Video source: Target
Target Corporation (NYSE: TGT) is testing out a faster delivery approach in a bid to win more consumer spending from its speedier rivals, like Amazon.com Inc’s (Nasdaq: AMZN) Prime Now and Walmart Inc’s (NYSE: WMT) Express Delivery.
The new delivery concept for online orders – which Target said is being piloted in its hometown of Minneapolis – will be supported by three companies that the retail giant has acquired in recent years: Shipt, Grand Junction and Deliv.
According to Target, when an online order is made, employees will pick and pack those products at stores. Then, the packages will be transferred from the store’s backroom to a sortation center several times a day, where Target will use technology from Grand Junction and Deliv to group packages to determine the most efficient routes to neighborhoods.
Deliveries will then be made by contract workers for Shipt, a same-day delivery service Target bought in 2017.
Target’s chief operating officer John Mulligan told CNBC the chain plans to open five more sortation centers this year and will utilize Shipt to carry out deliveries. He declined to say where, but said the sites will be in dense, urban areas where multiple packages can be delivered to the same neighborhood.
In 2020, sales through Target’s digital channels grew by nearly $10 billion – an increase the company attributed to demand for same-day services such as in-store pickup, curbside pickup and Shipt.
After the tremendous growth in digital sales, Target said improving online order fulfillment would be part of its $4 billion investment to bolster operations over the next few years.
In a press release, Target’s chief operating officer John Mulligan said, “For years, Target has put our stores at the center of how we serve our guests. Our new sortation center builds on that model by helping us ship online orders with greater speed and lower costs, while making room for future growth.”
Besides competing with Amazon and Walmart, the strategy could help Target meet customers’ expectations for speed by using an on-demand service and providing an alternative to traditional carriers like United Parcel Service and FedEx, CNBC noted.
Mulligan told the news outlet, “Shipping is the majority of the cost for getting a product to a guest. We continue to work on picking better and optimizing our pick and optimizing the batches [of packages] for the team — all of that is really important — but the key to the whole game from our perspective is to improve that ship cost.”
Mulligan said the new approach will help Target better handle the rising number of packages that pile up in its stores throughout the day, as well as give the company more control over the customer experience.
Source: Equities News