Target Corp. is bringing back free shipping on all online orders for the holiday season, the second straight year Chief Executive Brian Cornell has turned to the strategy to boost digital sales.
The shipping strategy is a key point of difference during the holiday season between Target and rival Wal-Mart Stores Inc., which said on Thursday that it will continue to charge a shipping fee for all orders of less than $50. Best Buy Co. last week said it would drop shipping fees on all orders through early January.
Mr. Cornell is leading his second holiday season at Target, though this year’s holiday shopping event will the first that bears his full imprint. His tenure atop the retailer started in 2014, with most of the company’s holiday plans already having been set.
One of the main changes for which he pushed last year was dropping shipping charges during the holidays, part of Target’s goal to boost its digital business and better compete with online rivals like Amazon.com Inc. Free shipping helped Target boost digital sales 36% during last year’s fourth quarter.
Mr. Cornell is hoping to grow Target.com’s sales at a 40% annual clip over the next five years. The retailer, though, has fallen short of that mark in the two quarters since announcing the goal, meaning it has to make up ground the rest of this year. Digital sales were less than 3% of Target’s business through the first half of the year.
Target’s broader holiday plans include improving the quality of home décor and apparel, as well as sprucing up displays in key areas of the stores. Target is also launching an online site to sell its products to over 200 countries and adding new ways of selling products, with curbside pickup available at 121 stores next week.
Mr. Cornell acknowledged on Thursday that the holiday season is unfolding at a time when shoppers remain cautious and the battle for shoppers remains fierce. “We’re going to have to fight for every dollar, ” Mr. Cornell said in an interview at Target’s New York office.
Though Target is now incorporating real marble into cutting boards and selling hand-crafted serving trays, improvement in quality hasn’t boosted prices. “The core assortment throughout the store is better quality, not higher prices,” said Jeff Jones, Target’s chief marketing officer.
Thus far, changes in other departments have paid off. Putting apparel on new mannequins, for instance, has boosted sales of those items by 30%, while dinnerware and furniture featured in Target’s restaged home area sell three to four times faster than the rest of the category, the company says.
Though the plan has been communicated from the top, Target’s stores will have to carry it out, including making sure that items are in-stock, a major problem the retailer is beginning to tackle. “Now it’s execution time,” Mr. Cornell said.
Written by Paul Ziobro of MarketWatch