Retail Channels
01 March 2022
Target makes digital investments in ads, fulfillment
The retailer is investing up to $5 billion to scale across operations.
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Photo by Max Bender on Unsplash
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Coming off a surge of growth in the pandemic, Target is making an investment of up to $5 billion to improve its experiences and scale operations. This will include digital upgrades and fulfillment capabilities that will improve the retailer’s ecommerce operations.
Among digital upgrades, Target said it will expand Roundel, a service that optimizes advertising placement on Target.com. The media investment comes on the heels of announcements by Amazon and Walmart that revealed massive ad businesses worth billions of dollars. The company said Roundel drove more than $1 billion in value in 2021, but it's not clear whether that means overall revenue is at that level.
Target is also looking to expand its same-day fulfillment services. These have grown 400% since 2019, which accounts for half of the company’s $13 billion digital growth. Target will be expanding its sortation center model, which provides next-day local delivery in specific geographic areas, beyond Minneapolis. It is planning facilities in Dallas, Houston, Austin, Atlanta and Philadelphia, followed by five more cities to be announced at a later date.
This complements a strategy of positioning the big box locations for both in-person retail and ecommerce distribution hubs as online shopping increases. Target executives said 95% of orders were fulfilled in its stores in the fourth quarter, whether it was through an IRL sale or digital order.
When it comes to Target's growing ecommerce business, the stores serve as both order fulfillment and pickup locations. With nearly 2,000 stores, Target already has locally-positioned hubs to serve customers close to home. Now they will be complemented by more facilities enabling local-level delivery.
The growth announcements came as Target reported $106 billion in revenue for 2021, growing 35% over the two years of the pandemic-driven demand for consumer goods.
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Marketing
26 May
e.l.f. Beauty grew quarterly digital sales 75%. Here are the drivers
Upping marketing spend, growing loyalty members and multichannel sales are key to the beauty brand's strategy.
Photo by Andrea Castro on Unsplash
Digital commerce is helping e.l.f. Beauty pour fuel on the fire.
The brand continues to be one of the shining examples of the staying power of beauty products despite consumer pullback in other areas of discretionary spend. e.l.f. grew net sales 48% in the fiscal year ended March 31 as it reached $500 million in sales for the first time. For the most recent quarter, sales grew by a whopping 78%. The company is seeing profit gains as well, as adjusted EBITDA grew 56%.
With the top-line revenue flowing, the brand was opportunistic about how it invested in marketing in the most recent quarter. After upping spend to 33% of net sales in the quarter, the company ended up with marketing and digital investment at 22% of net sales for the year. That was well above the higher end of its 17% to 19% outlook. In the coming year, it expects 22% to 24%.
The fact that digital and marketing fall in the same category reflects the brand’s approach to marketing. It's a favorite among Gen Z, and has found a home on the social apps that are popular with the generation.
“Our disruptive digital-first marketing engine has built strength across multiple social platforms,” CEO Tarang Amin told analysts on the company’s earnings call. “We are a pioneer on TikTok and are now a four-time TikTok billionaire with our last hashtag challenge garnering nearly 15 billion views. We were the first major beauty company to launch a branded channel on Twitch and the first beauty brand on BeReal.”
As a sales category, digital penetration is now 17%, growing from 14% last year. The channel grew 75% in the most recent quarter.
Amin laid out three factors driving this trend:
Marketing. The marketing investment that e.l.f. made brought strong returns, and the digital-first nature of those ads are bringing people to the brand’s digital sales channels.
Loyalty. E.l.f.’s Beauty Squad loyalty program has 3.7 million members, which is a 25% year-over-year increase. Loyalty members are the biggest driver of the brand’s digital business, accounting for over 80% of sales on the brand’s DTC site.
Multichannel. e.l.f. is the only one of the top five mass cosmetics brands that has a DTC site, Amin said. It is also seeing strong growth at Amazon and other retailer ecommerce websites. The growing presence is “building upon itself,” Amin said.
With digital growth, the brand is seeking to expand capacity in the supply chain that will provide more efficiency and faster delivery, as well. It is shifting to a more distributed ecommerce fulfillment model. Previously, it had one automated warehouse in Columbus, Ohio, which meant shipping to the West Coast could take time. Now, it is moving to a multinode distribution network. With the first couple nodes up and running, there is already improvement in delivery times.
The brand is also adding distribution capacity to its main warehouse in Ontario, California.
As marketing helps more people discover and buy from the brand, the operational improvements will help create a customer experience that lives up to the hype.
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