business news in context, analysis with attitude

From the Wall Street Journal:

"Target is set to emerge as a major winner from the coronavirus pandemic. Investors just need to look past some near-term challenges."  In the last quarter, ended May 2, "Target said it saw digital-sales levels that it wasn’t planning for until three years from now. But the company’s lean model of shipping goods directly from its retail outlets paid off as store employees were able to quickly pivot to fulfilling orders. Some 80% of digital sales were fulfilled from stores during the quarter.

The story goes on:

"Some worry this model could become a long-term weakness if Target eventually needs to start investing more in warehouses and logistics. But Barclays analyst Karen Short argues that Target has plenty of runway left on its existing model by making more efficient use of its retail network. She estimates that this year Target will generate $341 of revenue a square foot of retail space, compared with $510 for Walmart.  This suggests that Target could allocate more space in its existing stores to inventory and fulfillment operations without sacrificing retail sales."

KC's View:

This is part of the larger story that I talked about in my FaceTime commentary this morning - retailers that are looking to maximize their e-commerce potential by taking advantage of some of the options made available to them by a weakened commercial real estate market that was created by the pandemic that closed so many stores.

If store traffic is down, use stores to fulfill e-commerce orders.  If e-commerce continues to grow, find other satellite locations to serve as micro-fulfillment centers;  they could be vacant department stores that would be mini-warehouses, or they could be vacant Main Street storefronts that could serve as click-and-collect locations.

This will become especially important as the holidays approach - it is a pretty good bet that e-commerce;'s growth could accelerate even more, since it seems unlikely that the pandemic is going to decelerate any time soon.

This isn't something that just Amazon or Walmart or Target or Kroger or Albertsons can do.  Any retailer that is thinking ambitiously and aggressively ought to be looking for opportunities where they can test new approaches and innovate both in the core and around the edges.

Because if you don't, the competition will.