Target recently released its quarterly earnings report, and while first-quarter comparable sales decreased 1.3%, driven by declines in both traffic and basket size, comparable digital channel sales were extremely strong—up 22%.
The rising e-commerce results come on the heels of Target announcing its new Restock program, a next-day delivery program focused on household essentials.
Though the company itself has yet to share results, Frank N. Magid Associates reported data related to Target’s Restock program, which is in a test phase with Target employees and will roll out in a broader pilot in Minneapolis this summer.
According to Magid’s Retail Pulse study, 42% of consumers use Amazon Prime. Looking at crossover customers, the study showed that 57% of Target’s regular customers use Prime. When it comes to Target’s core market, mothers between the ages of 27 and 51, Prime usage is as high as 68%.
"What's surprising is that loyal Target customers (those that regularly shop Target, spend more, use the Target mobile app and are REDcard users) are more likely to use Amazon than nonloyal customers. These are people that love to shop and Amazon has allowed them to expand on their shopping habits," Matt Sargent, senior vice president of retail at Magid, told FierceRetail.
The Target Restock program is focused on household essentials and this focus makes sense for two reasons, according to Sargent. First, household essentials are a key trip driver for Target and second, that is one of the categories where Amazon Prime has made the most inroads with Target’s customer base.
Squarely aimed to take back market share from Amazon, Target needs this new adventure to succeed.
In looking at how Target customers use Amazon Prime by category, apparel, groceries and small appliances, in addition to household essentials, show significantly higher Prime penetration at Target than the rest of the market.
“Target Restock is a great start for Target to regain customers lost to Amazon, but Target may look to expand its efforts within Restock to the category of apparel,” Sargent added.
Focusing on apparel is a next logical step for Target Restock, given that research shows that 53% of Target customers use Prime for apparel versus 45% of customers within the rest of the market.
Sargent points out that Target has not yet said that Restock will include apparel, but he firmly believes they will need to do so in order to compete with Amazon in the space.
"The biggest challenge they will face is their own concern that increasing online apparel sales will decrease store trips. To some degree this is true, but they need to get over this fear and embrace the new online paradigm. Put simply, the only thing Target has to fear is fear itself," Sargent said.
In addition, Target is offering next-day shipping. But thanks to the Amazon trend, Target customers will eventually be looking to get items within a few hours and not at a "nominal fee," but for free.
And while the service is described as customers having the opportunity to "fill a box with multiple items," what if a customer only needs two items? Will they be required to fill a box?
"This language makes me think that customers will need to figure out what things they want to purchase at the same time. For this service to be successful, Target needs to figure out how to be flexible in that one week, I may want 10 items and the next I may need only one item," Sargent said.