We look at Target’s performance in November and December and the impact of its digital operations on sales growth.
Holiday sales key numbers
- Comparable sales in November and December increased 17.2%
- Traffic increased 4.3%, with average ticket up 12.3%
- Store comparable store sales increased 4.2%
- Digital comparable sales increased 102%
Traffic and basket size up
Target finished 2020 by building on the strong momentum the business has been generating since the start of the pandemic. As with Costco, Target is one of the few retailers to deliver growth in traffic and basket size, with most consumers generally undertaking less store visits and consolidating their trips. The retailer noted notable share gains across its product portfolio.
Source: IGD Research
Same-day services driving digital growth
The outstanding digital performance was underpinned by the retailer’s same-day delivery services. These include Order Pick Up, Drive Up and Shipt, growing by 193%. Drive Up continues to be its fastest growing service, with sales up more than 500%. The addition of fresh and frozen food ranges to this service during 2020 is one of the key factors supporting this level of growth. Sales fulfilled by its same-day delivery service, Shipt, grew more than 300%.
Stores as distribution hubs
Reflecting the decision made four years ago to position its stores as distribution hubs, around 95% of Target’s store-originated sales, same-day services and ship-from-store items were fulfilled by store level inventory. The digital growth which Target achieved over the holidays would not have been possible without the capacity to replenish and fulfil this demand.
Developing sortation centres
Extending this model, in markets with high delivery density, Target is testing sortation centres. In Minneapolis, store teams pick and pack orders as usual, but rather than being dispatched directly to customers’ homes, they are transferred multiple times a day to a sortation centre, freeing-up backroom space at its stores. Technology is used to allocate packages to different delivery providers from the centres. Developing sortation centres should negate the need to establish upstream fulfillment centres, providing the business with a more capital-efficient model.
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