Target reported a 34% increase in digital sales in the fourth quarter, well ahead of Walmart (8% growth) and online sales in general as well as Amazon (both 15% growth), as free shipping and well-oiled omnichannel operations proved a winning combination. Walmart opted to keep its $50 free shipping threshold and paid the price as Target gained the edge in ecommerce growth.
By contrast, same-store sales rose 1.9% for the quarter and 2.1% for the year, affected somewhat by the departure of Target’s pharmacy business in December. This compared to comp sales growth of 3.8% in the fourth quarter of 2014, although executives pointed that figure represented some bounceback growth after the data breach fiasco in 2013.
Overall, Target’s digital sales were up 31% for the year. While it was below the much-touted “target” figure of 40% ecommerce growth in 2015, it was still a very impressive result.
“Strong Black Friday and Cyber Monday weeks drove this increase,” Target chairman and CEO Brian Cornell told analysts. “In fact, after setting a new digital daily sales record in the week of Black Friday, we shattered all previous records on Cyber Monday. Our offer was broad and simple: 15% off everything on our site. And the guest response was exceptionally strong.”
Omnichannel was a big part of the story in Q4 and the year. Thirty percent of the quarter’s digital sales came from either ship-from-store or buy online, pickup in store transactions. Cornell said Target is now shipping from 460 of its 1,792 U.S. stores.
“We recognize that today, our Target guest interfaces with the brand in a number of different ways,” he said. “Sometimes they’re in our store. Sometimes they’re shopping online. We certainly heard many times because of some of the proprietary items that we offered during the fourth quarter, they were shopping online but quickly coming to our stores to pick up those items. So we felt really good about the way the guests responded to our offers during the fourth quarter, and a great combination of in-store traffic and more guests than ever before, clicking and collecting items in our store.”
John J. Mulligan, Target’s COO and executive vice president, said Target had more than a million digital orders on Cyber Weekend alone.
“Even though the traditional view of Cyber Monday doesn’t even include brick-and-mortar, Target stores set an all-time record for order pickup on that day, with more than four times the volume compared with last year,” Mulligan said. “And like last year, order pickup became even more important in the days leading up to Christmas, growing to half our digital volume.”
Mulligan said omnichannel not only saved shipping costs and allowed Target to respond quicker to customer demand, but also helped it save sales. A single view of inventory, he said, allowed Target to properly source and fulfill orders from across online and offline, keeping more items in stock for ecommerce orders.
“Specifically during the holiday season, about 40% of our order pickup and store shipped volume consisted of items that were out of stock in our web fulfillment centers,” Mulligan said. “This preserved sales on orders we would have otherwise missed had we only accessed inventory in our web fulfillment centers.”