Target BB #:166987 continues to prove me wrong. I’ve long said turning stores into digital order fulfillment centers can’t make sense in the long run.
Sobeys and Ocado agree with me – putting resources into digital grocery fulfillment centers with high-efficiency automated picking systems – but Target’s going the other way.
During the company’s first quarter earnings report on May 23, executives said they’re more than pleased with turning stores into mini fulfillment centers.
“Despite the success we’re already seeing, we continue to hear questions about the long-term viability of keeping our stores at the center of fulfillment,” said John Mulligan, Executive Vice President and COO, during the earnings report. “Our answer is emphatic—we are confident that this is the best long-term solution for Target.”
Mulligan said the company now offers more digital fulfillment options than any other retailer, with in-store pickup at every one of the company’s 1,851 stores, and drive-up at 1,250.
More than 1,500 stores offer online grocery order fulfillment through Shipt.
“We’re seeing a really positive guest response to our same-day digital fulfillment services, which drove well over half of our digital sales growth in the quarter,” Mulligan said.
Digital is not replacing in-store shopping either, he said.
“Our analysis indicates that the new services like Drive-Up and Shipt are driving incremental trips for Target rather than simply replacing other forms of shopping,” he said. “Specifically, first quarter digital sales from in-store pickup increased more than 80% from a year ago even as Drive-Up and Shipt grew even faster.”
Mulligan said the company continues to improve in-store experience.
“While we have quickly established ourselves as a leader in terms of convenience and digital fulfillment, we are equally focused on maintaining the leadership positions of our in-store shopping experience,” he said. “That’s why we’re remodeling 300 stores a year, keeping us on track to complete 1,000 remodels by the end of next year.”
(Did you catch my take on Target’s produce department remodels? See before and after photos here)
Walmart also is heavily investing in Grocery Pickup fulfilled through in-store, as well. I think the world of retail observers is waiting to see what happens with Kroger’s Ocado partnership, which currently has several fulfillment centers in development.
