Digital is giving Target green shoots after another quarter of revenue decline

Target’s situation isn’t improving much, according to the retailer’s latest quarterly data, with first-quarter revenue of $24.1 billion down 3.7% year-over-year, while net income fell to $942 million, down 0 .8%.

But there was one silver lining – the digital space, where Target is considered a leader, saw growth for the first time in over a year, although only by 1.4%. The share of digital technology in total revenues is now 18.3% compared to 17.5% a year ago.

The return to form was praised by CEO Brian Cornell, who said:

This growth was driven by our same-day, curbside pickup, in-store pickup and same-day delivery services, which have rapidly become popular with our guests in recent years. In the first quarter, our same-day services saw high single-digit growth over the prior year, led by Drive Up, which experienced growth during its maturation period.

This builds on Drive Up’s explosive growth during the pandemic, followed by double-digit growth in both 2022 and 2023. Overall, Drive Up’s sales of more than $2 billion in the first quarter were more than 30 times greater than I saw ours in the first quarter of 2019.

Loyalty

Chief development officer Christina Hennington also noted improvements from the free Target Circle loyalty program, which was relaunched last month. While it’s early days, Hennington could boast that it has added one million new members since retail sales resumed:

Our guests tell us they find the program easier to use, appreciate the transparency of the promotions offered, and understand the value their membership provides. Public sentiment has improved year-over-year, with mentions of Target Circle on social platforms up over 500% year-over-year, driven by our wildly popular marketing campaign featuring the return of Saturday Night Live alum Kristen Wiig for her role as Target’s lady.

In addition to these memorable ads, guests respond to Target Circle offers automatically applying while shopping, ensuring they’re always getting the best deal every time Target launches. Additionally, striking out prices on target.com and our app helps guests clearly see the value they receive from these offers. We believe that price and value transparency will become more important over time and that we can continue to raise awareness of the tremendous value we offer across our range.

Last month’s Target Circle week had “tremendous benefits for our online results,” she added, with the highest traffic to Target’s website and app last year outside of the holiday season.

Remodeling

Elsewhere, work is underway to redesign Target’s digital platforms, Hennington explained, focusing on generative AI and personalization capabilities:

We recently conducted a pilot with one of our largest suppliers to test our latest personalization capabilities with guests shopping in our personal care categories. We’re very encouraged by the results of early testing, which have shown a nearly three-fold increase in conversion rates for personalized promotions compared to mass offers, including higher sales growth across the rest of the category.

In addition to increasing personalization, we are also focusing on increasing relevancy, particularly where opportunities may exist within our current online selection. As we have previously communicated, we believe that our Target Plus digital marketplace will play a huge role in our growth in the coming quarters and years, even as we continue to prioritize the selection of both our inventory and digital partners on the platform. Last year, we more than doubled the number of partners and products hosted on Target Plus. We are excited to expand offerings with existing partners and introduce new brands to the platform in the second quarter and beyond.

Overall, she said the lines between physical and digital shopping continue to blur:

We take an industry-leading position to further minimize this distinction. In fact, we see digital technology as more than just a sales channel. It is also the connective tissue found in most of our transactions. About half of guests who open the Target app on a given day will shop with us in-store that same day. Guests look for inspiration on our digital platforms to help them plan their next targeted in-store campaign. They use apps in our stores to check prices, compare products and even navigate our stores more seamlessly. Whether they choose to walk through our physical or digital front doors, we want to deliver the inspiring and welcoming Target experience our guests have come to expect from us.

My application

Our team performs outstanding work in a complex environment, planning carefully while remaining flexible and responsive.

Cornell and his team still have a lot of work to do to get things back on track, but there are clear green shoots already visible. Target’s has reinvented itself before; can do it again.

Next!