Target Corp.’s third-quarter ecommerce sales show that pandemic-driven shopping is still surging heading into the holidays, and omnichannel services are fueling the online growth even more.
Online sales reached $3.51 billion during the quarter ended Oct. 31, up 153.9% from $1.38 billion in Q3 2019. Web sales accounted for 15.7% during the quarter, up from 7.5% a year ago. Target’s ecommerce business grew even faster during the first nine months of the year: Online sales jumped 163.0% to $10.37 billion, up from $3.94 billion during the same period of 2019.
Target is capturing market share as more shoppers use the company’s website and in-store pickup options, CEO Brian Cornell said in a call with investors discussing the results, according to a SeekingAlpha transcript. In fact, the retailer’s same-day options, such as online orders picked up in stores, curbside pickup and its Shipt same-day delivery service, grew 200% in the quarter, executives said without providing more detail.
“These services are fast, convenient, reliable and contactless, which explains why they continue to generate very high levels of guest satisfaction,” Cornell said. “Beyond same-day services, well over half of our packages we ship to guest homes are also fulfilled from our stores, providing speed to our guests while reducing shipping costs.”
Approximately 75% of digital sales, including BOPIS, curbside and online orders shipped to consumers, were fulfilled by Target stores, Cornell said on the call.
During the quarter, the retailer made changes to curbside pickup, which it calls Drive Up. A Target employee no longer needs to scan a customer’s phone when they deliver an order to the car. Instead, customers can now check in on Target.com in advance to reserve a spot in line before leaving home, executives said.
“Nearly $700 million of growth was from Drive Up service alone, which increased more than 500% compared with last year,” chief operating officer John Mulligan said on the call. “Amazingly, this growth was not at the expense of in-store pickup, which increased more than 50%.”
Total sales during Q3 increased 21.3% to $22.3 billion from $18.4 billion a year ago. For the first nine months of the year, sales are up 19.3% with $64.40 billion in revenue from $53.99 billion last year.
Echoing what fellow big-box retailers Walmart Inc. and Home Depot Inc. reported on Tuesday, Target said customers are buying more when they’re shopping, with basket size up 15.6% in the quarter. Unlike Walmart and Home Depot, which reported higher spending on fewer visits, Target said store traffic actually grew in the three months ended Oct. 31.
Target offered fewer price markdowns, which helped margins, although that was partially offset by costs related to the company’s push into ecommerce, such as shipping products. The cost of sales, meanwhile, jumped 20% in the period—a reflection of the price that companies are paying in 2020 for protective gear and more frequent store cleanings.
Like other retailers upended by COVID-19, Target has been using its stores more as mini distribution centers for its booming digital business to better fulfill online orders. The company also remains bullish on its small-format store strategy and says during an earnings call that it has room to boost sales per square foot: The average is in the high-$300 range, but some locations do more than $500.
As the critically important holiday period hits the U.S., the industry is bracing for a shopping season that looks drastically different than previous years.
Target, which will be closed on Thanksgiving Day, is relying more on ecommerce this year. Retailers have started advertisements earlier than ever to limit store crowds, while taking additional measures like limiting customers who shop in person, and adding pickup parking spots. Target began its holiday sales more than a month ago—but it doesn’t believe the drawn-out shopping season will leave December barren.
Percentages may not align with dollar figures due to rounding.
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