Merchant Innovation

eCommerce Supply Chain Pays Off For US Retailers

Second-quarter earnings of major brick-and-mortar retailers like Target and Home Depot are showing the benefits of distribution to digital consumers.

As reported by The Wall Street Journal late last week, the largest U.S. retailers are reporting strong online sales, supporting the continued trend of eCommerce revenue outpacing in-store sales.

In its second-quarter earnings report, Home Depot saw a 25 percent jump to its online sales from a year earlier, which now represents 5 percent of the company’s total revenue. In the same quarter a year earlier, the home improvement giant reported a significant hit to its margin due to high transportation costs, but the company has since seen an increase in its margins due to increased distribution productivity and an overall logistics improvement.

According to WSJ, The U.S. Commerce Department recently released data showing a 4.2 percent boost in the growth of eCommerce retail sales in the second quarter, which greatly surpasses the 1.6 percent growth for overall retail sales. Online sales made up 7.2 percent of total sales, at $89.2 billion.

Online sales growth also made a mark in Target’s Q2 earnings.

An ongoing focus on digital to drive up sales seems to be paying off, with the digital sales of the retailer growing 30 percent in the second quarter, compared with the overall sales growth of 2.4 percent. Target will reportedly be setting some very ambitious goals when it comes to online sales — and the retailer also saw an increase in its gross margin, which grew to 30.9 percent, up from 30.4 percent in the year earlier.

Moving forward, Target’s omnichannel focus will continue to grow as the retailer looks to build upon its ship-from-stores initiative that has helped create a better organizational structure flow in how Target can get goods to consumers quicker than ever before.

“While we are pleased with the industry-leading growth we’ve seen so far this year, we have much more work to do. And a key asset we will deploy is our stores. We are already shipping digital orders from approximately 140 stores. And by the end of this year, we’ll be shipping from more than 450 locations. Ship-from-store capabilities allows us to balance inventories across the network, leverage the capital and labor already in our stores and reach guests more quickly,” Target CEO Brian Cornell said on the earnings call with analysts last week.

Traditional retailers continue to strengthen their eCommerce efforts in order to keep up with online veterans like Amazon, a company that deems itself “customer obsessed.”

Implementing a successful eCommerce strategy remains a significant way to boost sales, but it also comes with a unique set of challenges for brick-and-mortar businesses, especially when it comes to handling various distribution channels and establishing effective supply chain management.

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