How Target Is Taking Ownership of the Ecommerce Experience
When we think of brands which are absolutely nailing the ecommerce experience, our minds often go to such behemoths of the industry as Amazon or Walmart – companies which have used their enormous influence to absolutely dominate the scene for years.
However, many other retailers have snuck in under the radar and are finding a great deal of success carving out their own little fiefdom in the world of ecommerce.
Big box department store brand Target is one such company and has been having a fantastic couple of years when it comes to succeeding in the ecommerce space.
Target
Since 2019, Target has seen its sales rocket by around 175%. In 2020 the big box retailer saw sales of around $16.56 billion – up 143.9% on the previous year. At the end of 2021, Target was on course for ecommerce sales to reach a staggering $18.64 billion – a further 12.5% increase from 2020.
Part of the story behind this surge is Target’s unique market position when comes to serving customers during a global pandemic. Because Target sells such a wide range of products including everything from food, cleaning supplies, and medicine to child-care items and equipment for remote work and eLearning, it provided a convenient one stop shop for people sheltering at home and looking to purchase essentials for themselves and their families during the crisis.
Target’s omnichannel click and collect service has also been attributed a substantial portion of the credit for this surge as it provided a method of accessing these essential products and being able to collect them in a safe and socially distanced manner.
"Target’s curbside pickup as a share of digital sales increased by more than 600% in Q1 2021 compared with the same quarter in 2019," said Target in its earnings call reported by Insider Intelligence. "Recognizing that consumers seek more flexibility and convenience in their retail experiences, the company said it would continue to invest and expand on this service."
However, a great portion of Target’s success can be attributed to the fact that the company has been investing heavily in digital technology recently, adopting a policy of owning the tech and digital platforms it deploys.
Taking Ownership
This policy of ownership gives Target a greater degree of control over its ecommerce output than would otherwise be possible and empowers the ecommerce brand with the flexibility to fulfil around 95% of its online orders from local brick and mortar locations – rather than dedicated distribution centers.
"We created a ‘local guest experience’ battleground," said Target Chief Supply Chain and Logistics Officer, Arthur L. Valdez Jr. "That is how you use goods in stores to win that experience. With 75% of the US population within ten miles of one of its 1,900 stores, Target was already well positioned to grab market share, but its approach – from acquiring technology and routing firms, to owning its own delivery network – helps set it apart and has been a key that allowed digital sales to grow by nearly 150% in 2020."
With this local store distribution model, Target eschews the traditional stock replenishment model of truckloads of good which employees break down and distribute through the store. Instead, Target opted for a method which sees items pre-sorted at the warehouse and arriving ready to be sent to their appropriate department – saving time and resources.
The next step was for Target to open a sortation center in Minneapolis – with plans for another four in the Philadelphia, Houston, Dallas and Austin, Texas regions, respectively. These sortation centers will serve as a central pickup point for ecommerce orders – including same-day delivery.
This method means store associates can pick and pack the orders and they can be shipped to the sortation center where the technology firms Target has acquired work to ensure the boxes are routed to the correct carrier for delivery. The Minneapolis sortation center is fed from at least 45 local stores meaning it can nearly always find a product which has been ordered by an ecommerce customer.
"Target utilizes Grand Junction and Deliv for this process," continued Valdez. "Grand Junction optimizes the delivery, helping identify the lowest-cost carrier and feeding this information to the sortation center. Deliv’s technology then determines, based on Grand Junction’s data, whether Target should deliver the package itself through its Shipt brand, or whether it should be outsourced to another carrier. Target is continually on the hunt for additional technologies that may further improve the process."
Final Thoughts
Target’s novel method of fulfilling online orders is allowing it to keep a local presence in the communities it serves while giving it the ecommerce power to play in the same pond as mega brands like Amazon and Walmart.
By taking ownership of the technology it uses, Target is making sure every element of its ecommerce operation works in harmony.
Ecommerce technology and innovative distribution methods are set to part of the conversation at eTail Connect 2022, taking place May 4-6 at The Westin Fort-Lauderdale Beach Resort, FL.
Download the agenda today for more information and insights.