Retailers are leaving no stone unturned to improve top-line performance and expand customer base. They remain committed to addressing the challenges related to the pandemic and position themselves for future success. In this respect, companies are directing resources toward digital platforms in order to better engage with customers, accelerating fleet optimization initiative, augmenting supply chain and concentrating on improving financial flexibility. The industry players are also focusing on superior product strategy to resonate well with customers, advancing omni-channel capabilities and ramping up delivery services or curbside pickup.
Clearly, the coronavirus pandemic and the resultant stay-at-home trends to maintain social distance has led to an accelerated shift to online shopping. According to eMarketer, U.S. e-commerce sales are projected to increase 18% in 2020, and reach 14.5% of total retail sales. Again, as per the report, click-and-collect ecommerce sales are likely to surge 60.4% this year. Click-and-collect, specifically curbside operating model, has been rapidly gaining traction as it minimizes physical contact and inside-store hassles.
Walmart Continues to Sharpen E-Commerce Edge
Walmart Inc. WMT has been sparing no effort to bolster omni-channel operations and ramp up delivery services to meet customers’ needs. Going by the media reports, the retail behemoth is all set to launch a subscription-based service — comprising same-day delivery of groceries — called Walmart+ to take on rival Amazon’s AMZN Prime membership program.
The company also recently partnered with Shopify. With this partnership, the omni-channel retailer can open its Walmart Marketplace to sellers of Shopify. With Shopify’s inclusion, Walmart intends to strengthen its marketplace with small and medium-sized, U.S.-based businesses with complementary offerings.
Further, the company has been focused on ramping up its delivery services, given the burgeoning demand for online grocery. To this end, the company’s Sam’s Club division launched curbside delivery. Additionally, Walmart added a feather to its delivery services cap by launching Express Delivery, in order to deliver orders to customers in less than two hours.
Without a doubt, Walmart is doing every bit to strengthen business and efficiently cater to customers’ growing online demand. Well, the company’s U.S. e-commerce sales surged 74% in first-quarter fiscal 2021. This Zacks Rank #3 (Hold) company saw a dramatic shift to online shopping for groceries and other essential owing to the coronavirus outbreak. As of the fiscal first quarter, Walmart U.S. had nearly 3,300 pickup locations and more than 1,850 same-day grocery delivery locations. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Players Riding the Digital Wave
Owing to this ongoing biological catastrophe, consumers’ have primarily shifted to e-store for purchases. As a result, retailers have been quickly moving to leverage their online platforms, including websites and mobile apps, and omni-channel capabilities to serve customer demand better. In fact, the companies’ digital businesses have played a key role amid the lockdown. However, it is obvious that this was not enough to make up for loss of revenues from brick-and-mortar stores. Going forward, industry participants will be playing dual in-store and online roles with evolving consumer shopping pattern.
The Kroger Co. KR has been making prudent investments to bolster omni-channel operations, improve supply chain and increase manpower to ensure swift customer service amid such challenging times. Driven primarily by coronavirus-led demand, this Zacks Rank #1 company registered a sharp rise in sales across both brick-&-mortar stores and digital channels during first-quarter fiscal 2020. Realizing the need of the hour, the company offered a no-contact delivery option, low-contact pickup service and ship-to-home orders. It also waived pickup fees with no minimum purchase requirements and continued to expand contactless payment solutions like Kroger Pay. Also, the company implemented pickup-only location in Cincinnati. We note that digital sales surged 92% in first-quarter fiscal 2020, while pickup or delivery reached 97% of Kroger households (2,000 pickup locations and 2,400 delivery locations).
Kroger, which operates in the thin-margin grocery industry, has been making every effort to strengthen position not only with respect to products but also in terms of the way consumers prefer shopping grocery. Its acquisition of Home Chef, the U.S. meal-kit company, and partnership with British robotics company, Ocado, are noteworthy. The company is aggressively working toward more convenient grocery delivery options. In this regard, the company has started utilizing Nuro’s fully autonomous, driverless vehicles for grocery delivery services.
Target Corporation TGT, being fully aware of the prevailing circumstances, is well equipped to serve shoppers be it curbside pickup or delivery at home. The company registered a sharp rise in comparable sales during first-quarter fiscal 2020, courtesy of booming digital sales as consumers shifted to online shopping amid coronavirus outbreak. Digital sales started to shoot up in the later part of the March month. The trend continued in April as well but accelerated significantly from the middle of the month. Digital comparable sales accelerated every month in the quarter, from 33% in February to 282% in April. We note that comparable sales rose 10.8% during the quarter. Impressively, comparable digital channel sales soared 141%, and added 9.9 percentage points to comparable sales.
This Zacks Rank #3 company made significant headway in the same-day delivery race by acquiring Internet-based grocery delivery service, Shipt, to provide same-day delivery of groceries, essentials, home, electronics, toys and other products. Drive Up, an app-based service, is another initiative to expedite the shopping process. The service enables customers to place orders utilizing the Target app and have them delivered to their cars. Sales fulfilled by Shipt were up more than 300% year over year and sales through Drive-Up were up more than 600% during the quarter under review. Notably, Target recently announced that it is adding 750 fresh and frozen grocery items to its in-store order pickup and curbside drive up online services.
Costco Wholesale Corporation’s COST growth strategies, better price management, decent membership trends and increasing penetration of e-commerce business have contributed to the performance. Cumulatively, these factors helped this operator of membership warehouses in registering impressive comparable sales run. We note that comparable sales for the month of June rose 11.5%. Also, this Zacks Rank #3 company’s e-commerce sales have been showcasing a sharp increase with large number of Americans still preferring online shopping on fears of contracting the deadly coronavirus. E-commerce comparable sales soared 85.8% during the month of June. This follows an increase of 106.2%, 85.7% and 48.3% in the months of May, April and March, respectively.
To drive its online sales, the company launched CostcoGrocery to deliver non-perishable items to buyers’ homes. It acquired Innovel Solutions, a leading provider of third-party end-to-end logistics solutions. The buyout bolsters Costco’s e-commerce capabilities and facilitate sales of "big and bulky" items.
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