Target announced that for the months of November and December, the de facto holiday season, its comparable sales jumped 3.4% year-over-year (YoY), outperforming expectations of a 0-2% YoY rise.
The retailer started strong; over Thanksgiving weekend, its online sales climbed 44% YoY, which was more than double the growth seen by competitors Amazon and Walmart. Target’s expectation-beating overall holiday sales suggest that it was able to capitalize on this strong start.
CEO Brian Cornell highlighted Target’s physical stores’ omnichannel capabilities as a key part of the company’s holiday success. Brick-and-mortar Target locations enabled approximately 80% of Target’s growth over the holidays, but that growth didn’t just come from in-store sales. Stores fulfilled over 70% of Target’s digital volume during the holiday season. The locations facilitated these orders by shipping items to consumers from stores, and through Target’s “Order Pickup” service. These services are part of Target’s greater initiative to reimagine and retool its stores, and this success suggests that the stores are headed in the right direction.
Target has the opportunity to build on this strong holiday performance to find similar results in 2018. Over Thanksgiving weekend, Target saw three times the number of unique buyers compared with what it normally sees, and it likely continued to reach additional customers as the holiday season rolled on. These additional consumers give the retailer a chance to create new loyal customers, so Target should make a concerted effort to draw these new consumers back in early 2018 with promotions, discounts, and more.
Cornell discussed some of Target’s plans for 2018 that aim to further grow its performance.
- New fulfillment options: Target plans to offer same-day delivery at approximately half of Target stores early in 2018. It’s also looking to expand its “Drive Up” program, which has been testing in the Minneapolis area since October; the program allows customers to place orders in advance, then park in designated spots where Target employees can bring the items to their cars. Cornell credited its recent acquisition of delivery startup Shipt as the reason these initiatives can be introduced.
- More private labels: The retailer will introduce new exclusive private labels. Target has rolled out a number of private labels recently, and some of them appear to be appealing to consumers, as Cornell noted that décor from new brand Hearth & Hand with Magnolia was one of its top sellers over the holidays.
Jonathan Camhi, research analyst for BI Intelligence, Business Insider’s premium research service, has laid out the case for why retailers such as Target must transition to an omnichannel fulfillment model, and the challenges complicating that transition for most companies. This omnichannel fulfillment report also detail the benefits and difficulties involved with specific omnichannel fulfillment services like click-and-collect, ship-to-store, and ship-from-store, providing examples of retailers that have experienced success and struggles with these methods. Lastly, it walks through the steps retailers need to take to optimize omnichannel fulfillment for lower costs and faster delivery times.
Here are some of the key takeaways from the report:
- Brick-and-mortar retailers must cut delivery times and costs to meet online shoppers’ expectations of free and fast shipping.
- Omnichannel fulfillment services can help retailers achieve that goal while also keeping their stores relevant.
- However, few retailers have mastered these services, which has led to increasing shipping costs eating into their profit margins.
- In order to optimize costs and realize the full benefits of these omnichannel services, retailers must undertake costly and time-consuming transformations of their logistics, inventory, and store systems and operations.
In full, the report:
- Details the benefits of omnichannel services like click-and-collect and ship-from-store, including lowering delivery times and costs, and driving in-store traffic and sales.
- Provides examples of the successes and struggles various retailers have experienced with omnichannel delivery.
- Explains why retailers are having trouble managing costs with their omnichannel fulfillment efforts, which are eating into their profits.
- Lays out what steps retailers need to take to optimize costs for their omnichannel operations by placing inventory where it best meets customer demand.
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