Target has taken some drastic steps over the last 12-months to improve its delivery game and better compete with e-commerce goliaths, Amazon, and now Walmart. How has it faired so far?
In 2017, Target announced it would be funnelling US$7 billion into investments to improve its business model by 2020. A large portion of that funding has been spent on shipping and logistics, with the retailer looking to enhance customer experience across each of its channels.
This has seen Target roll out free two-day shipping, acquire its own transportation company and incorporate curbside pick-up and same-day delivery options in metro areas.
However, holiday sales forecasts in the states are expected to be less robust than last year, which has left onlookers speculating about what Target will do this year to compete with the likes of Amazon and Walmart.
In an interview with CNBC, Stacey Widlitz, the president of consulting group, SW Retail Advisors said Target has “the product to win” as well as the tools to put them in customers’ hands.
“Last August, I ordered a bunch of stuff from Target, and it took so long to get it,” she told CNBC. “This year, I ordered stuff and I got it the next day. Some of it was even flown in.”
After a strong financial year, Target has boasted strong sales and fulfilment capabilities that have seen its stores become a central part of the company’s digital growth. In fact, according to Target’s CEO, Brian Cornell, “they are at the centre of everything” Target is doing. According to Cornell, the company’s bricks-and-mortar locations are fulfilling the bulk of Target’s online orders, which has helped improve the retailer’s overall speed of delivery.
For the holiday period, and to cope with demand moving forward, Target has reportedly hired an extra 7,500 workers to pack orders in its warehouses. Although, Target still expects the bulk of its online orders to be fulfilled in-store. Currently, 70 percent of all online orders are picked and packed in-store, while 90 percent of its two-day delivery orders are fulfilled from shop fronts.
To cater to customers who prefer an omnichannel experience, click and collect and curbside pickup have reportedly seen the majority of orders fulfilled within one-hour. Cornell believes these service offerings not only enhance delivery options and improve the customer experience; they also help boost in-store sales.
“Once you are in one of our stores, you might come in for a toy and walk out with something for your home,” he said.
When these services are compared to Amazon and Walmart, however, many experts still believe Target is making significant progress in catching up to its main online competitors.
“Zooming out, as we think about Target’s supply chain and inventory management, we do think it needs to catch up to its competitor, but also acknowledge progress is being made behind the scenes,” said Oliver Chen from Cowen & Co.
This progress has been significant over the last 12-months. For instance, Target has been offering free two-day shipping to customers who have a REDcard debit or credit card, while everyone else gets it free if their order is over $35. Meanwhile, Amazon only offers free two-day shipping to its Prime members, which comes with a steep annual membership price of US$119 per year, while Walmart’s two-day shipping service is only free for customers who spend more than $35.
As Target continues to differentiate its service offerings from its competitors, Chen believes it will start to emerge as a big competitor for the two online giants.
“We do believe Target has demonstrated it can quickly scale initiatives and acquire differentiated assets to drive growth,” he said.