Healthy digital sales trend
As discussed earlier, Target’s (TGT) strong digital sales continued to contribute meaningfully to its comps growth rate and added 1.8% to its comps during the last reported quarter.
As the graph below shows, Target’s e-commerce business continues to grow at a healthy rate and saw an increase of 29.0% during the last reported quarter. In comparison, Walmart’s (WMT) e-commerce business, which was growing at a breakneck pace, saw a steep sequential decline in its growth rate in fiscal 4Q18. The company blamed operational issues for the decline and expects to accelerate its digital sales growth rate in coming quarters.
What’s behind Target’s healthy digital sales?
As fast delivery and shopping convenience become popular among shoppers, Target expanded its delivery options of online orders, which is driving its e-commerce sales higher. The company’s strategic acquisitions of Shipt and Grand Junction have helped the company to test and roll out same-day-delivery services across numerous markets.
Target remains on track to offer same-day delivery of everyday essentials, groceries, and home electronics in half of its stores by early 2018 through Shipt. Also, the company plans to expand same-day-delivery service through Shipt to the majority of its stores before the holiday season.
Moreover, the company announced that it is expanding the Restock program, which offers next-day delivery of everyday essentials for $4.99, to 40 markets by the end of this year. The company expects the service to cover three-fourths of the US population.
Besides, Target is also offering free two-day delivery for orders above $35 or for payments with the REDcard, which is somewhat similar to Walmart. Notably, the service doesn’t require membership like Amazon (AMZN) Prime does. Moreover, the company also plans to expand its Drive Up service to about 1,000 stores by 2018.
The ease and convenience to shop associated with these multiple delivery mechanisms are likely to drive Target’s digital sales higher. Walmart has significantly ramped up its digital fulfillment options and plans to expand its online grocery delivery service to about 100 markets. Besides, the company’s online grocery pickup service remains popular and is supporting its e-commerce sales.