Target Puts Stores at the Heart of Its Ecommerce Strategy
Ecommerce is becoming an ever more critical player in the grocery and customer goods sector and brands are seeing increasing value in making sure they back up their brick-and-mortar presence with a rock solid online infrastructure.
As the eighth largest retailer in the United States and one of its largest American-owned private employers, grocery giant Target is no exception to this pattern and has been making significant roads in the world of ecommerce to help it better compete with its rivals in the space, such as Walmart.
Selling everything from groceries and other household products to clothing and electronics, Target sets itself up as a one stop shop for families and house sharers. And the retailer has been seeing incredible success in the ecommerce space thanks to the way it balances its online presence with its network of physical stores.
Ecommerce Success
According to Insider Intelligence, Target was one of many retail brands to see huge gains during the COVID-19 crisis. Between 2019 and 2020, Target saw its retail ecommerce sales grow from $6.79 billion to an eye-watering $19.73 billion with 2022 predictions that this volume will continue to increase a further 11.9% to hit $22.07.
A big part of the reason for Target’s success during COVID was its position as a general store where shoppers could access all their needs in a single trip. As the crisis deepened customers were understandably trying to reduce the amount of contact they had with other people. One way to achieve this was to make sure they could purchase all the products they needed in a single fell swoop and not have to engage with multiple retailers to meet their needs.
This pattern has continued into the post-pandemic landscape as well. With an increasing number of households relying on dual-income – that is both adults having to work full time jobs to make ends meet – customers simply don’t want the hassle of having to visit multiple stores to get their shopping done. They want a single location from which they can visit or order everything they need, so they can get on with the more enjoyable elements of life. Multi-purpose stores such as Target fulfil this role for these customers.
Store-as-hub Strategy
Another element of the Target success story is the way it leverages its physical store network as distribution hubs for its ecommerce sales. Whereas a purely ecommerce brand such as Amazon must invest in bespoke distribution centers, which serve no other purpose other than for picking and packing online orders, Target already has warehouses and locations which can facilitate this without further investment in real estate.
It's estimated that fulfilling ecommerce orders using its pre-existing store network allows Target to save on average 40% per package when compared to having dedicated distribution centers. Target further augments these savings with separate sorting centers which receive orders packed in store and then sorts them for local delivery. In fact, Target recently announced that it will be opening three new package sorting centers – two in the Chicagoland area, and a third in Denver – with plans to open more locations over the coming year.
"Our stores are driving digital growth,” said Chairman and CEO, Brian Cornell, noting that Target stores now fulfil close to 55% of all online orders. "About 50% of Americans live less than four miles of a Target store. That’s a huge competitive advantage. We’re turning our stores into fulfilment centers — we can ship twice as fast, and dramatically reduce costs compared to traditional [distribution centers].”
In recent years Target has also been augmenting its capabilities further through intelligent acquisitions. Its purchase of Instacart competitor Shipt has helped it compete with Amazon and Walmart by facilitating same day delivery options for its grocery customers. Furthermore, Target has purchased Grand Junction – a software platform which allows retailers to determine the fastest, most efficient method for local deliveries.
The Shipt partnership is also allowing Target to test large-capacity delivery vehicles in the Minneapolis area which can hold eight times more packages than its regular vehicles and will simultaneously increase ecommerce order capacity, add flexibility, and improve delivery speeds.
Final Thoughts
Ecommerce is going to continue to be a key determinant of retail success and any advantage brands can gain over huge players such as Amazon is sure to be welcomed. Retailers with existing store networks which can leverage those locations as distribution centers for online orders can see considerable savings compared to those which have to invest in real estate for that purpose.
Leveraging store networks for ecommerce success is sure to be part of the conversation at eTail Boston 2023, being held in August at the Sheraton Boston Hotel.
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