Target E Commerce BII

Target's Q2 2016 earnings revealed a year-over-year (YoY) decline in total sales, but the company's digital business is still doing quite well.

In fact, its solid e-commerce performance is propelling the company to invest even more in new tech tools to enhance both its online site and its in-store shopping experience.

The bad news stemmed from a drop in comparable store sales:

  • Total sales for Target during Q2 2016 amounted to $16 billion, marking a 7% YoY decline.
  • Comparable sales dropped 1.1% YoY.

But Target's e-commerce segment was a bright spot in the earnings results:

  • Total e-commerce sales reached over $533 million during Q2, according to our calculations. This marks 16% YoY growth.
  • Online sales accounted for 3.3% of Target's total sales during Q2. This is up YoY from 2.7%, but down sequentially from 3.5% in Q1 2016.
  • Although it is still a small portion of Target's business, e-commerce contributed 0.5 percentage points to the company's comparable store sales. This likely helped offset what could have been an even bigger decline in the metric.

Based on the company's strong e-commerce growth, Target is focusing its investments on enhancing its digital tools both in store and online. Most notably, Target launched a new fully adapted site during Q2 that provides a seamless shopping experience across devices, CEO Brian Cornell reported in the earnings call. This is especially vital as more consumers shop on multiple channels, including smartphones, tablets, and desktop computers.

In addition to this, Target has also focused on making its e-commerce portals as easy to use as possible. This includes streamlining online checkout, improving its search functions, and creating more personalized experiences for its shoppers. Optimizing the performance of Target's e-commerce portals will likely help the company drive up its online sales even further. This is especially important as we approach the holiday season — during Q4 2015, online sales accounted for 5% of the company's total sales.

Target's mobile Cartwheel app will likely become a bigger focus as the company tries to drive up in-store foot traffic and sales. The mobile Cartwheel app lends a strong omnichannel presence to Target's business as it blends at-home behaviors with the in-store purchase journey. Shoppers can save in-store deals that they want to shop, and when they arrive at the store, beacons trigger the app to provide an in-store map that leads them directly to the correct aisle for each deal.

Leveraging the mobile app by offering specific deals in local Target locations will help maintain the relevance of brick-and-mortar stores even while shoppers increase their reliance on digital devices.
