Merchant Innovation

Target's Digital Drive Drives Sales

During a time when sales can be rocky for most major retailers, Target posted a better-than-expected first quarter earnings yesterday (May 20) — driven by the company's push to ramp up its product offerings, as well as its investments in its digital initiatives.

Growth across its digital channels was highlighted as a particular high point for the quarter as eCommerce sales increased 37.8 percent, which helped increase the small sales boost for Q1. Overall, sales increased 2.8 percent to $17.1 from 2014's Q1 of $16.7 billion. But another positive mark for the retailer was its investment in its signature categories (style, baby, kids and wellness), which grew more than double the company average.

“We’re pleased with our first quarter traffic and sales, particularly in our signature categories, which drove better-than-expected profitability through improved gross margin and continued expense management,” Brian Cornell, chairman and CEO of Target, said in the company's earnings release. “We’re encouraged to see early progress on our strategic priorities, including strong sales growth in Apparel, Home and Beauty, nearly 40 percent growth in digital sales, and positive traffic in both our stores and digital channels. We continue to benefit from strong execution by our stores team, who overcame weather challenges and West Coast port delays to deliver outstanding guest service in the first quarter."

Overall, Target has continued to see an increase in traffic, and more importantly sales, across its digital channels. Mobile, in particular, has been a strong focus for the retailer. Target's mobile growth was the focus on its fourth quarter earnings, and should continue to play a role in Target's overall growth strategy. It's also continuing to focus on its efforts to increase mobile shopping via its app, while customers are shopping in store.

“Mobile experience needs to make commerce as easy as possible,” Jamil Ghani, Target’s VP of enterprise strategy, said in the company's Q4 call earlier this year. He also noted that Target’s mobile-engaged customers make four times as many store visits per year. “We call it bricks-and-mobile, and we’re really excited to see how far we can take it.”

Last quarter, Target's digital orders were up well over 50 percent, driven by conversion increases on both its conventional site and mobile.

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