Target Corp. is making it easier for shoppers to buy online while they are in one of the company’s stores.
Before this holiday season, Target will supply a select number of associates in all 1,802 of its stores with internet-connected mobile devices that will allow them to complete online sales directly from the sales floor.
“The mobile point-of-sale program will enable Target store team members to help guests find additional products on Target.com,” a Target spokesman says. “Guests will be able to search Target’s network of inventory, make their payment and arrange for home delivery, right from the Target store.” The spokesman didn’t specify how many associates per store will be equipped with the mobile devices or which operating platform those devices will operate on.
The mobile point of sale initiative is one of several Target, No. 22 in the Internet Retailer 2016 Top 500 Guide, is taking on as it seeks to become more channel agnostic.
“Our industry is the midst of a seismic shift,” Target CEO Brian Cornell told analysts on Target’s fourth quarter 2016 earnings call late last month, according to a transcript from Seeking Alpha. “The shift in channel preference is real and only gaining momentum.”
One needs to look no further than Target’s fourth quarter earnings to see the shift in shopper behavior.
Online is still a small part of Target’s overall sales, but it’s growing. Online accounted for 6.8% of Target’s overall Q4 2016 sales, and 4.4% of its total sales for fiscal 2016, up from 5.0% and 3.4% during the same periods respectively during the previous years. Overall sales declined to $20.690 billion during the fourth quarter, down 4.3% from $21.626 billion during the same period the previous year. In fiscal 2016, Target’s overall sales declined by 5.8% to $69.495 billion, down from $73.785 billion the previous year.
In terms of dollars, those online sales figures become more significant. Target’s online sales grew by 30.2% year-over-year in the fourth quarter to $1.407 billion, up from $1.081 billion the previous year. For 2016, online sales grew by 21.9% year-over-year to $3.058 billion, up from $2.509 billion.
It is perhaps with that in mind that Target is in the process of revamping its stores so that they do a better job of catering to online shoppers.
“We are reimagining and repositioning our assets to deliver even greater competitive advantage going forward,” Cornell told analysts. Target is moving from a linear model that consisted of suppliers, distribution centers and stores to a “smart network” in which its distribution centers, stores, digital channels are all guest-facing access points where “Target is always on, where Target is always within reach, down the street on your door step, or simply in the palm of your hand,” he said.
The retail chain began showing signs of its omnichannel push during the 2016 holiday shopping season, when it more than doubled the number of stores that it used to fulfill online orders compared to the previous year to over 1,000. Target also designated employees in 325 of its stores during the holiday season specifically to fulfill online orders that were picked up in store. Cornell told analysts that stores fulfilled around 68% of Target’s online orders over Black Friday weekend in 2016.
Target’s spokesman says that over the next two years, some of the structural changes to stores are going to happen behind the scenes.
“By 2019, most stores will ship from the Target backroom,” he says. “By transforming our current stores, we will reallocate space to support digital fulfillment, such as adding more room for order pickup and designing backrooms to grow our ship-from-store capabilities.”
Moody’s lead retail analyst Charlie O’Shea says more retail chains should rethink their store operations to reduce overhead costs and take advantage the stores’ locations, which are often closer to shoppers than fulfillment centers.
“If you’re Target and you’ve got a 100,000-square-foot box, you could probably reduce the selling space and free up some room in the back to ship online orders,” he says. “You rely on what’s in the store base to handle a percentage of your online business. If you don’t make those short term investments today, you may not have a long term where you’re very competitive.”
Target’s spokesman claims that three-quarters of Americans live within 10 miles of one of its stores, which gives it a competitive advantage.
“We know for digital sales to work, you have to deliver quickly and that means being close to the consumer,” he says.
“The work underway is game changing for Target,” Cornell told analysts. “It will significantly reduce costs and dramatically improve speed, efficiency and reliability across our network.”
O’Shea says it’s still fairly early in the game when it comes to creating a retail model that is truly omnichannel–Target isn’t alone in trying to figure out what’s going to work best in the long run–but retail chains have to move fast if they’re going to survive.
“The key to effective multichannel retailing is when you’re reducing your costs as you see both channels combine,” he says. “Nobody yet is at the point where the [cost] curves [between physical stores and online] has crossed. It’s a tough environment and obviously you’d want everything to go faster [when it comes to fulfilling online orders], but there’s a reasonableness test when it comes to how fast these guys can go.”