Retailers See Gains in Serving e-Commerce Supply Chains

Big U.S. retailers say distribution to digital consumers is getting more efficient and becoming a better financial proposition

The Wall Street Journal

August 20, 2015—Retailers may be figuring out the logistics of e-commerce.

The largest U.S. retailers reported strong online sales in their second-quarter earnings reports this week, extending a trend that has seen e-commerce revenue expand far faster than store sales, and several said they are making strides in delivering goods to consumers more profitably.

Home Depot Inc. said its online sales grew 25 percent in the second quarter from a year earlier compared with 4.3 percent total sales growth, and now represent 5 percent of the company’s total revenue. The home improvement giant, which said in the same quarter a year earlier that high transportation costs weighed on its margins, attributed a slight increase in its gross margin in the June quarter to improved logistics, including increased productivity in its distribution network and lower fuel costs.

Target Corp., which said digital sales grew 30 percent in the second quarter compared with 2.4 percent overall sales growth, said on Wednesday it is setting ambitious online sales targets and reported a small increase in its gross margin, to 30.9 percent from 30.4 percent compared with a contraction in the same period a year earlier to 30.4 percent from 31.4 percent.

The gains come as traditional retailers are struggling to catch up with rapidly changing consumer purchasing habits and competition from online specialists, including Inc. While online shopping is often a boon to sales, it can be a drag on profits as brick-and-mortar retailers ship products to their customers’ homes while maintaining storefronts. Delivering goods to stores and to consumers at their homes requires different distribution channels, and retailers are trying to minimize the costs of maintaining parallel delivery networks.

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