Target to Test Downstream Sort Centers to Keep Up with ‘Jaw-Dropping’ Digital Growth

Press enter to search
Close search
Open Menu

Target to Test Downstream Sort Centers to Keep Up with ‘Jaw-Dropping’ Digital Growth

By Lisa Johnston - 05/21/2020

Like Walmart, Target’s omnichannel capabilities were put to the test during Q1, and the retailer passed with flying colors thanks to an ability to leverage its store fleet during stay-at-home orders.  

Target’s comp sales grew 10.8% during the first quarter, and although store comps ticked up just 0.9%, digital comps grew a whopping 141%.

While the quarter began with a relatively standard February with overall comp growth of 3.8% and digital comp growth of 33%, it completed April with total company comp growth of over 16% and a 282% increase in digital comp sales — the latter figure described as “jaw-dropping” by CEO Brian Cornell in an earnings calls.

This digital growth caused a volume increase that Target didn’t expect to witness for another three years, said John Mulligan, executive VP and chief operating officer, with an average day in April fulfilling more items and orders last year’s Cyber Monday.

See also: Home Depot’s Online Engagement Skyrockets, but so do Operating Costs

The stores did much of the heavy lifting, fulfilling more than 80% of its digital sales in April. In fact, of the $1.1 billion-plus digital sales growth in April, store fulfillment accounted for over $950 million of it.

Target’s Drive-Up service also played a starring role during the pandemic, serving as the company’s most popular service. More than 5 million customers used it during the quarter — 40% of whom were new to the service. Customers who use Drive-Up for the first time spend more at Target in total, and 40% of them make a repeat purchase.

Among the fulfillment achievements include sales of orders shipped from stores or picked up in stores growing nearly 150% in the first quarter, as well as sales fulfilled by Shipt up more than 300%. Sales through its Drive-Up service were up over 600% vs. a year ago, with those in April up nearly 1,000%.

Although the company has slowed down its plans for store remodels and new stores, it continues to see both of these as important for its strategy. This includes moving forward with its plans to add fresh, refrigerated and frozen items to its pickup and Drive-Up capabilities. It recently resumed the test in the Twin Cities market and has expanded the test into the Kansas City market.

See also: Target Names Supply Chain & Logistics SVP

“Operational results have been positive so far,” said Mulligan. “And while we will continue to govern the pace of the rollout based on the circumstances facing our team, we are committed to rolling out this capability to as many stores as possible this year.”

In the near term, the company will add more parking spots over the next several months to accommodate the Drive-Up growth, as well as flexible and incremental storage space in stores.

The retailer acquired route-optimization technology from Deliv earlier this month, which it intends to use for testing sort centers placed downstream in select markets where it has a high density of packages delivered to customers’ homes. The first center will be tested in the Minneapolis market, although the company couldn’t share a timeline.

The company has also paused its work on developing analytics and technology across inventory, planning and control (IPC). “We’re about a third of the way into that deployment,” said Mulligan. “The teams are assessing right now what timeline we want to get back on to begin deploying that further across the chain. We feel really, really good about the opportunity for us to improve what we’re doing from an inventory placement with that technology and analytics.”

See also: Target Reveals Its Customers’ Shopping Habits Amid COVID-19