Target Corp. and Walmart Inc. both announced earnings for their fiscal second quarters of 2023 and 2024, respectively. Walmart grew sales both online and in stores, while Target sales lagged in both channels.
Walmart ranks No. 2 in the Top 1000, Digital Commerce 360’s ranking of North America’s online retailers by web sales. Target ranks No. 5 in the Top 1000.
Walmart is also No. 9 in the Global Online Marketplaces Database, Digital Commerce 360’s ranking of top online marketplaces.
Online sales comparison
Walmart’s online sales were a highlight for the big box retailer in a quarter with already impressive results. U.S. online sales grew 24% for the fiscal 2024 second quarter ended July 28, 2023. International ecommerce sales grew 26%. Growth was particularly strong in comparison to comparable in-store sales, up 6.4%, excluding fuel. That’s still above analyst expectations of 4.1% growth. Total revenue grew, too, by 5.7% to $161.6 billion.
Walmart did not share what percentage of total sales took place online.
Target’s digital sales declined 10.5% year over year in the fiscal 2023 second quarter ended July 29. Meanwhile, comparable in-store sales declined 4.3% versus Q2 last year. Target’s total revenue in Q2 reached $24.8 billion. That’s down 4.9% year over year.
The diverging results are evidence of the same trends impacting consumers, says Neil Saunders, managing director at retail analysis firm GlobalData Retail. Consumers are “cutting back on discretionary spending and prioritizing essentials” at both stores, he says. Walmart, unlike Target, made up the difference by growing grocery sales more than enough to offset discretionary losses.
Digital Commerce 360 analysis: Walmart vs. Target ecommerce sales growth
Target had a “huge early-pandemic advantage,” Digital Commerce 360 senior analyst James Risley said. “Not only was its Drive-Up program well-advertised (in front of every store), but shoppers, unable to spend on experiences, had more money to spend on goods that Target specializes in like home décor and small appliances. Now that consumers can save for experiences or are just feeling the pressure of inflation and economic uncertainty, they are turning to budget-friendly alternatives.”
Now, Walmart is seeing bigger gains than Target.
“Walmart passed Target in online growth for the quarter in Q4 last year, when the last pandemic worries ended in many consumers’ minds and experience spending picked up. Most ecommerce retailers have experienced slower growth amid changing (and lower) consumer spending,” Risley said.
He also pointed out that some Target customers may be more likely to shop in stores for the types of merchandise that Target specializes in.
Pickup and delivery
Walmart and Target consumers made it clear they still value the convenience of omnichannel offerings.
Walmart credits pickup and delivery sales for the major jump in online orders.
“Around the world, our customers and members are prioritizing value and convenience. They’re shopping with us across channels — in stores, Sam’s Clubs, and they’re driving ecommerce,” CEO Doug McMillon said in a statement.
Customers especially respond to the time-saving advantages of curbside pickup, McMillon said.
Target cited its version of curbside pickup, Drive-Up, for leading digital sales, too. The retailer plans to add to the popularity of the service by adding Starbucks orders and returns to the Drive-Up process, CEO Brian Cornell told investors.
Walmart chief financial officer John David Rainey said the retailer’s automated ecommerce fulfillment centers are improving efficiency. More specifically, they’re achieving efficiencies of 30% higher units per hour than non-automated buildings.
“We’re also seeing increased productivity from the more than 15% of stores now being served by automated regional distribution centers,” Rainey said.
McMillon said Walmart wants to improve each leg of the fulfillment journey. Walmart plans to “densify our inventory at the first mile, make the middle mile as efficient as possible and then shorten the last mile,” he said. He added that the retailer’s more than 4,700 locations in addition to fulfillment centers enable it to do so.
Comparably, Target has “invested billions of dollars in our existing store base, modernizing their shopping experience while optimizing those facilities to support digital fulfillment,” Cornell said.
Target has been expanding its network of sortation centers to improve this process. Cornell said the centers have “delivered meaningful savings while increasing our speed over the last-mile delivery.”
Up to 70% of the packages these facilities process remain in their local markets, said John Mulligan, chief operating officer at Target. In markets where Target has a sortation center, the average time from when an order is purchased online to when it is delivered is nearly 1.5 days shorter than the network average, Mulligan said. And about a third of the packages arrive in one day, he added.
Target expects the current group of sortation centers to process more than 35 million packages this year. That would be a more than 20% increase from 2022 and more than six times what it was in 2021.
Chief growth officer Christina Hennington said Target learned last year that Target Circle members “love exclusive events, so we repurposed last year’s deal base and met our Target Circle Week in July bigger than ever.”
Target enrolled more than 3.5 times as many new guests during Circle Week than it does in an average week, she said. The retailer acquired an additional half a million members, she added.
Walmart’s Rainey said the retailer has been working with suppliers to offer select seasonal baskets “at the same prices as last year, essentially removing the impact of inflation.”
And customer response has been strong, he said, as sales exceeded Walmart’s expectations during the Memorial Day, July 4 and our Walmart Plus Week Savings events.
“We’re taking a similar inflation-fighting approach to Back to School, with a basket of 14 of the most popular classroom essentials for under $13,” Rainey said.
He added that the retailer “achieved record member acquisition tied to Walmart Plus Week and continued to enhance the value of the Walmart Plus membership.”
Where do Target and Walmart go from here?
While Walmart had the more successful quarter, things aren’t actually as bleak as they might appear for Target, Saunders says. Target made a lot of gains during the pandemic, even more so than Walmart, he says.
Through the first fiscal half of 2023, Target’s total revenue was about 39% higher than in 2019, Cornell said. Target total revenue was about $50.1 billion in the first half of this year. It was about $36 billion in 2019’s first half. Long term, Target is “still a real winner,” according to Saunders. In 2023, Target is resetting after a period of sustained sales growth since 2020.
Meanwhile, inflation and consumer focus on essentials make Walmart’s outlook positive in the near term, as reflected in the retailer’s increased guidance for the rest of 2023.
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