Target Corp. plans to test a next-day delivery service this summer for more than 8,000 household items such as laundry detergent, paper towels and coffee.
Minneapolis-area consumers who have Target’s REDcard credit card will be able to visit a dedicated site to order household items for next-day delivery. The retailer, No. 20 in the Internet Retailer 2017 Top 500, is currently testing the program with employees at its headquarters in Minneapolis.
The program enables consumers to order multiple eligible items for delivery by 1:30 p.m. the next business day. A Target spokeswoman declined to disclose the shipping rate but says it will be “will be competitive with other services in the market, and there will be no annual membership dues required.”
“We created Target Restock to save busy guests time, and make it easier than ever to get household essentials delivered quickly,” Target writes in a blog post. “This is another example of how Target is connecting stores and digital to create new services for guests.”
In launching next-day delivery Target is taking on a number of large retail players, including Amazon.com Inc., No. 1 in the Top 500, which offers two-hour delivery on more than 25,000 items in dozens of U.S. markets through the Prime Now service, as well as free same-day delivery for members of its Prime loyalty program in select markets. And Wal-Mart Stores Inc. (No. 3), which offers free two-day shipping for orders of at least $35.
Target is on the right track to respond to the Amazon and Wal-Mart offerings, says Greg Portell, lead partner in the retail practice of global strategy and management consultant A.T. Kearney. Target has an opportunity to gain market share, he says, because the home-delivery market is still in flux. “Target shouldn’t have to face entrenched consumer preferences,” he says. “This plays to their favor.”
However, making the program work won’t be easy. “Scaling a business that keys on the last mile from thousands of distribution points with low margin for error is daunting,” Portell says. “Ensuring the right products are staged in the optimal locations to fulfill demand will increase inventory distributed across their network. While increased inventory levels will bring scrutiny, the risks should be manageable in the short term. Perhaps the biggest challenge will be managing the ecosystem. Target is unlikely to be building this with in-house resources. Beyond the pilot, it wouldn’t make sense at scale. The use of partners over such a vast network creates sizable problems from employee performance to network scheduling. The bet is too big for Target to leave execution decisions to their partners without strong oversight. They will need to manage behaviors tightly without overstepping co-employment regulations.”Favorite