Today, we’re taking a look at Target’s e-commerce strategies, how it’s performing, where the department store is innovating and what it’s biggest challenges are ahead. Seeking Alpha takes a positive investment snapshot of Target and is optimistic about its progress instore and online. Fortune magazine has a contrary view based on Barclays analysts who believe the company will struggle to reach its 3% growth goal especially in e-commerce. Amazon is suing a senior logistics executive who left to join Target to lead its logistics systems. A top-secret program codenamed “Goldfish” is underway at Target as it aims to build an e-commerce stronghold according to speculation from recent recruitment ads and hiring announcements.
The company expects to spend up to $2.5 billion on technology and logistics in 2016. While Walmart only grew its e-commerce business by 8%, Target grew by 34% in its most recent quarter. Impressive growth. Analysts are wondering if Target’s scarcity strategy will work again with another big online Spring promotion planned with Finnish design house Marimekko. Target’s 34% increase in e-commerce sales even beat bigger competitor Amazon whose online sales increased 26%. In addition to e-commerce, Target will also focus on grocery and better customer service. Years later, Target’s chic not cheap positioning still seems to win over competitors. The consensus seems to be that Target is definitely on target in it plans.
Target Is Still A Great Investment Today
Barclays downgraded Target to underweight at the end of March, and thankfully it has more or less held firm despite having a price target of $70 placed on it. By calling it out as underweight, Barclays is saying it expects it to underperform either its industry, sector, or even the market altogether. No prizes for guessing that we don’t agree. The reason Barclays’ Matthew McClintock gave on the downgrade was concerns over the company’s longer-term annual comp store sales target of 3%. McClintock believes it to be overly optimistic due to lower sales expectations from e-commerce pressures and decreased expectations for margin expansion.
It is fair to say that Target has fallen short on its e-commerce targets previously. It had been targeting digital sales growth of 40% last year, but only managed to deliver growth of 31%. E-commerce will be key to growing revenue at a strong rate in the next five years, and we believe it will get there. Target is investing heavily to achieve this, so we expect to see a big improvement in the future. It announced in an analyst call that it plans to spend $1.8 billion this year and $2.5 billion next year on supply chain and technology. These are big investments, but with free cash flow coming in at $4.4 billion in the last financial year, the company can more than afford to make these important investments. Via seekingalpha.com
Target Shares Slip On Barclay’s Downgrade, E-Commerce A Huge Threat
Shares of massive retailer sank nearly 3% Thursday after Barclays cut Target’s price estimate from $90 to $70 and tagged the stock as “underweight”—Wall Street’s nice way of saying sell—saying weak digital sales growth and pressures from e-commerce giant Amazon are likely to erode average sales per store.
“We believe Target’s comp store sales growth and margin expansion targets are optimistic, as the company faces substantial pressure within the general merchandise category from e- commerce,” a team of analysts led by Matthew McClintock wrote, referring to sales growth from existing stores, rather than adding new locations. “We don’t believe the company can achieve its longer-term goal of at least 3% annual comp stores sales.” Via fortune.com
Amazon Sues Ex-Logistics Executive Over New Job At Target; E-Commerce Giant’s Secrets Compromised?
Amazon has gone up in arms on Monday, filing a lawsuit against its former employee, Arthur Valdez, for defecting to the e-commerce giant’s competitor, Target. According to Amazon, Valdez, who used to work in the company’ supply chain and logistics division as an executive officer, is violating a non-competition agreement that the former employee signed in 2012.
Valdez was one of Amazon’s seasoned employees. Being with the company for 16 years, the veteran executive saw Amazon’s rise and domination of the e-commerce trade. Thus, his defection to Target has affected Amazon deeply.
In its statement, Amazon announced that Valdez, being a tenured executive, was privy to the company’s closely guarded secrets and operational techniques. Apart from this, several important strategies that Amazon has developed over the years were conceived with the help of the former employee. Via hngn.com
Target is investing billions in ecommerce
Target plans to spend as much as $2.5 billion a year on technology and supply chain initiatives by 2017. Last year, the company spent $1.9 billion on the category. Target will likely spend the money, in part, to hire 20 engineers and product managers to join a mysterious technology-focused start-up called “Goldfish,” reports the Star Tribune.
While details about the “new franchise” are still murky, it’s clear the Goldfish is attempting to crack the ecommerce code, seeking new ways to utilize technology and digital channels. The job posting notes that Target is looking for people with a “deep understanding of the fundamentals of retail marketplaces, social commerce, and influencer networks.” Via businessinsider.com
Walmart is starting to lag in e-commerce, and Target is getting better at it
Walmart isn’t keeping up in a category that will determine the future of retail. As Target has grown its e-commerce business, Walmart’s growth is slowing, The Motley Fool notes. In the past two years, Walmart’s e-commerce growth has steadily dropped. The company reported growth of 8 percent in its most recent quarter, compared with 22 percent in last year’s fourth quarter and 30 percent two years ago.
Target, by comparison, grew its e-commerce business 34 percent in its most recent quarter. The company’s growth has been consistent in the past few years, with digital sales growth of at least 20 percent a quarter for the past year. Walmart’s lowly position isn’t from lack of trying. In October the company announced it would invest $900 million in its web development, with plans to spend $1.1 billion in the coming year, working to expand online grocery and scale its online assortment. Via slate.com
Target’s Scarcity Strategy Can Be a Boon to Online Sellers
Despite a public relations backlash after last year’s “Lilly Pulitzer” sale, Target is going ahead with another limited edition collaboration, this one with Finnish design house Marimekko. And the sale that kicks off on April 17th is likely to draw online sellers eager to cash in by buying items at retail and then selling at a markup after the event.
The “Marimekko for Target” collection features more than 200 pieces from outdoor decor to swimwear and includes some firsts for Marimekko, including the bocce ball sets and parachutes. Most items are priced at under $50. (Prices range from $7.99 for sunscreen to $499.99 for the paddle board.)
Last year, Target launched “Lilly Pulitzer for Target,” a collection of 250 items, but Target found its website overwhelmed with traffic, and shoppers were disappointed when the website and retail stores quickly sold out of the items. There was a backlash against resellers who listed the special branded items for sale on eBay and elsewhere at tremendous markups – the hashtag #LillyforTarget turned to #LillyforeBay and #LillyGate2015. Via ecommercebytes.com
Will Target Stock Get a Big Push From E-Commerce? (TGT)
Last month, TGT reported fourth-quarter earnings, revealing 34% growth in e-commerce sales during the holiday shopping season. Investors were pleased with the results as a whole, sending Target stock more than 10% higher ever since.
Cornell’s decision to spend upward of $1.4 billion on improving the TGT website and mobile shopping experience clearly paid off, with full-year e-commerce revenue growing 31% over 2014. Sure, that’s not quite as well as he’d originally hoped, predicting 40% improvement. But Target’s 34% e-commerce growth in Q4 was more than quadruple the 8% increase reported by key retail rival Wal-Mart Stores, Inc. (WMT) and also ahead of the 26% increase reported by e-commerce big dog Amazon.com, Inc. (AMZN). Via investorplace.com
Major changes coming to Target as it focuses on grocery, customer service
It will be easier, less frustrating and more convenient, executives said a meeting with analysts here Wednesday. Starting a shopping trip through Target’s app or online and finishing it in a store will become more seamless, with text notifications when online orders for in-store pickup are ready and dedicated areas of the store for these orders. Online orders will ship faster, as Target transitions more of its physical stores to double as fulfillment centers.
Those capabilities are part of a plan laid out by Target executives to become the ultimate one-stop grocery, apparel and home destination for American families as it continues a transformation to become a more digitally focused, personalized and reliable retailer. Via msn.com
Target’s Chic Beats Cheap
In our Brand Keys Customer Loyalty Engagement Index (CLEI) for the discount retail category, Target has generally ranked in the No. 2 spot, after Wal-Mart and just ahead of Kmart. Those are the only three national discount retailers, so the list isn’t very long anymore.
Target was originally a division of Dayton Hudson Corporation, got bigger, and finally became the name for all the company’s divisions. Around the early ’90s, Target began to differentiate its stores by offering more upscale-feeling, trend-forward merchandise and clothing at lower costs. It created a category unto itself, even if just perceptually, called “cheap chic,” and was in direct opposition to the Wal-Mart model of focusing on low, lower, lowest-priced goods. Kmart didn’t actually have a strategy other than locations with low prices, but not quite as low as Wal-Mart. Via mytotalretail.com
Can Target stay on target?
The consensus by analysts and retail industry watchers seems to be that Target is among the strongest of the retail e-commerce companies and will, at the very least, be strongly competitive as it aims for eCommerce growth, grocery market share and customer service improvements.