Retailers Adjust Supply Chain to Address E-Commerce Demand

August 27, 2020


Retailers’ quarterly earnings reflect the impact of COVID-19 as many report impressive increases in e-commerce. Among the winners have been Best Buy and Target.

Best Buy E-Commerce Results

Best Buy’s online sales for the quarter ended Aug. 1 more than tripled in the U.S. and represented 53% of the region’s sales. Compared to the same quarter last year, Best Buy’s online sales were 16% of its U.S. business. "Products that help people work, learn, connect and cook at home, like computing, appliances and tablets, were the largest drivers of our sales growth for the quarter," noted Best Buy’s CEO.

As a result of its e-commerce success, Best Buy plans to convert about a quarter of its stores into shipping hubs to boost delivery speeds. It will also add more third-party locations for customer pickups, on top of the 16,000 it currently has.

Success for Target, Too

Target reported digital sales grew 195%. Same-day services Drive Up, Order Pick Up and Shipt also grew by 273%. Target’s Drive Up service, which allows customers to shop online then pull up in designated parking spots to have orders brought their car, was up by more than 700% in the quarter. Target’s same-day home delivery service Shipt was up 350% over last year. In addition, Target said its stores fulfilled more than 90% of its second-quarter sales.

To reduce fulfillment costs, Target announced in May that it was testing a post-store sort center. According to a Supply Chain Dive article, these sort centers are intended to remove parcel sorting from stores and enable higher throughput of e-commerce packages and more efficient shipping to lower costs per order.

What Lies Ahead for E-Commerce

Retailers such as Best Buy and Target are betting big for e-commerce’s continued domination by investing in technology and strengthening supply chain networks to address faster fulfillment and quicker last-mile delivery options.

According to Adobe Analytics, monthly e-commerce sales have grown, year-over-year, by double-digits from 49% in April to 55% in July. Not surprising, the U.S. Census Bureau reported that as a percentage of total retail sales, e-commerce represented 16.1% in the second quarter as compared to 11.8% during the first quarter.

Expectations for the rest of the year remains strong for e-commerce. According to eMarketer, US consumers will spend $709.78 billion on ecommerce in 2020, representing an increase of 18.0%. Brick-and-mortar retail spending, however, is expected to decrease 14.0% to $4.184 trillion.


ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered.

Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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Retailers Adjust Supply Chain to Address E-Commerce Demand

August 27, 2020


Retailers’ quarterly earnings reflect the impact of COVID-19 as many report impressive increases in e-commerce. Among the winners have been Best Buy and Target.

Best Buy E-Commerce Results

Best Buy’s online sales for the quarter ended Aug. 1 more than tripled in the U.S. and represented 53% of the region’s sales. Compared to the same quarter last year, Best Buy’s online sales were 16% of its U.S. business. "Products that help people work, learn, connect and cook at home, like computing, appliances and tablets, were the largest drivers of our sales growth for the quarter," noted Best Buy’s CEO. As a result of its e-commerce success, Best Buy plans to convert about a quarter of its stores into shipping hubs to boost delivery speeds. It will also add more third-party locations for customer pickups, on top of the 16,000 it currently has.

Success for Target, Too

Target reported digital sales grew 195%. Same-day services Drive Up, Order Pick Up and Shipt also grew by 273%. Target’s Drive Up service, which allows customers to shop online then pull up in designated parking spots to have orders brought their car, was up by more than 700% in the quarter. Target’s same-day home delivery service Shipt was up 350% over last year. In addition, Target said its stores fulfilled more than 90% of its second-quarter sales. To reduce fulfillment costs, Target announced in May that it was testing a post-store sort center. According to a Supply Chain Dive article, these sort centers are intended to remove parcel sorting from stores and enable higher throughput of e-commerce packages and more efficient shipping to lower costs per order.

What Lies Ahead for E-Commerce

Retailers such as Best Buy and Target are betting big for e-commerce’s continued domination by investing in technology and strengthening supply chain networks to address faster fulfillment and quicker last-mile delivery options. According to Adobe Analytics, monthly e-commerce sales have grown, year-over-year, by double-digits from 49% in April to 55% in July. Not surprising, the U.S. Census Bureau reported that as a percentage of total retail sales, e-commerce represented 16.1% in the second quarter as compared to 11.8% during the first quarter. Expectations for the rest of the year remains strong for e-commerce. According to eMarketer, US consumers will spend $709.78 billion on ecommerce in 2020, representing an increase of 18.0%. Brick-and-mortar retail spending, however, is expected to decrease 14.0% to $4.184 trillion.

ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered. Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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