Target lowers free delivery threshold

Absrtact: February 26, the US retail giant, Target Corp., had not launched a free delivery service until last summer, but less than a year later, the company had lowered the threshold for free deliveries by half, down from 50 dollars

February 26, United States retail giant chain stores, target Corp. did not launch a free delivery service until last summer, but less than a year later, the company has cut the threshold for free deliveries by half, down from 50 to $25, putting pressure on rivals such as Amazon and Wal-Mart.

In the fall of 2011, Target took back its website operations from Amazon, and in the days that followed, the company experienced a few "episodes", such as the crash of a Web site in conjunction with the Italian high-end brand Missoni (Missoni) to launch the Missoni for Target series. Today, Target has raised the stakes in online business and, in its own words, has "taken bold steps to become an e-business leader".

"It shows that they are seriously trying to build their own ' full channel ' model," said Robin Sherk, retail analyst Robin Checo Kantar Retailing, in an interview. She says, Target has recognized the problem that if the company wants to get in touch with "next-generation shoppers", it has to have a place in the online shopping market.

Checo points out that while many consumers are now turning to the Internet to buy daily necessities and other consumer products, the market share of online shopping is still in the "presence of the people".

According to statistics from Kantar Retail Shopperscape, Target's investment in this area appears to have yielded results. In December 2014, Target's online consumer conversion rate during the holiday shopping season (ie, the proportion of Web Access converted to shopping activity) reached 58%, compared with 2010 years only 31%. While Amazon and Wal-Mart's conversion rates are still higher than target, the growth rate has slowed in the same period, according to the data.

Checo noted that Target's online consumer conversion rate was fifth in the holiday shopping season last year, well above the 11th position in 2013.

In the third quarter of 2014, Target's online sales rose by more than 30% per cent, accounting for half of the growth in its same-store sales. In contrast, Wal-Mart, which has business operations in 27 countries, has an overall online sales growth of 21% per cent over the same period, not taking into account the impact of exchange rate movements. According to Checo estimates, the sales of the tower's website in the quarter amounted to $1.89 billion trillion, representing a 2.6% per cent of its total sales. She also estimates that Wal-Mart's website has a 6.81 billion-dollar sales share of 2.4% of its total U.S. sales.

In the near term, lowering the threshold for free delivery services is likely to hurt Target's profits. Simon Gutman Simeon Gutman, analyst at Morgan Stanley, said the move would weigh on target's profit margins in the short term. Target said the company believed the move would increase its sales, and its spokesman, Eddie Baeb, said the free delivery service, which had no minimum shopping restrictions during the 2014 holiday shopping season, had "significantly increased" the conversion rate of target and helped the company attract new customers.

The company's online sales rose 36% in the fourth quarter of last year, exactly the same as Wal-Mart's global online sales growth, according to Target's conference call, which was reported in Wednesday. Target U.S. same-store sales grew 3.8% per cent in the quarter, with a 0.9% contribution from online sales. By contrast, Wal-Mart said online sales contributed 0.3% of its sales to U.S. stores.

John Mulligan, John Murigan's chief financial officer, said in a conference call that while the absence of a threshold free delivery service in the holiday shopping season did cost the company, the "big" increase in online sales offset the impact. In addition, he points out, Target can make more money from shoppers because of increased shopping expenses.

After the threshold was lowered, two-thirds of the orders on Target's website are now compliant with the free delivery service. Low prices and free shipping are two of the most prized factors for online shoppers, according to a survey published by National Retail Federation. Target also said earlier that more than half of the online shoppers chose not to complete the shopping deal because they were unwilling to bear the shipping costs.

In addition, the gap between Target and Amazon and Wal-Mart has narrowed this year from commodity pricing, according to a study published by Markettrack, a data company. Snow）