Target’s same-day pickup and delivery services growing at double the rate of 2018 – TechCrunch
aims Investing in same-day pickup and delivery options pays off. The company, which today offers in-store pickup, commissioning, and same-day delivery through the acquisition of Shipt, announced this week that these services combined have more than doubled their sales over the past year. In addition, they accounted for more than a third of Target’s digital sales, after around 20% in the previous year.
“These options offer speed, convenience and reliability and are quickly becoming the preferred fulfillment option for our guests,” said Brian Cornell, CEO of Target, of Q2 results for the second quarter. “Most importantly, because these options leverage our business infrastructure, technology and teams, same-day fulfillment also provides great financial performance,” he added.
The special thing about same-day sales is that it brings guests to Target who have never placed digital orders with the retailer before.
Around one in five customers who placed an order on the same day in the second quarter placed an order with Target for the first time.
And once the target customers become comfortable with the process, they seem to return in a short amount of time. During the second quarter, more than three-quarters of orders placed on the same day were made by guests who had used same-day fulfillment in the previous three months.
Target’s ability to grow its same-day sales this way was the result of investments in infrastructure, technology, and even its brick and mortar stores.
In terms of technology, Target’s pick-up and delivery services benefited from greater efficiency in order picking. Rather than using a first-in, first-out (FIFO) system, new algorithms are being used to prioritize the order of picking, which allows store workers to get right on the work that needs to be done first as well as the best carton size for packing orders.
The technology also helps streamline the picking path to minimize the number of steps between the sales floor and the back room.
Target claims that these improvements have increased order picking for drive-up and pickup services by over 30% since early last year. During this time, the dispatchability improved by over 30%.
The retailer’s over $ 7 billion remodeling project, announced in 2017, focused on more than just updating the store’s look and feel and merchandising displays. The stores in the new format also include changes intended for online shoppers who come to the store for their pickup by adding more space for things like picking up orders.
Outside, space is added for Drive Up customers who shop online and later drive to the roadside store.
This summer, Target passed its 500th store remodel and says it is on track to remodel 1,000 stores by the end of 2020. There are also plans to open more small-format stores – around a third the size of a traditional target, or an average of 40,000 m² – in large cities, suburbs and universities.
Target plans to open 30 more small-format stores each year, like last year and last year. On Friday it opened its 100th small-format store.
All of the changes that make Target’s stores a home for order fulfillment have helped the retailer cut costs. The company cited its second quarter results this week.
According to Target, costs have decreased by more than 40% as the company moved from upstream distribution centers to its branches to fulfill orders. The cost of same-day services decreased by 90%. Target today has 1,855 US stores. This is how this branch strategy can work.
Many traditional big box retailers have struggled under competition from Amazon – Macy’s, Kohl’s, and JC Penney, for example, posted disappointing profits this week.
However, Target’s earnings surpassed any estimate this week, pushing stocks to record highs.
The company had sales of $ 18.42 billion, above the expected $ 18.34 billion. Earnings rose 17% to $ 938 million ($ 1.82 per share) from $ 799 million ($ 1.49 per share) a year ago.
Comparable sales in the second quarter rose 3.4%, with same-day fulfillment accounting for nearly 1.5 percentage points of that. Over the past two years, like-for-like sales have increased 10%, Target said.