Is Target (TGT) Ready To Take On Amazon & Walmart In 2018?

Retail is no more restricted to brick-&-mortar. The scenario has drastically changed with the advancement of technology and digital transformation that are playing key roles in changing consumer shopping pattern. Consumers now prefer to shop online from the comfort of their homes rather than hopping from one store to another. Nevertheless, this transition has persuaded retailers to come up with innovative ways to market products, and Target Corp. (NYSE:TGT) is no exception to the trend.

But before jumping on how Target is bracing itself for 2018 retail war, let’s analyze the changing retail scenario.

Changing Retail Ecosystem

The major disruption in the brick-&-mortar format or to say in a more sophisticated manner, the reason behind the today’s ultra-competitive retail environment is because of Amazon.com (NASDAQ:AMZN) . The e-commerce giant is aggressively making headway into retail space be it grocery, books, clothes and accessories or electronics, you name it and you have it. With its compelling pricing strategy and the buyout of Whole Foods, the online retail bellwether has caused a tectonic shift in the retail landscape. Moreover, through Prime membership program it is trying to build a loyal customer base and provide them lucrative deals, same-day delivery options and others.

To tackle the growing Amazon dominance, Wal-Mart (NYSE:WMT) is striving hard to give itself a complete makeover by moving beyond brick-&-mortar and to resonate with customers’ evolving shopping patterns. This supermarket giant has long been undertaking aggressive efforts to facilitate shopping through miscellaneous channels.

This is well-evident from its constant e-commerce initiatives — including buyouts, alliances, and improved delivery and payment systems. Evidently, Walmart’s buyouts of Bonobos, ShoeBuy, Moosejaw, ModCloth and Jet.com underscore its quest to build an impressive digital brand portfolio. Its Walmart Pay mobile payment system, and Mobile Express Returns program further highlight its focus on accelerating online business along with making shopping easier and faster. Further to fortify position in online grocery business, Wal-Mart acquired a delivery start-up Parcel, Inc., which specializes in same-day delivery.

Target Sharpening the Edge

No wonder Target is trying all means to rapidly adapt to the changes in the retail ecosystem. We believe that initiatives such as the development of omni-channel capacities, diversification and localization of assortments along with emphasis on flexible format stores, bode well. The company intends to deploy resources to significantly develop online platform as well as store facilities to make shopping more convenient for customers. We observed that comparable digital channel sales surged 24% during the third quarter of fiscal 2017 and added 0.8 percentage points to comparable sales.

This general merchandise retailer recently launched curbside pickup program, at 50 Twin Cities stores. This program gives customers an option to get ordered items without leaving the comfort of their cars. It has also rolled out Target Restock program that allows customers to restock their shipping box with essential items online and get them delivered at door steps by the next business day for a nominal charge. Further, in order to improve supply chain and expand delivery capabilities, the company had acquired Grand Junction.

To tap digital sales this holiday season, Target strengthened relationship with Google (NASDAQ:GOOGL) by allowing customers nationwide to shop through Google Express, including voice-activated shopping. Wal-Mart and Home Depot (NYSE:HD) are also using Google's voice-activated shopping platform. Target has also made a concerted effort on the front of same-day delivery services by acquiring internet-based grocery delivery service Shipt for $550 million.

Certainly, Target is leaving no stone unturned to attract consumers and attain incremental revenues. We believe that these strategies are likely to bolster the company’s performance and drive the stock further. In a month shares of this Zacks Rank #3 (Hold) have increased 10.7%, outperforming the industry’s growth of 7.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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