Target's Online Sales Soar Thanks to Flexible Fulfillment

Target's e-commerce sales soared 34% in its fourth quarter 2015, in part thanks to the company's fulfillment from stores over the 2015 holiday season. The big box retailer improved out-of-stock metrics by 20% in the quarter, over the same period the year before.

Over the 2015 holiday season, 30% of Target's online orders were fulfilled from the stores through the combination of order pickup and direct-to-guest shipments. On Black Friday weekend, Target stores fulfilled more than one million digital orders. After setting a new digital daily sales record in the week of Black Friday, Target shattered all previous records on Cyber Monday. While the traditional view of Cyber Monday doesn't include brick-and-mortar, Target stores set an all-time record for order pickup on that day with more than four times the volume compared with last year. And like last year, order pickup became even more important in the days leading up to Christmas, growing to half the company's digital volume.

"We have been building our flexible fulfillment capabilities for several years, and this holiday season highlighted the power of these capabilities to serve our guests and drive business performance," noted said John J. Mulligan, Chief Operating Officer & Executive Vice President.

This isn't an example of temporarily adding resources to work around systems and processes, Mulligan explained. It's a case of making improvements to those systems and processes to support a sustainable improvement in performance. A key pillar of Target's work is focused on improving freight flow through the supply chain. Target began tests to reduce variability of inbound shipments at its DCs, with a goal of reducing inbound variability by 50% and plans to engage in tests to optimize outbound volatility, which will further improve overall freight flow.

"While our stores help us save meaningfully on shipping costs and allow us to fulfill guest demand faster, they also help us capture more sales," said Mulligan. "Because we now have a single view of inventory, encompassing all of our distribution center and store locations, we can rely on our entire network when fulfilling digital orders, keeping us in-stock on a greater percentage of digital orders."
During the holiday season, about 40% of order pickup and store-shipped volume consisted of items that were out-of-stock in Target's web fulfillment centers.

"This preserved sales on orders we would have otherwise missed had we only accessed inventory in our web fulfillment centers," concluded Mulligan.

Target also just brought in a former Amazon executive to help lead supply chain. Arthur Valdez is the new executive vice president, chief supply chain and logistics officer and will lead Target’s supply chain transformation including planning, distribution and transportation. He will report to Mulligan.

“While we’ve made significant progress in improving our operations, Target’s growth hinges on our ability to enhance the fundamental aspects of our business, starting with the supply chain,” said Mulligan.