Customers shop in the grocery section of a Target Corp. store in Chicago, Illinois, USA on Saturday, November 16, 2019.
Daniel Acker | Bloomberg | Getty Images
Electronics, toys and groceries?
As Target launches a competing sales event to compete against Amazon Prime Day, the big box retailer puts its grocery department in the spotlight. It adds discounts and promotions to entice customers to its cereal, meat, and soda aisles.
Target introduced Deal Days to compete with Prime Day in 2019, but this will be the first time Target has used the event to promote groceries. The discounts extend from Sunday to Tuesday – one day longer than the event of the e-commerce giant.
It’s likely that Target sees the food category differently these days. Food was a major reason Target’s sales skyrocketed and its market share grew during the pandemic. While people settled down at home, dinner ingredients, staples, and snacks drove into the store. Target had a head start in the early months of the health crisis by keeping its doors open as a major retailer by locking it down. As rival stores reopened, Target was still drawing shoppers in with its variety of merchandise, from eggs to workout tops, while people rounded up their trips and filled larger baskets.
Even with people making social plans and eating out again, Target sees its grocery stores as a way to get people to come back. The next few months will test whether Target and other grocers can convince people to keep filling fridges and cooking, even if they plan to hang out with friends for a drink or go out with family for dinner.
Before the pandemic, US consumers spent more each month in restaurants and bars than in grocery stores. This pattern was reversed in March 2020. In the past two months, the habit of spending more on restaurants has returned, according to the US Census Bureau. That leaves grocers competing for a bigger slice of a shrinking cake.
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Amazon Prime Day is all about spending that can keep up with the busiest days of the Christmas shopping season. According to an analysis by Adobe Analytics, based on a survey of 1,000+ consumers, US online spending is expected to beat last year’s all-time record of $ 10.4 billion during the two-day sales event and cyber Monday of last year surpassed US retail site visitors. According to a survey by Adobe, nearly 60% of consumers said they would shop online during Prime Day.
Retailers of all sizes have taken up the shopping vacation and increased sales as shoppers browse and buy more than usual.
Deal Days discounts will be widespread at Target, but there will be a special grocery promotion: $ 10 worth of gift cards will be given out to customers who spend $ 50 or more on food and drink while they are using one of its Use same day services as roadside pickup and home delivery service, Shipt. The company declined to share certain items that are available for sale.
At least two of Target’s competitors will also dangle grocery stores: Walmart and Amazon. Walmart is also adding groceries to Deals for Days, its annual sale, for the first time, according to a company spokesperson. It will lower the prices of foods like ribs, watermelon, ice cream, and coffee.
Amazon plans to sell some groceries for $ 1 and its Cursive wine brand is on sale. Whole Foods will discount seasonal products like lemonade and Caprese pizza, a company spokesman said.
If buyers benefit, these offers could help companies hold their own against tough year-on-year comparisons. All three have big growth numbers that will be hard to match or beat – especially in the grocery department, where consumers were stocking items during the pandemic.
Target sales grew by more than $ 15 billion in the last fiscal year – more than the sales growth of the last 11 years combined. The company said it gained approximately $ 9 billion of market share during the year, according to the company’s own and external research.
The company’s shares are up nearly 31% so far this year, reaching a market value of nearly $ 114.05 billion.
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Comparable sales for Target, which tracks sales in stores that are open for at least 13 months and online, rose 19.3% over the past fiscal year – a faster rate than any other major food company. Like-for-like sales for Kroger increased 14.1% and Walmart’s increased 8.6%. Retailers’ fiscal years and definitions of comparable sales vary slightly.
By combining food and digital services, Target has also found that it can drive customer loyalty.
At a conference call on the fourth quarter results on March 2nd, Target CFO Michael Fiddelke said customers tended to visit their stores more frequently, increase their food and beverage spend by an average of 20-30%, and get more sales in other categories after getting fresh or frozen Groceries bought by pickup or roadside store had to pick up the first time.
A sign advertising Shipt, the same day grocery delivery service owned by Target, will be displayed on a freezer display in a Target Corp store on Saturday, November 16, 2019. exhibited in Chicago, Illinois, USA.
Daniel Acker | Bloomberg | Getty Images
The company also announced that groceries and beverages accounted for 20% of its total sales for the year, making the category the second largest sales driver after beauty and household items at 26%. During the pandemic, the company launched its own brand of snacks and desserts, as well as a collection of gourmet pasta, coffee, and more.
So far, Target has been able to keep growth going. In the first quarter, food and beverages grew in the low to mid single digits, despite difficult comparisons with the same period last year as consumers stocked up and sought shelter.
Target will use food as a differentiator and “defense mechanism” on Amazon Prime Day, Krishnakumar Davey, president of strategic analysis at research firm IRI. Over the past year, it has helped Target promote bigger shopping carts and attract new customers, he explained.
Target has deepened its market penetration with lower-income customers and older buyers, according to market research from IRI.
It has also done more business than the competition in the past few months. As of the beginning of June, the number of destination trips increased by 16.1% compared to the same period in the previous year. All other competitors, with the exception of Costco, are in the low single digits, according to the IRI, which collects consumer data from a representative sample of over 100,000 households.
Compared to Amazon, Target also has a much larger footprint in the food space. Amazon owns more than 500 Whole Foods stores and has about a dozen Amazon Fresh stores, its expanding grocery chain. Target has around 1,900 stores.
Eating out may return, but home food consumption is still above pre-pandemic levels due to other factors such as remote working, Davey said. Also, he said, a sale of groceries might be more popular than other types of offerings.
“Everyone needs something – more than an iPad or whatever,” he said. “It’s a high frequency object.”
Reporting on Amazon Prime Day 2021
Read more about Amazon and others scheduled for this year’s sales events:
