Entering analyst firm eMarketer’s top 10 companies in US retail (8th place) in 2020, up from 11th place just one year ago, Target has recently seen great success. This year, Target’s e-commerce business will jump 24.0% to $8.34 billion. A key example of a successful omnichannel strategy, Target’s recently launched marketplace is thriving by capitalising on its vast network of stores.
Operating since 1962, Target is a general merchandise retailer with 1,871 stores in all 50 U.S. states. The retailer’s tagline is “Expect More. Pay Less.”, reflecting its positioning as a discount retailer that sells trendy essential items in areas such as homeware, toys, electronics, and sporting goods. An impressive 75% of the U.S. population lives within 10 miles of a Target store. In February 2020, Target launched an online marketplace called Target+, or Target Plus.
Amazon has an open-door policy for new sellers, setting up a new Seller account and listing products is extremely straightforward. Walmart screens new accounts validate the capabilities of new sellers yet remains accessible to brands and retailers.
Meanwhile, Target+ is currently the smallest marketplace in the U.S., with a select, curated list of selected brands on an invite-only basis. The marketplace was launched with just 30 merchants, a list which has grown to 55 merchants and 115,000 products today, compared to the 36,000 sellers and 40 million available products on Walmart’s marketplace (Marketplace Pulse) or 1 million active sellers on Amazon.com.
This is to ensure only quality brands and products that have been selected by Target are sold on the platform, such as Skullcandy, Mizuno, and Hasbro, theoretically avoiding counterfeit products and prevent other challenges that are faced by Amazon such as fake product reviews and grey-market inventory. This strategy means Target+ could attract brands who have shunned Amazon in recent years due to concerns with counterfeiting and unauthorized resellers.
Getting the omnichannel mix between online and offline is not an easy balance. Over the past 3 years, Target has strategically invested $7 billion to overhaul its supply-chain, invest in digital and reinvent the in-store experience. In a digital age, consumers need a compelling reason to come into a store and shop.
Stores play a pivotal role in Target’s so-called “store-centric strategy”, making the company stand out from competitors such as Amazon and Walmart, as the physical experience, discovery, inspiration and service of stores is combined with the ease, convenience and personalisation made possible through digital.
We’re putting our stores at the center of our strategy. In the last three years, we spent more than $4 billion remodeling our stores, completing hundreds each year, transforming them into showrooms, fulfillment hubs and service centers.
CEO – Target
Delivering ease and convenience, Target stores play a central role in its marketplace strategy, as they are used to fulfil online orders while keeping up with customer demands for convenience and speed. The marketplace Target+ focuses predominantly on its first-party assortment, which can be fulfilled by its stores offering in-store pickup, free two-day shipping as well as same-day delivery.
Stores fulfilled nearly 80% of orders placed on Target+. In-store fulfilment options include pick-up, where the customer enters the store to collect their order, and drive-up, where a Target worker meets the client curbside to hand over the delivery.
The drive-up service allows consumers to leave the heavy lifting of bulky products such as bottled water and paper towels to the Target team, who will place them in the boot of the car. After this exceptional guest service, the customer can then head in-store to browse Target’s more ‘fun’ aisles and interesting products, enjoying the in-store shopping experience.
In 2019, Target reported an increase in pick-up sales of almost 50%; drive-up increased by more than 500%. In response, Target is ramping up its assortment of fresh groceries and beverages available through its same-day order pickup and drive-up services.
Third-party sellers currently handle their own fulfilment on Target+, which poses a limitation to Target’s strategy since they cannot compete with Target’s fulfilment and same-day delivery options. This creates friction for shoppers and limits the success of third-party sellers–this remains a big untapped opportunity for Target.
Thanks to its fulfillment strategy built around stores and its omnichannel customer experience, Target’s online sales continue to grow, enabling it to compete with e-commerce giants such as Amazon. This will be a marketplace to watch as it further differentiates itself in the market and drives long-term, profitable growth.
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