Double-digit online sales growth still isn’t good enough for bricks-and-mortar retailers

Still not enough.
Still not enough.
Image: AP/Michael Dwyer
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Target just posted a 20% rise in digital sales, but even that wasn’t good enough to satisfy stakeholders who were expecting a greater increase.

The bricks-and-mortar retailer had boasted year-over-year online sales growth of at least 30% for the first two quarters of 2015, and for the third quarter of 2014. It was hoping for a similar performance during the third quarter of this year, but only achieved two-thirds of its goal.

Digital-channel performance, while above industry levels, was weakened by slow electronics sales and sluggish growth in the apparel sector due to relatively warm US weather during the period, Target CEO Brian Cornell told analysts on a conference call today (Nov. 18) to discuss the company’s third-quarter results.

Target’s shares fell more than 5% at the time of this writing, to as low as $68.59. The market’s reaction underscores the gap bricks-and-mortar chains still need to close in order to compete with fast-growing e-retailers like Amazon, as more shoppers move more purchases online. (Walmart’s global e-commerce sales last quarter rose about 10% on a constant-currency basis, the company said yesterday.)

Target has invested heavily in its digital operations over that last few years and is shoveling out another $1 billion to beef up its e-commerce capacity in 2015. The company plans to focus on speeding up transactions and improving the experience on, Cornell said on the call. Tactics will include free shipping for online orders during the holiday season, and improving the delivery times for Target’s “ship-from-store” option, he said. Cornell expects 40% of digital orders in the fourth quarter to be shipped from Target retail stores.

Overall, Target’s performance during the third quarter of 2015 were modest, in line with slow growth across the broader retail industry. Total sales increased 2.1% to $17.6 billion.