Target Corp. today revealed a bit of bright news coming out of the coronavirus pandemic. The chain retailer, No. 12 in the 2020 Digital Commerce 360 Top 1000, said it is experiencing strong demand for its same-day fulfillment services and record-setting digital growth.
The mass merchant, which is in its fiscal first quarter, said since the start of the quarter on Feb. 2, digital sales have grown more than 100%. And from the beginning of April, digital sales have grown 275%.
Despite the gains, investments necessary to meet the surge in shopping and to keep employees safe, as well as the likelihood of having to write off slow-selling merchandise like clothing, will weigh on profitability, the company said in a statement.
Best Quarter for Target Since 2000
So far for the quarter comparable sales have grown more than 7%, with store sales declining slightly and digital sales growing rapidly. If comparable store sales of 7% hold, it would mark Target’s best quarterly performance since 2000, according to data collected by Bloomberg.
In February, comparable sales increased 3.8%, Target says. Late that month, Target saw an increase in traffic and comparable sales in both its stores and digital channels as consumers began stock-up shopping. By mid-March there was an even stronger surge in traffic and sales, especially for essentials and food and beverages, Target says.
However, by late March, store sales sharply declined as consumers across the country began to shelter in place, while digital sales accelerated dramatically. For all of March, comparable sales increased in the low double-digits, reflecting mid-single-digit growth in stores and more than 100% digital growth. Target did not disclose exact figures.
Target has kept stores open as others have closed. Still, U.S. shoppers shifting to staying at home means fewer visits to stores. Target’s store comparable sales fell at a mid-teens percentage in April. While its nearly 1,900 locations have posted a “slight decline” in revenue so far this quarter, that’s a performance many harder hit retailers would covet given the circumstances. Month-to-date in April, comparable sales have increased more than 5%.
Target is also extending a temporary $2-an-hour pay increase and other benefits to May 30.
Curbside Strategies in Coronavirus Pandemic
Target told investment analysts in March that its same-day fulfillment options—in-store and curbside pickup and delivery via its paid Shipt service—are 90% less expensive for than home delivery and cut the retailer’s ecommerce fulfillment costs by 25% in 2019. Big retailers like Walmart Inc. (No. 3) and Target, which already had introduced curbside pickup in large part as a convenience for online grocery shoppers, promoted the ease of their curbside options in emails to consumers at the start of the coronavirus pandemic. “We’ve enhanced Drive Up with your safety in mind. No signature required and we’ll load your trunk, too,” Target wrote in an email.
Target said in reporting its Q4 and fiscal year earnings in March that its nearly 1,900 stores now deliver 80% of Target.com orders, including items shipped from stores to consumers’ homes. But the biggest growth in 2019 was in Target’s three same-day options—delivery by the Shipt delivery service Target acquired in 2017, in-store pickup of online orders and curbside pickup.
Shipt—a subscription service that costs $99 per year or $14 per month and provides free delivery of orders of $35 or more—delivered 2.5 times more orders in Target’s fiscal year that ended Feb. 1, 2020, than in the prior 12-month period. Curbside pickup of web orders increased 500% year over year as Target extended the service to about 1,750 of its almost 1,900 stores.
Target plans to double down on curbside delivery by adding fresh items and alcoholic beverages to the selection of items that Target employees will bring out to a shopper’s car. That will allow a shopper to pick up “a gallon of milk and a six-pack” along with other nonperishable items already available for curbside pickup, CEO Brian Cornell told investment analysts in March 2020.
Target has also noted that adding fresh items to the selection for curbside pickup was the No. 1 request it received from customers and that many Target shoppers also asked that “adult beverages” be available for drive-up delivery.
Shoppers buy more after trying curbside pickup
Cornell said online shoppers buy more from Target once they try curbside pickup. After their first such pickup, three-quarters try it again within three months and their spending with Target increases by nearly 25%—with online purchases going up 50% and store purchases by 9%.
“Engagement leads to higher sales in all channels,” Cornell said. As a result of the positive customer response to the same-day options and the lower cost to Target of those delivery services, Cornell said, “You’ll continue to see us lean into our same-day fulfillment options in 2020 and beyond.”
Target also plans to open more smaller-footprint stores, in addition to the 100 or so it’s opened in recent years in cities and on college campuses. Those stores average about 12,000 square feet, and Cornell said the retailer is planning to open stores half that size—about the size of a typical convenience store—giving it more locations where consumers can buy goods and also pick up online orders.
Don Davis and Bloomberg contributed to this story.Favorite