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Retail e-commerce trend is ‘here to stay’: Jharonne Martis

Yahoo Finance’s Brian Sozzi, Myles Udland, and Julie Hyman discuss earnings across the retail industry with Refinitiv Director of Consumer Research, Jharonne Martis.

Video Transcript

JULIE HYMAN: A drone-- this has just been-- I mean, we already saw the numbers for Walmart, but Target's are even better in terms of magnitude here. There has been this combination during this pandemic of pandemic trends fueling an acceleration of things like online shopping, but then the retailers themselves-- some of them have really risen to the challenge. What stands out for you about Target?

JHARONNE MARTIS: Well, today's numbers were really outstanding, not only for Target but Lowe's also. Both of them posted triple-digit growth in digital sales. And this is pretty much in line with what we've seen yesterday when the government reported October retail sales. When we look at the overall picture for 2020, e-commerce grew about 29.3% in the first half of the year, and this is expected to continue even further in the second half to about 43.6%, according to Refinitiv IFR.

And when we look at the results yesterday, Walmart, Home Depot, today Target-- the conversation during the earnings call really seems to be that this trend is here to stay, especially because it offers consumers a fast, efficient, and safe, contactless way of shopping. And it's very important because where-- winter is here. There's another wave that has-- of coronavirus that is, you know, threatening the consumer spending again. And so therefore the retailers that have a strong omnichannel presence are the ones that will continue to do well going forward, because when you look at the overall retail sales pictures, earnings-growth rates are expected to drop even further into the fourth quarter as a lot of the government's stimulus programs will come to an end and the unemployment rate is still very high.

BRIAN SOZZI: Jharonne, Julie was talking about this at the top of the hour. Target put a stat in its earnings release that they gained $6 billion in market share. Where is that coming from?

JHARONNE MARTIS: It's coming from the department stores. The department stores have been struggling for some time even before the coronavirus. But then because of the pandemic, this accelerated that shift in pace. Target is-- has become a little bit more renowned and popular when it comes to their athleisure wear, for example. The department stores have been out of favor, especially when it comes to their fashion sense. But the fact that Target has been able to give consumers a more value-oriented line of athleisure in a time when a lot of consumers are using their house as a gym and a home office and their health and wellness is such a big priority and they're working out more and more at home. They're able to purchase a lot of the merchandise that's very similar to Nike and Lululemon for a significant lower price, while what is very key and what makes Target a big winner is the fact that consumers are doing consolidated trips.

So while they're purchasing, you know, the key essentials, groceries, and they're thinking, oh, you know what? I want to work out at home. They're also buying the weights and the athleisure merchandise that's stealing that merchant-- that fashion market share from the department stores. And that's been key for Target.

MYLES UDLAND: And you know, Jharonne, on that point, Doug McMillon talked about this on the call yesterday that the consolidation of trips, many of which begin online and then they're picked up in-store, that's leading to that higher ticket price. And he thinks that's like a long-term behavior. And I think we can all find it ourselves. You buy something online, you're more inclined to buy a couple other things. You're maybe not quite as disciplined. Do you see the trends sticking around this omnichannel that we've heard so much about? Seems like it's actually happening, and we seem to hear more executives arguing that it's not going to revert when the pandemic finally does come to an end, whenever that is.

JHARONNE MARTIS: Absolutely. The conversation around it has been that this is a trend here to stay. When we look at the forecast from Refinitiv, we're continuing to see that this is going to continue to grow into the second half of the year. But I think a clear point differentiation of how important e-commerce is is when we look at today's results, when we compare to Lowe's and we compare it to Target. Both of them posted triple-digit growth, but, you know, Target has been investing in their e-commerce strategies for some time, which helped them post an astronomical number of 155% growth.

Lowe's also did well, posting triple-digit growth. But they're still catching up when, you know-- they're still trying to get to the point of trying to steal a lot of that market share from Home Depot. Target, when you look at Target-- Target offers a wide variety when it comes to e-commerce service. They offer ship, drive up, pick up, which grew over 200% this quarter alone, which underlines the importance of having a very strong omnichannel and giving the consumer really a fast and efficient way of shopping, whether that is pickup in-store, drive up, or have it shipped because consumers want it now. And so when we say that this is a trend that will continue to stick, it's because now the consumer has been conditioned to know that they can rely on this service and do exactly what it does-- offer them a safe, contactless, fast and efficient way of delivering their product in front of their doorstep without having to be exposed to COVID.