of sales during the fiscal third quarter ended Oct. 29, up 21.0% from $475.6 million during the same period last year, when online accounted for 2.7% of sales. E-commerce also accounted for 3.5% of Target’s total sales through the first nine months of fiscal 2016, or $1.708 billion, up 17.0% from $1.460 billion last year. This online sales growth comes during a quarterly and fiscal year-to-date period when Target’s overall sales slid more than 6%.
Shipping online orders from stores isn’t the only way Target’s retail locations will play a role in fulfilling online orders, however. The retail chain is placing a greater emphasis on buy online, pick up in store service this holiday season, remodeling 80 of its stores so they have a designated online order pickup section at the front of the store. The retail chain also will have employees assigned specifically to fulfill online orders in 325 of its stores. Those employees will wear white shirts that say “order pickup” on them so shoppers can distinguish them from regular Target store employees, who wear red shirts.
“During the peak period from Thanksgiving through Cyber Monday, we expect our stores to fulfill more than half of our digital demand,” Mulligan said. “While this is the third holiday season in which we’ve offered order pickup in all of our stores, we’re planning for volume to grow another 50% from a year ago.”
Target CEO Brian Cornell views those stores-as-fulfillment-centers as a competitive advantage as Target tries to win market share from Amazon.com Inc. (No. 1 in the Top 500).
“We want to make sure we continue to give our guests the choice of shopping any way they want, [including] the ease of shopping online and picking up in our store, which we think is going to be a very important factor during the fourth quarter,” he said.
For the third quarter ended Oct. 29, Target reported:
- Sales of $16.441 billion, down 6.7% from $17.613 billion last year.
- A comparable sales decline of 0.2%, compared with a 1.9% gain.
- Net earnings of $608 million, up 10.7% from $549 million.
For the first nine months of 2016, Target reported:
- Total sales of $48.805 billion, down 6.4% from $52.159 billion last year.
- Flat comparable sales.
- Net earnings of $1.920 billion, down 0.9% from $1.937 billion.