Target’s digital sales fuelled first-quarter gains, with total revenues growing by 11.3% and same-store sales up by 10.8%. Digital comparable sales increased by 141%, accounting for 9.9 percentage points of Target’s sales growth. The sales have come at a cost to operating income however, with shoppers spending more on lower margin categories, while Target spent USD500 million on additional wages and store cleaning during the pandemic. Last month, Target reported unusually strong traffic and sales due to COVID-19.
Beyond the headline numbers, Target revealed insights that highlight the importance of stores to its overall strategy. While customers shifting online has increased costs, the retailer has managed this by using its stores as a fulfillment centers. The company said nearly 80% of its first-quarter digital sales were fulfilled by stores and its same-day services were especially popular, growing by 278% in the quarter. It also revealed that as 5 million new customers shopped at Target.com, over 2 million tried its store-based drive-up service for the first time in the quarter.
Target’s ability to combine its online and offline operations, placing stores at the heart of its fulfillment system, has given it the agility and flexibility needed to meet these changing times. As consumers live differently and shop differently, brands must also adapt quickly to this rapidly changing environment. Working with retail partners, continued flexibility towards shopper engagement and supply chain strategies will be required for both digital and store-based retail.
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