Target Finally Takes eCommerce a Bit More Seriously

Target Corporation, which operated over 1800 upscale discount retail locations in the United States, is finally getting serious about eCommerce.

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While the company has operated an online presence for years, it has focused on staying competitive in the physical retail world.

Just this year, the company announced it would remodel stores, increase private label products, and expand its grocery offering.

Target did make some investments in eCommerce as recently as a few months ago when it purchased logistics technology company Grand Junction and forged an image search partnership with Pinterest. But these acquisitions didn’t really move the needle that much.

Despite lagging behind in investing in eCommerce, their eCommerce sales have improved and showed a 24 percent increase in the last fiscal quarter.

Now Walmart’s growth curve has been almost three times that, and the world’s largest discount retailer is taking on Amazon full steam ahead.

Same Day Delivery, The Next Battleground in Grocery Retail

Same day delivery is increasingly emerging as the next central battleground among major retailers, with groceries leading the way.

Last week, Target announced they have agreed to buy grocery-delivery startup Shipt for $550 million.

This purchase will help Target bring same-day delivery to about half of its stores by early 2018, with the majority of stores coming onboard by the end of 2018.

Shipt focuses on groceries and household essentials like cleaning supplies, toilet paper, and paper towels.

It is a membership driven platform, which currently charges $99 per year and offers free same day delivery on orders over $35. Sound familiar?

To date, Shipt has worked with local merchants to provide their service, and the company expects to continue to offer this option even under the Target ownership.

It’s win-win for us. We get to continue growing this company we love, at a more accelerated pace. With Target’s support, we’ll be able to reach more customers in more markets across the country.

We’ll also continue to grow our marketplace approach with new and existing partners, a strategy that drives scale and efficiencies for all.

Bill Smith, CEO Shipt, Inc.

What makes Shipt different from most other shopping/delivery services is that the shopper and delivery person are the same.

So if a member is really happy with a shopper/delivery person, they are more likely to get that same person on future orders.

Target expects to expand the categories offered by Shipt as the service rolls out to the majority of its stores. By the end of 2019, Target expects Shipt to deliver products from all categories available at Target.

How this category expansion may impact other Shipt retail partners is not exactly known, but one can assume that Target will be the primary or exclusive partner in some categories.

Shipt will be a wholly owned Target subsidiary, but its offices will remain in Birmingham, Alabama, and San Francisco, and the team will operate independently with Bill at the helm. We’re coming on as a Shipt retail partner, and will expand into more markets and product categories over time.

John Mulligan, COO Target Corporation

Is This Target Finally Getting Serious about eCommerce and Grocery?

With the acquisition of Shipt and several other smaller companies earlier in the year, Target is finally taking a more serious step toward competing with Walmart and Amazon.

15 Years ago, Walmart was its primary competitor, but Amazon’s dominance in online retail has brought more pressure on Target’s overall business. It has a history of neglecting a significant retail segment.

In a previous battle about its future with activist investor Pershing Square Capital Management head William Ackman, Target resisted major expansion into grocery.

Ackman wanted Target to focus on expanding grocery to bolster its retail sales, a move that had been hugely successful at Walmart, and get the company out of credit cards and real estate. But his attempt to redirect the company’s strategy was ultimately unsuccessful.

Today, Target still is not a major player in grocery and with the acquisition of Whole Foods Market, Amazon has surpassed Target in grocery market share.

One has to wonder what Ackman is thinking today as the company spent $550 million to catch up in grocery and delivery. What was once a single fight with Walmart is now a dual fight with Walmart and Amazon in both grocery and delivery.

Is this the point when Target finally gets it? Drop us your thoughts in the comments section below.

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