Target Corp. is expecting its store locations to fulfill more than 80% of its online orders in the days leading up to Christmas.
Target, No. 20 in the 2017 Internet Retailer Top 500, reported online sales accounted for 4.3% of its overall sales during the third quarter ended October 28, or $716.7 million, up 24.6% from $575.4 million during the same time last year, when online accounted for 3.5% of its overall sales. Through the first nine months of 2017, Target also reported that online accounted for 4.3% of its overall sales, or $2.112 billion, up 23.7% from $1.708 billion during the same time last year, when online accounted for 3.5% of its overall sales.
“24% online growth continues to place Target in the upper echelon of brick-and-mortar retailers from a percentage growth perspective,” Moody’s lead retail analyst Charlie O’Shea said.
Target executives said that stores will play a crucial role in fulfilling online orders during the holiday season.
“Our stores are planning to ship over 30 million units related to digital orders in the peak four weeks of the holiday season, up from about 18 million units last year,” vice president and chief operating officer John Mulligan told analysts on the retailer’s Q3 2017 earnings call, according to a transcript from Seeking Alpha. “To date, stores are already fulfilling more than half of our total digital volume through the pickup and ship-from-store capabilities, and that will peak at well above 80% in the days leading up to Christmas.”
Target has used its store locations so web shoppers can receive their online orders faster. The retailer launched a next-day delivery service in its hometown of Minneapolis earlier this year called Target Restock, which initially allowed online shoppers to order from a selection of 10,000 items by 2 p.m. and have their order delivered from a Target store the next day for a $4.99 fee. Mulligan told analysts that Target has expanded the offering to 11 markets nationwide that will combined reach 90 million U.S. consumers. Target has also increased the amount of products offered to 15,000 and changed the deadline for next-day delivery to 7 p.m.
“The average value of a Restock order is about 50% larger than an average store transaction and we’re pleased that our stores have been able to fill these orders reliably and efficiently,” Mulligan said.
One previously discontinued omnichannel initiative that Target reintroduced during the third quarter is curbside pickup. This time rebranded as Drive Up, shoppers can select the option once they complete a purchase through Target’s mobile app. Target will let a shopper know via a notification when her order is ready via email as well as in the app. The shopper then informs Target when she is on her way through the app. Upon arriving, she pulls into one of the designated parking spots for Drive Up pickup, and an employee then brings her order to her.
Target is testing the Drive Up service at 50 store locations in the Twin Cities. The retailer had previously tested a curbside pickup service through mobile app Curbside in 11 store locations in California starting in January 2015, eventually expanding to 121 store locations nationwide before Target discontinued the service for unspecified reasons in June 2016. A Target spokesman did not immediately return a request for comment on why Target decided to reintroduce a curbside pickup option.
Analysts are optimistic about Target’s e-commerce growth and its investments in fulfillment operations improvements.
“Investments in stores and e-commerce capability are readily evident, with capital expenditures up around $900 million from Q3 2016, and all-in-all, we believe Target is executing its strategic plan effectively,” O’Shea said.
For the third quarter ended October 28, Target reported:
- Net sales of $16.667 billion, up 1.4% from $16.441 billion during the same time last year.
- A year-over-year comparable sales gain of 0.9%, compared with a 0.2% decline last year.
- Net earnings of $480 million, down from $608 million last year.
For the first nine months of 2017, Target reported:
- Net sales of $49.113 billion, up 0.6% from $48.805 billion during the same time last year.
- A year-over-year comparable sales gain of 0.3%, compared with flat comparable sales last year.
- Net earnings of $1.883 billion, down from $1.920 billion last year.