- Target posted its highest annual comparable sales growth in history thanks to its astounding 195% annual increase in digital sales.
- And the pandemic could lead to top players like Target and Walmart to expand their market share long term.
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The retailer’s comparable sales soared 24.3% year-over-year (YoY) in its fiscal Q2 2020 (ended August 1, 2020), the company’s best quarterly performance in the metric ever. Target managed this result despite the coronavirus pandemic hurting US retail sales throughout its fiscal quarter.
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Target’s digital business was key to its historic performance because it drove both tremendous sales growth and led consumers to spend more in-store.
- Its digital comparable sales surged 195% YoY, largely due to the rapid growth of Target’s same-day services. Digital-originated sales made up 17.2% of Target’s total sales in the quarter, up from 7.3% in the comparable period the year before, because the pandemic has pushed consumers to shop online more to avoid contracting the virus. Target’s same-day services, which include in-store pickup, curbside pickup, and delivery via Shipt, have attracted consumers as they shop online more by offering convenient fulfillment options, leading the services’ sales to grow 273% YoY and to contribute around six percentage points of Target’s record-breaking overall comparable sales growth.
- And Target has found that growing its digital business can strengthen its in-store sales. After consumers try Target’s curbside pickup offering for the first time, there’s an approximately 30% increase in their overall spending with Target, including their in-store shopping, COO John Mulligan said on the company’s earnings call. And considering Target’s curbside sales grew a staggering 734% YoY in the quarter, Target has likely attracted a number of new curbside customers, helping its store comparable sales grow 10.9% YoY.
The retailer is set to build out its same-day delivery options for the holidays, positioning it to post even greater digital gains later this year. Target plans to add thousands of items to its same-day services, including gifts and other products, CEO Brian Cornell said. Introducing more products to same-day services should attract digital sales throughout the shopping season, especially if consumers want to ensure they get their gifts on time without shopping in-store, bolstering Target’s performance in what is already traditionally its biggest sales quarter.
Because major retailers like Target and Walmart are thriving while other retailers falter, the pandemic could lead to top players expanding their market share long term. Cornell noted that Target has gained $5 billion in market share so far in 2020, leveraging its impressive digital capabilities to build up its business during the pandemic.
This suggests that Target is attracting customers from other retailers that may lack comparable digital tools or are otherwise struggling. And Target and other succeeding retailers may be able to retain these customers after the pandemic by continuing to offer similar levels of convenience, giving them greater control of the retail market well into the future.
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