Finding online revenue estimates for Target Corporation (NYSE:TGT) proved rather difficult. The Top 500 list puts its 2012 online sales between Williams-Sonoma, Inc. (NYSE:WSM) and The Gap Inc. (NYSE:GPS), which reported e-commerce revenues of $1.656 billion and $1.927 billion respectively. With total retail sales of $72 billion in 2012, its online revenue comprised somewhere between 2.3% and 2.7% of total sales at Target.
Costco Wholesale Corporation (NASDAQ:COST)’s web sales reached an estimated $2.08 billion in 2012. While that number represents 2.1% of the company’s total merchandise sales in 2012, it’s actually quite disappointing. In 2011, the company sold $1.9 billion worth of merchandise through its website, so online sales grew just 9.5% in 2012. As a result, the percentage of sales coming from e-commerce fell from 2.2% to 2.1%.
What have you done for E lately?
My previous article stated that Wal-Mart is behind the competition in e-commerce – which I hope this article helps illuminate – but I also emphasize what Wal-Mart Stores, Inc. (NYSE:WMT) is doing to make sure that changes in the future. The company is improving its web and mobile presence with things like a new search engine that increases sales conversions, real-time online price monitoring and adjustments, and innovative app features that improve the in-store shopping experience.
Target is also doing well in this regard, and continues to work diligently to improve its online sales faster than the industry average. In 2012, the company grew mobile sales at a triple digit pace (of a small base), as total online sales grew at a pace in the mid-teens.
Target previously outsourced almost all of its online sales to Amazon.com, Inc. (NASDAQ:AMZN). In late 2011, the company revamped its website, and stopped selling its products on Amazon. The new version of the website allows the company to better position its products, and boasts a faster checkout process.
Late last year, the company announced 6 new online-exclusive brands in an effort to attract customers to its website. Last month, Target acquired two kitchenware e-tailors, Chefs Catalog and Cooking.com. Additionally, it announced a partnership with Google to participate in its newly launched Shopping Express service, which provides same-day shipping for online store orders. Target hopes these efforts will allow the company to continue gaining ground on the competition in the growing e-commerce space during 2013.
Costco, however, is falling behind the competition in the e-tail space. While still generating more online sales than Target, and a higher percentage of sales than Wal-Mart, the company’s e-commerce growth and efforts simply do not match the competition’s. Last summer, the company finally got around to releasing an app for iOS and Android to establish a mobile web presence. Later in the year, the company updated its website platform so it would be more prominent in search results.
As a result of showing up late to the game, online sales for Costco actually grew more slowly than in-store sales. In-store sales improve 11.5% as the company continues expanding its store count, while online sales improved just 9.5%. Interestingly, the company reports that 80%-90% of items available on its website are not available in its stores. With a distinct product portfolio, online sales ought to grow at a similar pace. The company’s failure to accomplish that reflects a problem with its e-commerce strategy.
Investing in the future
I have no doubt that e-commerce will continue to grow into an even more significant role in the future – hence my investment in Amazon. For traditional retailers, that means a larger portion of their revenues will need to come from online sales as foot traffic falls. That’s why it’s important to see the former increasing over time.
While it’s still behind the competition at this point, I believe Wal-Mart will make advances in e-commerce faster than the rest of its competition. The company has 1,500 employees dedicated to improving its digital presence working at its @WalmartLabs office in Silicon Valley. It calls it “the world’s biggest startup.” These are the people that will make Wal-Mart’s website much more significant to the company in the future.
The article How Wal-Mart’s e-Commerce Potential Stacks Up originally appeared on Fool.com and is written by Adam Levy.
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