Target execs - offline stores will fulfil 80% of online orders this Holidays season
- Summary:
- Target is on, er, target for a busy Holidays season with 80% of online orders fulfiled by their offline network of stores.
Chalk up another retailer espousing the value of its stores while simultaneously driving investment into digital transformation as Target CEO Brian Cornell looks to the firm’s offline network to fulful 80% of online orders during the Holidays season.
It’s an achievement, if executed upon, that will be regarded as a marker of early success from February’s statement of strategic direction for Target. Cornell notes:
Our plan included the investment of more than $7 billion of capital over three years to accelerate our progress in support of several key initiatives, including: blending Target's digital and physical shopping experiences; reimagining our existing stores and the labor model to operate them; rolling out new fulfillment options to enhance convenience for our guests; opening new small-format stores in dense urban, suburban and college campus neighborhoods; and reinventing our assortment of exclusive brands to further differentiate Target from everyone else in retail.
The role of the stores in all this is critical, he adds:
We've tested and rolled out same-day delivery in four locations in New York City, supported by our recent acquisition of Grand Junction. And we have rapidly tested and rolled out a new Drive Up service in 50 locations in the Twin Cities where we're receiving positive feedback from our guests. With each of these capabilities, the team is rapidly learning and iterating as we expand our reach, and we have plans to further build out all of these fulfilment options in 2018.
We've taken the same approach to our ship-from-store capabilities, which we first rolled out to approximately 140 stores only a few years ago. As we enter the holiday season this year, the count of ship-from-store locations has grown more than tenfold and it's now in more than 1,400 locations across the country.
For each of these fulfilment options, our stores play the key role in delivering the experience.
More to come
Target has focused on expanding its fulfilment options, adds Chief Operating Office John Mulligan:
We have multiple new fulfilment options that are in some phase of testing or rollout across our network. We offer in-store pickup of digital orders, available in all of our store locations. We have a Drive Up service which we just began testing at 50 locations in the Twin Cities. We now have same-day delivery which we're testing at four stores in New York City. We offer next-day delivery through Target Restock, which is now available for 90 million guests in 11 markets. And we have a ship-from-store capability which is now in more than 1,400 of our locations.
Of those five fulfilment options, only two were available as we entered the year, in-store pickup and ship-from-store. And while both of those options are relatively mature, we continue to increase the amount of our digital volume handled by our stores. Today, the stores are already fulfilling more than half of our total digital volume through the pickup and ship-from-store capabilities, and that will peak at well above 80% in the days leading up to Christmas. In fact, our stores are planning to ship over 30 million units related to digital orders in the peak four weeks of the holiday season, up from about 18 million units last year.
He also points to changes to developing models, such as extending the deadline for next-day delivery to 7 PM and expanding the number of eligible items to more than 15,000 as part of the Target Restock offering.
Same Day Deliver is now on offer at four stores in New York. Mulligan explains:
For a small fee, typically between $5 and $10 depending on the address, guests can leave their basket with us at check out and arrange for delivery later the same day in a time window of their choosing. Guests in these stores are enthusiastically responding to this service. Basket sizes for delivery transactions are running six to nine times the average transaction across the four stores that have the service.
Finally, our new Drive Up capability is in the earliest stage of testing. We rolled out this service to 50 stores in the Twin Cities in the third quarter and we're pleased with the early results. Specifically, guest survey scores for this service are running well ahead of goal, and the stores are outperforming our goal for average wait time. Last week, we began offering this service at our next-generation store in Houston.
All of this is progress, but also only a start, says Mulligan:
Our ultimate goal is to build a supply chain that can reliably deliver any item in our network to all but the most remote areas in the U.S. in two days or less, with most items delivered in one day. While a large percentage of our digital orders today are already arriving that quickly, we have more work to do before we can reliably deliver in that timeframe across all of our assortment.
To achieve this goal and to be able to scale all these new fulfillment capabilities, we need to improve the speed, accuracy, and reliability of our entire supply chain, from end to end. While we have already made progress on all of these measures, we still have a lot more to do.
My take
Target took a hit on Wall Street yesterday as the firm announced Q3 numbers that were better than expected, but not good enough to balance out some downbeat expectations for the Holiday season. Breaking down the numbers, there are some strong digital themes in there. Digital sales were up 24% year-over-year, although that’s down on 26% for the comparable quarter last year. Online sales now make up a larger chunk of total revenue 4.3% versus 3.5% last year. Those low digit percentages serve as a timely reminder that for all the digital talk, the in-store experience remains phenomenally important to a retailer like Target.