Target’s investment in store pickup for online orders is paying off
Alongside disappointing holiday sales reports from Macy’s and JCPenney, Target is a bright spot among legacy retailers. The retailer reported 5.7 percent same-store sales growth for November and December — a jump from 3.4 percent for the same period in 2017. One contributor to that growth was in-store pickup for online orders, a way the retailer has held its own against increasing competition from Amazon.
The company handled 60 percent more items through online order pickup, “Drive Up” (an option where customers drive to designated delivery pickup points at Target locations) and ship from store compared to last year, chief operating officer John Mulligan said in a company blog post Thursday. According to the company, digital sales growth of 29 percent in the November-December period was driven entirely by store-fulfilled digital sales, and based on 2018 results, Target is on track to grow digital sales for a fifth consecutive year.
Juozas Kaziukėnas, CEO of e-commerce research firm Marketplace Pulse, said Target’s store pickup options for online orders make sense for customers outside of U.S. major urban centers, where customers are accustomed to driving to stores to pick up items. Target’s online pickup services helped rushed holiday shoppers wanting to save time on their last-minute holiday purchases, he added.
“Target was one of the bigger winners last year — it’s a massive turnaround compared to where they were a couple of years ago,” said Kaziukėnas. “Most of these people are driving to the store anyway; picking up [at the store] is super convenient because it meshes the advantages of picking up something in the store and buying online.”
Store pickup lets legacy retailers like Target repurpose physical stores into fulfillment and delivery hubs. Neil Saunders, managing director of GlobalData Retail, said store pickup reduces the burden of a costly direct-to-consumer delivery business. It’s a service large retailers like Home Depot, Walmart and CVS have invested in as well. According to a recent Zebra Technologies poll of retailers, 86 percent of those surveyed felt “buy online, pickup in store” will soon become the default delivery method for customers.
“Fulfilling products bought online [in stores] is so much more cost effective than delivering it to homes,” he said. “It’s helped [Target] drive sales but it’s also helped them protect their bottom line.”
Despite the appeal, “buy online, pickup in store” also has its risks. As stores become fulfillment centers for online orders, it could put pressure on inventory customers expect to be available on the shelves.
“There are risks in getting it wrong — the volume now has become at such a level that you’ve got to make sure your [the inventory strategy] is really disciplined and that you have systems in place to ensure proper monitoring,” he said.
In 2018, Target put forward significant resources to modernize its delivery and in-store pickup operations. It grew the footprint of its subscription-based Shipt personalized shopper service to 46 states and also expanded curbside pickup to nearly 1,000 stores. The cost pressures behind these logistics enhancements seem to be affecting Target significantly in comparison to other large retailers, Digiday recently reported.
Subscribe to the Digiday Retail Briefing: A weekly email with news, analysis and research covering the modernization of retail and e-commerce.
Member ExclusiveDespite hungry VCs, DTC brands are rethinking their fundraising approach
This is the latest installment of the DTC Briefing, a weekly Modern Retail column about the biggest challenges and trends facing the volatile direct-to-consumer startup world. Join Modern Retail+ to get access to the DTC briefing–as well as all articles, research and more. Before 2020, some founders and investors were starting to warn that most consumer […]
Member ExclusiveA cautionary tale: What the FTC’s attempt to block P&G’s Billie acquisition means for CPG startups
Thanks to record e-commerce sales, it’s been a good year for direct-to-consumer founders. Except, maybe, for founders of direct-to-consumer razor startups.
Member ExclusiveDTC brands are preparing for nightmare holiday shipping delays and out of stocks
After surviving the Black Friday rush, direct-to-consumer brands have a new challenge at hand: how to ensure their holiday sales aren't hampered by long shipping delays and going out of stock on certain items
SponsoredAs publishers recognize the true cost of malvertising, recent cases highlight the damage
Malvertising — the use of ad tech by malicious actors to attack end users at scale — has been a silent but insidious aspect of digital advertising in recent years. Now, however, the extent of the damage, both real and potential, is expanding. And it should, according to experts, as approximately $1 billion revenue was lost […]
Member ExclusiveDTC brands aren’t feeling the Black Friday pressure
In the five days following Thanksgiving, there's usually a wave of retailers offering anywhere from 20% to 50% off of their products. This year, that wave will feel more like a never-ending tsunami.
Member ExclusiveAs its ecosystem grows, companies are becoming reliant on Shopify for more parts of their business
Eight years ago, startups turned to Shopify primarily to sell products online. Now, a startup might turn to Shopify to help fulfill orders, get some cash for their business or use its point-of-sale system when it opens a physical store.