Target CEO Isn’t Scared of Amazon’s Grocery Foray as Online Sales Jump 31%
Target stock jumped more than 2% after the company hiked its minimum wage to $13. | Source: AP Photo/Mark Lennihan
The chairman and CEO of Target Corporation, Brian Cornell, has revealed that among the things that he worries about as the company head, the encroachment of Amazon in the grocery space is not one of them, according to Yahoo Finance .
According to Cornell, the reason he is unmoved is that success in the grocery business comes after a long period as the sector is a ‘challenging space, there’s lots of competitors’. Cornell was reacting to an earlier report by the Wall Street Journal that Amazon is planning to unveil brick and mortar grocery outlets in major U.S. cities.
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According the Journal, Amazon’s grocery stores will be distinct from the Whole Foods Market brand which the e-commerce leader acquired last year.
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With the new stores, Amazon will be able to sell products are not traditionally sold at Whole Foods. For instance, Whole Foods doesn’t stock products containing sweeteners, preservatives, colors and artificial flavors. The new Amazon grocery stores will however not have these restrictions.
Additionally, Amazon also reportedly wants the flexibility to sell beauty and health products at the new stores. The plans by Amazon are not expected to curtail the expansion strategy of Whole Foods. Per the Journal, the new grocery outlets could be regular stores or cashierless.
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From the report, Amazon also seems interested in copying an e-commerce strategy popularized by brick and mortar retailers. The strategy involves shoppers picking up their online purchases in-store. This was hinted at in Amazon’s obsessiveness over parking lots at the properties it is eyeing:
Amazon is also looking to have some control over the attached parking lot, which would allow shoppers to get their groceries within a 10-to-15-minute time frame.
Target’s in-store pickup service is known as Drive Up. It allows customers shop online and then have their purchases loaded to their cars when they drive to designated spots.
In a statement issued earlier this year, Target revealed that the in-store pickup service has been a success. During the months of November and December, 25 percent of the retailer’s online sales were in-store pickups:
Store Pickup plus Drive Up grew more than 60 percent from a year ago, and accounted for a quarter of the Company’s digital sales in those two months.
Target Impresses with Q4 and Full-Year 2018 Earnings
Cornell’s remarks brushing off Amazon’s grocery store plans came after Target released the 2018 Q4 and the full-year earnings. During the holiday quarter, the big box retailer recorded 31 percent growth in online sales. 2018 also marked the fifth consecutive year that online sales were expanding by over 25 percent.
Adjusted earnings per share for the fourth quarter was $1.53 while the full-year adjusted EPS was $5.39. Per Cornell this was a new all-time record for Target Corporation:
Thanks to the dedication of Target’s team, we delivered our strongest traffic and comparable sales growth in well over a decade, and our 2018 Adjusted EPS set a new all-time record for the Company.
