Target Expands Grocery Pickup Options
Target began introducing grocery pickup and driveway in the US this summer to compete with low-contact options offered by competitors. The service enabled customers to place digital orders in advance through the retailer’s website or app. Pick-up customers can pick up their orders on site, and drive-up customers have their orders delivered directly to their car by a Target employee. These options have been very effective on sales as COVID-conscious consumers try to minimize the amount of time they spend in the store. In fact, digital sales accounted for two-thirds of the retailer’s total growth. According to an analyst meeting on Tuesday (March 2), Target is now planning to expand the collection of fresh food and beverages for adults to 800 more stores in the next few months.
“We can do more for our guests,” said Michael Fiddelke, Chief Financial Officer and Executive Vice President of Target, on the conference call. “One possibility is to further expand the range of fresh, chilled and frozen foods that are available for pick-up and drive-up.”
He added that, according to the retailer’s study of consumer buying behavior across different channels, those who first tried to collect or drive grocery shopping were more likely to shop at Target, an average increase of one visit per month compared to corresponds to those who have not tried these services. In addition, those who tried pickup or drive up increased their grocery expenses by 20 to 30 percent compared to those who did not. Not only that, those who tried these low-contact food options subsequently increased their spending in other non-food categories by about 20 percent.
As Target expands its order-ahead options, competitors are also sweetening their remote offerings. Walmart just cut the $ 35 minimum on its 2-hour delivery service, which could already give Walmarts a considerable lead over Target, with the former’s total sales being an order of magnitude higher than the latter. Even Costco, which has resisted roadside pickup for much longer than other retailers, is finally giving in. The retailer partnered with Instacart, whose valuation doubled to $ 39 million, for pickup. According to PYMNTS ‘latest Global Digital Shopping Index, interest in roadside pick-ups has “increased significantly. 15.5 percent of those who shop digitally state this as their preferred shopping method in July – compared to 10.8 percent in March. “
In addition to expanding pre-order options, Target has also driven growth in the grocery category with its private label grocery line, Good & Gather. The line, which “captured significant market share” according to Brian Cornell, chief executive officer, expanded its offering in September. The brand has been a success since its inception, grossing over $ 1 billion in the first year. Cornell’s summary says, “Good & Gather has made a tremendous start in a short space of time, a multi-billion dollar brand. It was well received by our guests, of great quality for great value, and I think it’s typical of the things we do with our own brands. “
Of course, much of this growth could be due in part to the shift in consumers from restaurants to grocery stores during the pandemic. However, some of these changes, Fiddelke said, will continue to affect consumer behavior in the future.
“In categories that are primarily consumed at home, including food and beverages,” he said, “… industry trends have accelerated over the past year and may feel some softness as we emerge from the crisis. However, the timing and extent are difficult to predict and could be offset by permanent changes in consumer habits, including a higher percentage of working time spent at home and an increased focus on cleanliness and health as a result of the pandemic. “
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About the study: The Retrospective Study of Shopping On Vacation: Insights into Merchants for 2021 and Beyond, a collaboration between PYMNTS and PayPal, examines consumer shopping practices and preferences during the 2020 holiday season and what these mean for merchants now and for the upcoming holiday seasons. The report is based on a census among 2,070 US consumers.