One stat in Target's earnings proves stores are still the biggest defence against Amazon

Getty/Helen H. RichardsonA new Target store opening in Denver complete with mascot.
  • Target said in its latest earnings report it fulfilled nearly three out of every four digital orders through its stores in some way, contributing to 31% growth online for the quarter.
  • Target has heavily invested in new initiatives to create an experience that centres stores as the center of the customer experience, even when customers never actually set foot in the building.
  • It leverages Target’s store footprint, which both cuts costs and give customers more options to get their orders.
  • Online-only competitors like Amazon can’t cash in on this strategy – yet.

Target’s stores are taking center stage.

In the company’s latest earnings report, Target says it fulfilled nearly three out of every four digital orders through its stores in some way.

Target started shipping more orders directly from stores to customers, making it cheaper for the company and quicker for the customer. It’s also rolled out new initiatives to get customers to come to the store and pick up their orders, like Target Drive Up which does not even ask customers to come inside. That curbside delivery service is now in over 1,000 locations.

When all is said and done, Target will have spent $US7 billion through 2020 to remodel some stores, open its small-format stores in urban areas, and beef up its online operation

Early indications show Target’s strategy is working. It’s these initiatives that contributed to 31% growth online for the quarter, and Target has raised its future guidance.

“Target’s strategic initiatives, announced two years ago, are clearly bearing fruit, with its online push continuing to generate impressive gains,” Moody’s Lead Target Analyst Charlie O’Shea told Business Insider in an email. “Leveraging of stores to support these online sales remains compelling”

In an interview with CNBC, CEO Brian Cornell clarified Target’s strategy.

“We look at full fulfillment as our friend. The investments we’re making in drive-up and pick-up: One, the consumer really prefers that. It’s really reliable. It’s easy. It’s convenient. And it’s more profitable for us,” Cornell said. “So that’s really going to help our margins going forward.”

As pick-up services mature, customers seem to be flocking to them. Nearly 70% of customers have used a buy-online pick-up-in-store service more than once, according to data from Doddle.


Read more:
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Retailers are now able to convince shoppers that online shopping does not always mean home delivery. Whereas once stores were seen as a potential liability as e-commerce grew, Target is making a compelling case for that its 1,850 stores continuing importance for large retailers.

“Digital growth at Target isn’t coming at the expense of our stores,” Cornell told investors on Tuesday in a meeting. “It’s making stores more relevant.”

Amazon doesn’t have anything that can compete with that – yet.

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