Target Same-Day Services Grew 90% in 2019

This is the latest in Localogy’s Skate To Where the Puck is Going series. Running semi-weekly, it examines the moves and motivations of tech giants as leading indicators for where markets are moving. Check out the entire series here, and its origin here

Ordering things ahead to pick them up locally is quickly growing as a consumer behavior. As we’ve reported in the past, this has driven lots of revenue and point-of-sale logistical streamlining for everything from quick-serve (Starbucks, McDonald’s) to heavier fare (Target).

Target in fact has explicitly linked past quarterly revenue gains to its same-day set of services, which is outpacing every other division. This trend continued in its Q4 earnings announcement last week when it was reported that same-day services grew 90 percent in 2019.

Consisting of same-day delivery, curbside drive-up, and in-store pickup, the Same Day Services division accounted for more than 80 percent of Q4 digital sales growth. This was an earnings bright spot against lower than expected earnings per share ($1.69) and revenue ($23.4 billion).

Panning back beyond the last few quarters, the overall transformation to physical stores that are increasingly purpose-built for online shopping/ordering has born other fruit. Target just won its spot on the top 10 e-commerce retailers at #8, beating out QVC, Costco and Macy’s.

Seeing that success, it’s now doubling down on same day services and adding product categories including groceries and alcohol. Both will be added to in-store pickup and drive-up, starting in Target’s home market of Minneapolis, then expanding to half of its global locations by Q4.

Target chairman and CEO Brian Cornell said in an earnings statement:

“The strategic investments we’ve made over the past several years to elevate the shopping experience, curate our multi-category assortment at scale, and deliver ease and convenience through our fulfillment capabilities are deepening our relationship with our guest […] As we look ahead to 2020 and beyond, we are well-positioned to build on this strong foundation to further differentiate Target and drive long-term, profitable growth.”

So what does this mean for the rest of us? As is the point of our “skate to where the puck is going” series, online giants moves’ can signal where things are moving. That can mean eventual downmarket shifts to SMB and mid-market segments, and consumers’ evolving tastes.

On the latter point — and expanding to other categories like restaurants —  a consumer survey from BRP and Windstream Enterprise (n=1200) reveals that 20 percent of diners use a pre-order option such as in-app ordering and pick up. So those who meet that evolving taste will gain an edge.

And there’s lots of space to gain that edge: The same BRP study revealed that only 26 percent of restaurants currently offer order-ahead functionality or have compatible POS systems. That means lots more transformation still to come and lots of head room for SMB-focused startups in restaurants and beyond.

Like other local commerce tech, same-day logistical functions will start with multi-location brands before migrating to SMBs en masse. But smart SMBs — or companies that serve them — will start devising road maps for product-ordering, pick-up and overall logistical transformation.

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