Retail stocks: Optimism and Caution in the holiday season
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Retailers' Digital Sales Comparison: Who Is the Winner?
Traditional retailers are deploying online sales. The retailer's latest earnings reports showed Walmart's online sales exploded while Target and Costco slowed again. What are the reasons?
Firstly, product strategies are different.
The diverging results reflect the impact of inflation on customers. Neil Saunders, managing director at retail analysis firm GlobalData Retail, said, “Consumers are cutting back on discretionary spending and prioritizing essentials at these stores,” which benefits Walmart's revenue since they have been taking an inflation-fighting approach.
Target specializes in products like home décor and small appliances. Now that consumers are feeling the pressure of inflation and economic uncertainty, they are turning to budget-friendly alternatives.
For Costco, underperforming departments were big-ticket items like jewelry, home furnishings, and electronics as well.
Besides, some Target and Costco customers may be more likely to shop in stores for the types of merchandise that they specialize in, contributing to their e-commerce weakness.
Secondly, the logistics system construction progress varies.
Walmart CFO John David Rainey said the retailer's automated e-commerce fulfillment centers are improving efficiency. They are achieving efficiencies of 30% higher units per hour than non-automated buildings. Walmart CEO Doug McMillon said in a statement that customers especially respond to the time-saving advantages of curbside pickup. Walmart plans to “densify our inventory at the first mile, make the middle mile as efficient as possible and then shorten the last mile.”
Target has been catching up, according to CEO Brian Cornell. 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.
A temporary slowdown doesn't mean Target and Costco lose competition in the longer term.
While Walmart had the more successful quarter, things aren’t actually as bleak as they might appear for Target and Costco.
Target had a “huge early-pandemic advantage,” Digital Commerce 360 senior analyst James Risley said. “They promoted Drive-Up program in front of every store.” Target made a lot of gains during the pandemic, even more so than Walmart.
For Costco, the company is making more headway with mobile e-commerce, though its CFO Galanti noted that the retailer remains “in the early innings” of its digital mobile transformation efforts. Costco redesigned parts of its mobile e-commerce website. It also redesigned its account page and the digital membership card. In turn, Costco's App Store rating has climbed from 2.3 stars to 4.7 stars over the past year, according to Galanti.
Source: Digitalcommerce360, Walmart, Target, Costco earnings reports
By Moomoo News Calvin
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