Does Target have a problem online?
At least in its stores, the story is pretty positive for Target these days. Under CEO Brian Cornell, the company has:
- Removed the anchor from around its corporate neck that was its Canadian operations;
- Made a deal with CVS to bring in needed dollars while getting out of a category (pharmacy) where it was far from best in class;
- Largely put behind the company the massive 2013 data breach that caused a loss in consumer confidence and sales along with it;
- Remodeled stores to create a more engaging customer experience while also partnering with designers to bring back some of its cheap chic cachet;
- Made use of digital sales promotion tools such as Cartwheel to help drive traffic and sales, primarily, in everyday product categories.
All in all, the plans put in place by Mr. Cornell and company have paid off as Target has seen an increase in customer traffic at its stores for four quarters running. In the latest quarter, Target achieved a 1.9 percent same-store sales increase (on the high end of its expectations) as traffic improved 1.4 percent. Significantly, the chain said that key categories where it has increased its focus — baby, kids, style and wellness — achieved same-store growth that was two-and-a-half times faster than the company average.
Online contributed 0.4 percent to Target’s same-store number for the quarter as the chain reported a 20 percent increase in revenues. Unfortunately, while Target’s percentage change was higher than the 15 percent improvement for e-commerce sales across the U.S., according to the Census Bureau, it fell well shy of the 30 percent improvement the retailer was expecting.
On the company’s earnings call, Mr. Cornell pointed to apparel and electronics as categories that underperformed for target.com during the quarter. Despite failing to meet expectations in the most recent period, Mr. Cornell reaffirmed his belief that digital will be a growth driver across the company as a whole.
"Regardless of where our guest demand is ultimately fulfilled, in a store or in a guest front porch, we know the vast majority of our sales in all of our channels are digitally enabled," said Mr. Cornell (via SeekingAlpha). "For example, our guests access our brands through a digital device, both in advanced hub and during their trip to one of our stores. As a result, we don’t think that digital is simply a selling channel, but a critical enabler of the shopping experience in all of our channels. This has significant strategic implications, both in terms of organizational structured and the way we reward our team."
Target was not the only major brick and click retailer to struggle online. As Bloomberg reported, Walmart’s online sales grew 10 percent during the third quarter.
- Target Reports Third Quarter 2015 Earnings – Target Corporation
- Target’s (TGT) CEO Brian Cornell on Q3 2015 Results (Earnings Call Transcript) – SeekingAlpha
- Target, Walmart See Online Sales Growth Ebb in Ominous Sign – Bloomberg
- Target profit jumps as customer traffic picks up, but at a slower pace – The Associated Press/Minneapolis Star Tribune (tiered sub.)
Do you see lower than expected online sales for Target and Walmart as a blip or an indication of bigger problems? What are the biggest challenges and opportunities facing target.com?