Web Sales Still A Small Slice Of Big Retailers’ Revenue
Major retailers routinely boast growth in online revenue, telling investors that website sales are increasing by large percentages.
But new data disclosed in correspondence between retailers and the U.S. Securities and Exchange Commission (SEC) illustrates that digital sales still tend to constitute a small sliver of the companies’ overall revenue.
Minneapolis-based Target Corporation recently announced that its second-quarter profit slid about 13 percent, chalking up the drop to soft sales and the underwhelming performance of its Canada operations. But in a conference call with investors, CEO Gregg Steinhafel said “second-quarter sales in our digital channels grew in the teens overall, with mobile traffic and sales continuing to grow at a triple-digit pace.”
The company recently acquired beauty products e-retailer DermStore Beauty Group, as well as the e-commerce sites ChefsCatalog.com and Cooking.com. Too, it opened an office in San Francisco to focus on finding and fostering partnerships for technological innovation.
Steinhafel recently told investors that Target “will continue to explore acquisition opportunities to augment our digital capabilities, content, and brands.”
But how much in sales are big retailers actually conducting online?
The SEC recently asked major retailers—including Target and Wal-Mart Stores—to provide details about the amount of goods they sell online, according to a Wall Street Journal report. The agency is concerned that retailers are touting their online capabilities and high percentage growth in digital sales—without disclosing how that growth actually affects total revenue.
When asked by the SEC to quantify its online sales, Target reportedly said the following: “Our recent earnings conference calls have provided information about directional growth in digital sales to demonstrate that our investment is beginning to show return. However, digital sales represented an immaterial amount . . . of total sales in each period presented.”
A Target spokesperson told the Wall Street Journal that the company tells investors online sales currently account for less than 2 percent of the retailer’s $73 billion in total revenue.
Target, of course, is not alone in touting its online sales. Locally, Richfield-based Best Buy Company, whose stock price recently hit a two-year high on news of strong second-quarter financial results, recently said that it is investing further in its website and referenced double-digit growth in domestic online sales.
The Wall Street Journal said that about a dozen retailers were contacted by the SEC regarding their online sales, and many of the answers echoed that of Target’s—showing that while online sales are growing, the actual sales figures remain relatively small.
The full Wall Street Journal story is behind a paywall but can be found here. It includes a chart that estimates Best Buy’s online sales at $3.3 billion, a tiny fraction of the company’s overall $45 billion in revenue.