Target and whether its e-commerce site can take the demand on Black Friday and Cyber Monday will be the item to watch in retail information technology next week.
In 2009, Target announced plans to separate from a partnership with Amazon.com, which used to run the retailer's site. That 10 year deal expired in 2011 and now Target controls its own fate. Strategically, the breakup makes sense, but Target is winging it a bit when it comes to its e-commerce operations and managing demand spikes.
Meanwhile, the stakes for the 2011 holiday shopping season are high. Why the worry? Target's site has already been tested by a spike in demand and it fell over. In September, Target.com faced downtime related to the launch of clothing brand Missoni. On Target's most recent earnings conference call, executives said that Missoni spike outpaced any demand the site saw in previous holiday shopping seasons.
In addition, Target is lacking a leader for its e-commerce unit due to the departure of Steve Eastman, who departed to pursue other opportunities that just happened to come up after outages. Eastman's departure was overshadowed by the news that Target's CFO and chief marketing officers were also leaving.
Needless to say that Target.com's resiliency was a big topic on Target's third quarter earnings conference call. Gregg Steinhafel, CEO of Target, said:
Our stores' teams are excited and ready to handle the holidays with Black Friday only nine days away and our online business and technology teams are working tirelessly to correct the issues that have arisen with the relaunch of Target.com.We know we're not yet providing a consistent experience online and we won't stop until these issues are resolved.
Kathy Tesija, executive vice president executive vice president of merchandising at Target, said the Missoni debacle at least tested the site. Speaking on the earnings conference call, Tesija said:
Our third quarter partnership with Missoni generated an amazing amount of buzz, and the guest response on the day of the launch was unprecedented. Our largest collection to date created a frenzy, reminding some of Black Friday, as guests formed lines hours before some stores opened. Most stores sold out quickly in the first few days and replenishment shipments sold out quickly throughout the month. On Target.com, Missoni demand created online traffic that outpaced any Black Friday or Cyber Monday in our history, putting a great deal of stress on our newly launched online platform. While we didn't anticipate putting our new site through such a dramatic test at such a young age, we are quickly moving forward to make improvements, applying what we've learned from the experience to implement hundreds of fixes that will elevate the guest experience and enhance stability.
Moving to our own web platform is part of a larger strategic commitment to enhance Target's multi-channel capabilities and we continue to devote significant resources in support of that commitment.
The looming issue for Target is whether it can get its Target.com reliability in order after a few weeks of crashing.
Well, we believe the platform is stable.We are in the process of building out that team and adding more resources to that team. We have been doing that all along. We, very shortly, will be naming a leader of that team but we have gone through -- we've made a tremendous amount of fixes. As you can imagine, with a re platforming effort of this magnitude, we really took a three-year program and did it in just over two years. So we fully expected to have some issues coming out of the changeover and we've had those -- that amount of issues and more. So we feel confident we've got the right amount of resources, the capital that we're spending to make those fixes as well as the team members in place to make great progress going forward.
In any case, Target will invite some more stress testing. The retailer is planning Cyber Monday doorbusters and offering free shipping.
Analysts are mixed on Target's ability to handle the Web rush. Wells Fargo analyst Matt Nemer said that Target's e-commerce sales growth has slowed since moving off Amazon and outages "don't seem to be completely resolved." Piper Jaffray analyst Jeffrey Klinefelter said Target has a multiyear opportunity to grow its e-commerce business---currently 1 percent to 2 percent of its $70 billion in estimated fiscal 2012 sales---but first the retailer has to stabilize its site and avoid sending emails out like these:
We’re contacting you because one or more items from your Target.com order (number redacted) are out of stock.
Due to the unprecedented demand for our Missoni for Target collection, we are still working to fill outstanding Missoni orders. Some items may not be available and may need to be cancelled. Items we are able to fill could take up to the end of December to ship.
If you are no longer interested in receiving your Missoni for Target items, please visit either the My Account or Contact Us section of Target.com to cancel.
Within the next 10 business days you will receive additional email communication if any items from your order will be cancelled. We know this is disappointing and is not the experience you expect from Target. We are making improvements to better serve you in the future.
Sincerely, Target.com Guest Services