Target’s same-day pickup and delivery services growing at double the rate of 2018 – gpgmail


Target’s investment in same-day pickup and delivery options is paying off. The company, which today offers same-day in-store pickup, drive-up, and same-day delivery through its acquisition of Shipt, said this week that these services combined have more than doubled their sales in the last year. In addition, they accounted for more than a third of Target’s digital sales, up from about 20% last year.

“These options offer speed, convenience and reliability and as a result, they are quickly becoming the preferred fulfillment choices for our guests,” said Target CEO Brian Cornell, speaking to investors about Target’s Q2 earnings. “And most importantly, because these options leverage our store infrastructure, technology, and teams, same-day fulfillment delivers outstanding financial performance as well,” he added. 

What’s notable about the same-day sales is that they’re bringing in guests to Target, who had never before placed digital orders with the retailer.

Roughly 1 in 5 customers placing a same-day order in the second quarter were placing an order with Target for the first time.

And once Target customers become familiar with the process, they seem to return in short order. During Q2, more than three-quarters of the same-day orders were placed by guests who had used same-day fulfillment in the past three months.

Target’s ability to grow its same-day sales in this fashion was the result of investment in infrastructure, technology, and even its brick-and-mortar stores themselves.

On the technology front, Target says its pickup and delivery services benefitted from increased order picking efficiency. Instead of using a first-in, first-out (FIFO) system, new algorithms are being used to prioritize the sequence of order picking that helps direct store employees on which work to do first as well as the best box size for packing orders.

The technology also helps to optimize the path for order picking to minimize the number of steps between the sales floor and back room.

Target claims that since the beginning of last year, these improvements have led to an over 30% increase in order picking for drive-up and pickup services. Its ship-from-store capability also improved over 30% during that time.

Meanwhile, the retailer’s $7+ billion remodeling project announced in 2017 was focused more than just updating the stores’ look-and-feel and merchandising displays. The new format stores also include changes designed to cater to online shoppers who come inside the store for their order pickups, by adding more space for things like Order Pickup.

Outside, space is added for Drive Up customers who shop online then later drive to the store for curbside service.

This summer, Target passed its 500th store remodel, and says it’s on-track to remodel 1,000 stores by the end of 2020. It also plans to open up more small-format stores — about a third of the size of a traditional Target, or on average, 40,000 sq ft — in big cities, suburbs, and college campuses.

Target says it plans on opening 30 more small-format stores per year, as it has done last year and the year prior. It said on Friday it had opened its 100th small-format store.

Richmond Drive Up

All the changes to make Target’s stores more of home for order fulfillment has helped the retailer reduce costs, as well, the company pointed out this week on its Q2 earnings.

Target says, as it’s shifted away from upstream distribution centers for order fulfillment to its stores, costs went down by more than 40%. And costs related to same-day services went down by 90%. Target today has 1,855 U.S. stores, which is how it’s able to make this store-centric strategy work.

Many traditional big-box retailers are struggling under the weight of competition from Amazon — Macy’s, Kohl’s and J.C. Penney’s all released disappointing earnings this week, for example.

Target’s earnings, however, beat every estimate this week, sending shares to a record high.

The company reported $18.42 billion in revenue, above the $18.34 billion expected. Profits were up 17% to $938 million ($1.82 a share) compared with $799 million ($1.49 a share), a year ago.

Second-quarter comparable sales grew 3.4 percent, with same-day fulfillment accounts for nearly 1.5 percentage points of that. Over the past two years, comparable sales have grown 10%, Target said.

 


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Walmart tops U.S. online grocery market, with 62% more customers than next nearest rival – gpgmail


Walmart is dominating the U.S. online grocery market, according to new research out this week from the analysts at Second Measure. The nationwide retailer today offers grocery pickup and delivery in nearly every U.S. state, and had 62% more customers in June than its next nearest rival. And no, in this case, that rival is not Amazon — it’s Instacart.

Like Walmart, Instacart also operates across the U.S., offering both pickup and delivery services.

The same is true for Amazon Prime Now and Peapod, while other competitors are limited to delivery only — like Target-owned Shipt and FreshDirect. Meanwhile, AmazonFresh offers delivery, plus pickup in Seattle.

While Walmart has been steadily capitalizing on its existing brick-and-mortar footprint and proximity to its customer base, Amazon’s strategy in the online grocery space appears to be one of confusion. The retailer is competing against itself by offering two services — Amazon Prime Now and AmazonFresh. The latter, an older service operated before Amazon’s Whole Foods acquisition, is actually one of the few online grocery businesses in decline, the report discovered. Founded over a decade ago, AmazonFresh has only grown to 15 U.S. cities and shut down in others.

This June, AmazonFresh sales were down by 19% year-over-year — the worst sales change in the new research report, the analysts noted.

Prime Now, on the other hand, is booming. Year-over-year sales nearly tripled in June. This is not only due to Whole Foods, whose assortment was added in February 2018, and is now a big driver for orders. Consumers also likely opt for Prime Now because it’s offered as part of their annual Amazon Prime subscription, while AmazonFresh is an additional $14.99 per month.

Prime Now has also been expanding to more U.S. markets, and is on track to reach even more as Amazon invests in building additional Whole Foods locations and possibly other non-Whole Foods stores. 

The new research also notes that Target’s Shipt could be doing better than its estimates indicate.

Since Shipt’s acquisition by Target in December 2017, Shipt’s customer base has grown by 69%. While a membership is required to shop the various grocers and stores offered in the app, Target deliveries don’t require a subscription.

In June, Target launched a dedicated online grocery shopping site on Target.com, powered by Shipt. Second Measure says it cannot distinguish any grocery orders that originate in the Target app or website, so Shipt’s customer counts may be higher than it’s able to determine.

Another question the report answers is to what extent Instacart has been impacted by the loss of Whole Foods.

Following its 2017 acquisition by Amazon, Whole Foods ended its relationship with its first and older delivery partner last year. The company recently claimed, however, that Whole Foods was only 5% of sales. Second Measure seems to back this up, finding that Instacart had 23% more customers in June than it had when the partnership ended in December 2018.  

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Meanwhile, one exception to Walmart’s dominance in online grocery is in the unique urban metro that is New York. Here, locally headquartered FreshDirect has 31% of the NYC customer base for online grocery. (Note that Second Measure counts customers at each company they use — so customers who shop from more than one are counted twice.) Walmart only has 2% of the NYC metro, by comparison.

It also has small percentages in several other big metros, including San Francisco (2%), Boston (8%) and Los Angeles (9%). Walmart is huge in both Dallas and Phoenix, on the other hand — but both have been early markets for online grocery.

GroceryDelivery chart3 v2

The report additionally found there’s strong loyalty among online grocery shoppers. Unlike with meal delivery services, no grocery delivery company shared more than 9% of another company’s customer base in the second quarter of 2019.

The market still has room to grow, as well. Only 12% of U.S. consumers have tried at least one of the grocery services the report analyzed, up from 9% in June 2018.


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