US retail giant Target to spend US$4bn annually to expand e-commerce capabilities

US – American retail corporation Target has announced plans to spend US$4 billion annually over the next several years to upgrades stores and strengthens its online business.

The store upgrades are aimed at cementing the gains made during the pandemic that led to blowout holiday quarter results.

The number 8 largest retail in the US has over the last year used its retail outlets as fulfillment centers for online orders.

This drastically cut delivery times and enabled it to swipe market share from smaller rivals who rely more on their store traffic.

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Sales through the company’s same-day deliveries and store pick-up services more than tripled, while total revenue rose 21.1% to US$28.34 billion in the quarter.

The company now wants to cement the gains achieved during the pandemic and put itself in a better position to take advantage of the en masse migration towards online by consumers in the United States.

The company expects to remodel 150 stores in time for the holiday season to cater to same-day fulfillment, as it seeks to better compete with Amazon.com Inc and Walmart Inc .

Insider Intelligence projects that as the pandemic runs its course in the next few months, online grocery adoption will reach 55% of US consumers by the end of 2024.

This would still be much greater penetration than the online grocery market would’ve reached without a pandemic.

 But if the pandemic stretches longer as we await a broader vaccine rollout or other treatments, it will climb quickly, hitting 66% in 2024 instead.

This shift presents greater opportunity for stores with an online presence while those reliant on brick and mortar stand out to lose.

“We’re in a position to play offense and lean into the opportunity to build on last year’s momentum,” Chief Operating Officer Michael Fiddelke said.

The company expects to remodel 150 stores in time for the holiday season to cater to same-day fulfillment, as it seeks to better compete with Amazon.com Inc and Walmart Inc .

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Additionally, the company said it plans to launch 30 to 40 stores each year, compared with 30 in 2020, with new small format outlets in New York City, Los Angeles and Portland.

While Target refrained from providing sales and earnings forecasts for fiscal 2021, it expects to benefit from new stimulus money but unsure by how much.

Comparable sales rose 20.5% in the fourth quarter, comfortably beating estimates for a 16.4% rise, according to IBES data from Refinitiv.

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