Target Boosts Its Omnichannel Fulfillment Capabilities

Target announced a number of initiatives to improve its omnichannel delivery and fulfillment services for customers as it continues to feel the heat from Amazon and other major competitors in retail and ecommerce.

Among the changes announced were expansion of free two-day delivery, as well as a significant expansion of its curbside pickup service. Hundreds of thousands of online SKUs will now be eligible for free two-day shipping, with no minimum for Redcard (Target credit card) members and $35 for non-members. CEO Brian Cornell has said that Target is working on making two-day shipping the norm for all ecommerce orders.

Target’s curbside program is expanding to nearly 1,000 of its 1,822 domestic stores. It was tested last fall in Minneapolis-St. Paul, which led to a 10% increase in week-over-week orders. This option has proven popular at Sears as well, especially for larger items.

Cornell talked about how Target is aiming to further blur the physical/digital divide in a fourth-quarter call with analysts.

“Our stores fulfill more than two-thirds of our digital orders,” he said. “So now if I’m sitting at my desk and I order something from, but I pick it up on my way home, does it make sense to call it a digital transaction? Or if I buy a patio set with my phone while I’m sitting on the store display model, is that a digital sale? Our finance folks would say yes. I can tell you, our guests could care less and our technology teams are working hard to create new tools to completely erase that line altogether.”

As for same-day shipping, boosted significantly with December’s acquisition of Shipt, the program is available at 400-plus Target stores across the Southwest and in the Twin Cities, with plans to include all major U.S. markets by the 2018 holiday season.

“Just eight weeks after (the Shipt acquisition) we began offering millions of guests the ability to shop online for more than 50,000 items across groceries, essentials, electronics baby and more, and have those products delivered that same day,” COO John Mulligan told analysts. “We are rolling into new markets almost every week.”

Target is also expanding a new program that lets customers buy in store and have the item shipped home the same day. Launched from four Manhattan stores, it will be offered this spring in 25 more New York locations this spring, reaching all five boroughs by end of the year. It will also roll out in other markets including Boston, Chicago, San Francisco and Washington, DC.

“It’s quick and efficient and it’s all possible, because the technology we acquired from Grand Junction last year,” Mulligan said. “The platform assigns every order to the most logical local carrier, which is what allows us to efficiently scale the service beyond a single store or market.”

For the quarter, Target’s sales increased 10% from $20.7 billion to $22.8 billion, helped by an extra week in the quarter compared to 2016. Earnings per share were $1.37, down from $1.45 in the prior year. The company also reported a 3.6% bump in comparable sales, and a 29% increase in ecommerce comps. Still the results fell short of analysts’ expectations and the stock took a hit.