Is Target struggling in online business despite digital transformation?

Target, the leading retail chain in the United States, said digital sales represented 18.3 percent of its total revenue in Q1 2024. Online sales grew 1.4 percent despite spending $700 million to boost digital sales and customer experience.
Target jobTarget’s total revenue reached $24.5 billion (down 3.1 percent) with operating income margin rate of 5.3 percent in the first quarter of 2024.

Target said first-quarter Capex was under $700 million. Target is aiming to invest $3 billion to $4 billion for the full year.

Target is aiming to invest in new and existing stores, the digital shopping experience, multi-category assortment, supply chain, technology, and Roundel ad business.

In 2023, Target has made an investment of $700 million in spending for information technology and other areas focusing on digital transformation projects. This compares with $600 million in 2022 and $600 million in 2021.

Target’s digital transformation projects are spearheaded by Brett R. Craig, Chief Information Officer, and Prat Vemana, Chief Digital & Product Officer.

“We’ll keep investing in our supply chain while leveraging artificial intelligence and other technology to further enhance our operations and shopping experience,” Brian Cornell, chair and chief executive officer of Target, said in its annual report for 2023.

Target’s other decision makers include Christina Hennington, chief growth officer; and Michael Fiddelke, chief operating officer and chief financial officer.

Target has already announced that it is aiming to open more than 300 new stores over the next decade as it is investing in the vast majority of existing stores. Target is also making investment in the supply chain to modernize to improve merchandise distribution, including the rollout of additional sortation centers, to increase the speed and efficiency of last-mile delivery.
Target investment in digital transformationTarget has also highlighted the importance of investment in technology, including AI and machine learning, to make it easier and more reliable for team to serve guests in every channel.

Target has previewed the relaunch of loyalty ecosystem, making it simpler and easier to deliver more value to buyers.

Target outlined changes to the digital experience and its focus on bringing the joy of discovery to the digital channel.

Target added more than 1 million new members to Target Circle in the first quarter of 2024.

In the first quarter, Target achieved an increase in digital sales for the first time in more than a year. This growth was driven by same-day services, Drive Up, in-store pickup, and same-day delivery, which has been rapidly embraced by guests in recent years. In the first quarter, same-day services saw high single-digit growth over last year, led by Drive up, which grew in the low teens.

Across sales channels, sales were strongest in digital, where first-quarter comparable sales grew 1.4 percent. This was driven largely by growth in same-day services as well as meaningful improvement in apparel business.

Mentions of Target Circle on social platforms increased by 500 percent versus last year, boosted by popular marketing campaign featuring Saturday Night Live alum, Kristen Wiig, revisiting her role as the Target Lady.

Guests are responding to the automatic application of Target Circle deals when they shop, giving them confidence that they are always getting the best deal on every Target run. Plus strike-through pricing on Target.com and our app helps guests to clearly see the value they’re receiving on those offers.

“Q1 Target Circle Week drove the highest traffic to website and app that we’ve seen in the past year outside of the Q4 holiday season. In addition, of the Target Circle members who shopped us during Target Circle Week, more than three-quarters redeemed an offer,” Brian Cornell said.

Target is remodeling digital platforms to boost sales and customer experience. Target has developed generative AI and personalization capabilities for expanding scope and reach of guests in terms of product recommendations, search results, and more.

Target recently engaged in a pilot with one of biggest vendors to test latest personalization capabilities with guests shopping personal care categories. Test results showed a nearly three times lift in conversion rates from personalized promotions versus mass offers, including higher sales lift across the rest of the category as well.

Target is focused on growing relevance, particularly where there may be opportunities in on-line assortment. Its digital marketplace, Target Plus, will play an outsized role in growth. Target is in the process of curation of both assortment and digital partners on the platform. In the past year, Target has more than doubled the number of partners and products hosted on Target Plus.

“The lines between physical and digital shopping continue to blur across retail. We view digital as more than just a sales channel. It’s also the connective tissue across most of our transactions. Around half of guests that open the Target app on a given day make in-store purchases with us that same day,” Brian Cornell said.

Guests look to digital platforms for inspiration, helping to plan their next in-store Target run. They use the app while in stores to check prices, compare products, and navigate stores more seamlessly. “Beyond stores and digital, we’re exploring new ways to grow the business outside of these traditional channels,” Brian Cornell said.

Baburajan Kizhakedath

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