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Investments In Same-Day Fulfillment, Private Label Grow Target’s Grocery Sales

Target reported low- to-mid-single-digit sales growth in the first quarter of 2021, according to a company blog post Wednesday (May 19). While this figure may not sound especially impressive, the comparison included sales for March and April, which in 2020 saw grocery sales surge amid mass panic buying.

As Executive Vice President and Chief Growth Officer Christina Hennington put it on a call with analysts, “To see healthy growth on top of last year is remarkable as you recall that a year ago, guests were aggressively stocking up their pantries, fridges and freezers and we sold virtually every unit of paper goods that we owned.”

Even competitor Walmart, which touted its grocery strength on an earnings call Tuesday (May 18), saw a year-over-year sales dip compared to the early months of the pandemic, instead opting to compare its grocery sales on a two-year stacked basis.

Part of Target’s strength in grocery comes from the strength of its eCommerce channels, with the retailer reporting 50 percent growth in digital sales. For instance, the company has been expanding its fulfillment capabilities, investing in growing the grocery assortment available through its same-day services: Order Pickup, Drive Up, and delivery through its partnership with Shipt.

“We … continue to enhance the assortments available for all three same-day services, adding more perishable food to our Pickup and Drive Up,” said Executive Vice President and Chief Operating Officer John J. Mulligan on the call. “And we just announced that, in the second quarter, we’ll have adult beverages available through Pick Up and/or Drive Up in more than 1,200 stores and available for same-day delivery in more than 600 stores across the country.”

To the latter point, the company announced the rollout of its same-day alcoholic beverage pickup and delivery on Monday (May 17), noting that the category “is one of the fastest-growing divisions within our food and beverage business,” and that offering pickup and delivery is a “natural next step.” Overall, the expansion of Target’s food and beverage assortment available through Drive Up and Order Pickup is included as one of the retailer’s major 2021 strategic investments announced in March.

In addition to building out its digital fulfillment capabilities, Target has also been investing in its grocery business by growing its private label brands. During the quarter, the retailer rolled out its new Favorite Day indulgent food and beverage brand, and more recently, the company expanded its Good & Gather brand, its “No. 1-selling food and beverage owned brand,” to include Good & Gather Plant-Based, with the company noting that demand for plant-based food and beverages is growing.

As Favorite Day offers baked goods and other sweets, and as Good & Gather emphasizes its natural flavors and lack of synthetic ingredients, the retailer is able to capture a wide range of consumers’ grocery spending with these private-label brands.

“Target’s own brands grew approximately 36 percent in the first quarter, the strongest increase we’ve ever recorded,” Hennington said on the call. “These brands aren’t something that our guests pick up while they’re at Target, they are a big reason why they shop at Target, which is why we continue to invest in them.”

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