Target (TGT -0.72%) has been somewhat overlooked as Amazon and Walmart stampede toward retail domination. The cheap and chic retail chain markets itself as a value purveyor in much the same way as Walmart, but it's a smaller outfit, with a market capitalization of $63 billion compared to Walmart's $338 billion.
But Target is a tough little cookie; it has been making important changes in its retail operations and e-commerce strategy and is managing to keep up with the big guys. Comparable sales rose 4.5% in the third quarter, on top of a 5.1% increase for the same quarter last year. That included a comparable digital channel sales increase of 31%, on top of 49% growth last year.
Full speed ahead with technology
What's driving Target's success? The company has embraced technology and is giving its customers the streamlined, omnichannel experience that's vital in today's changing market -- and at a pace that matches the best standards for the industry.
For a while, Target offered free regular shipping, eventually stepping that up to free two-day delivery. It now offers same-day fulfillment, including in-store pickup and Shipt same-day delivery services. Target acquired Shipt in 2017 to stay competitive in its market by offering more delivery options to its customers. Similar to Amazon Prime, a Shipt subscription costs $99 annually for free same-day delivery of orders over $35. Shipt services recently became available on the Target app.
Target has an advantage in the grocery and home sectors, where customers still like to shop in-store and where Amazon has been sweating to succeed. The combination of in-store shopping, digital options, and Shipt services is very attractive to customers, who can choose how to manage individual shopping experiences.
Standing out from the crowd
The multiple ways that Target has differentiated itself from competitors are helping the company succeed in its e-commerce initiatives. Target is not a classic discount store because it doesn't offer discounted off-season merchandise and rarely does sales. It promotes itself as offering value for the customer, embracing the grassroots dub of "Tarzhay," with fashion-forward styles at always low prices.
The company has invested heavily to optimize its store layout, improving the lighting and merchandise displays as well as access and tools for employees to fulfill digital orders efficiently.
Target is also known for its merchandise assortment, which has a unique blend of trendy, casual, and economy-priced goods displayed in a fun and clean environment and which the company has been able to reproduce on-screen.
Giving customers what they want
Target develops its e-commerce options, seasonal products, store arrangements, and fulfillment capabilities to cater to what its customers want to see. Target is currently offering same-day Shipt deliveries for free for a limited time, strategically coinciding with the beginning of the holiday shopping season. Customers who opt for Shipt deliveries are also eligible for all of the usual perks available to Target shoppers.
Target recently introduced a rewards program that has proven super-popular, enrolling 25 million subscribers since its launch in early October. Rick Gomez, chief marketing and digital officer, said, "We worked directly with guests to develop Target Circle, and the program includes the benefits and perks that they told us were most important to them."
Pushing the numbers up
The company's move into e-commerce is having a strong impact on its top line. In August, CEO Brian Cornell said, "Same-day fulfillment options, in-store pickup, drive up and Shipt ... together have more than doubled their sales in the last year."
The company's third-quarter results showed same-day delivery options accounting for 80% of its digital sales growth. Store pick-up saw a 50% increase, Shipt sales more than doubled, and drive-up saw greater than 500% growth.
With the critical Black Friday weekend coming up in just a few days, Target is planning major deals to maintain its presence as a leader in retail, offering its magical combination of in-store and digital channels working together.