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Why Target’s Digital Business Is Poised to Grow

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Target’s e-commerce performance

As shoppers turn to the online shopping and Walmart (WMT) and Amazon (AMZN) make serious inroads in the grocery space with their strong digital capabilities, Target (TGT) is leaving no stone unturned and has ramped up its digital business quickly in 2017. Although its e-commerce sales account for about 4.3% of its total sales (as of fiscal 3Q17), the strong growth in the company’s digital channel has been the key catalyst behind its comps or comparable-store-sales returning to growth. Target’s digital sales increased 22%, 32%, and 24% in fiscal 1Q17, 2Q17, and 3Q17, respectively.

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Factors to drive e-commerce sales

To further strengthen its digital capabilities, Target recently acquired Shipt, one of the digital platforms offering same-day delivery. Earlier, the company acquired Grand Junction to step up its delivery process and offer same-day delivery in New York. The move is likely to strengthen Target’s competitive position against Walmart, Costco (COST), and Amazon and could result in higher sales as fast delivery remains one of the key drivers behind digital sales.

With these acquisitions, Target aims to offer same-day delivery service in half of its stores by early 2018. Also, the company plans to expand these services across the majority of its stores before next year’s holiday season. Plus, the company plans to offer a wide range of products including groceries, electronics, and essentials under the same-day delivery program and remains on track to expand the product list further.

In addition to the fast delivery mechanism, Target rolled out its “Restock” program where consumers get doorstep delivery of everyday essentials including food and personal care products for a fee of $4.99. Meanwhile, Target also expanded its offering through Google (GOOGL) Express nationwide.

The company’s digital measures are expected to drive its sales higher in the coming quarters. However, Target still lags Walmart in digital capabilities. Read our earlier series, Why Walmart Is Steps ahead of Target and Costco, to gain insights on Walmart’s digital capabilities.

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