Target adds quick sort centers to facilitate same-day delivery

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Target adds quick sort centers to facilitate same-day delivery

Highlighting the disproportionate growth of its same-day delivery services, Target plans to double its investment in local sorting centers that support nearby stores to quickly process orders and help it meet last-mile logistics challenges.

According to Target CEO Brian Cornell, the increased commitment to meeting demand for same-day and in-store order pickup is a direct result of changing consumer habits and increased traffic to its stores. and its website, which it says have added 90 million new customers in the past three years.

“Our industry-leading, same-day services have transformed our business in a short time,” Cornell said during the retailer’s second quarter. earnings call Wednesday (August 17).

While Target’s digital business accounted for 7% of its total sales in 2019, Cornell said the same-day delivery portion of those digital orders — alone — now generates more than 10% of its total revenue. , contributing to an increase in its total digital penetration rate, which it says is now nearly 18%.

Target’s increased investment in sorting centers is in line with a PYMNTS survey out of 2,700 consumers, 34% of connected consumers now require same-day pickup and delivery, and 9% of consumers use online purchase and pickup in store (BOPIS) daily.

Better, faster, cheaper

Right now, nearly 95% of Target’s $26 billion in second-quarter sales came from its network of nearly 2,000 stores, but to meet that surge in same-day demand, the manager of operation John Mulligan said the Minnesota-based chain is rapidly increasing the number of sorting centers operating across the country.

“We have six of these facilities in operation today, including three that have opened in the last few months, and we plan to add five more by early next year,” Mulligan said during the call, adding that smaller installations expand Target’s ship. to the store while significantly reducing its cost of last mile delivery, including the continued integration of its Shipt delivery unit and fleet of drivers.

“Given the parcel delivery density we’ve achieved in many markets over the past few years, we see continued opportunities to add more sorting centers over the next few years,” Mulligan said, noting the speed and cost benefits they bring at a time when the retailer is working on a broader inventory issue it unveiled in May.

Along with the new sorting centers, Mulligan said Target will also continue to upgrade existing fulfillment centers through new automation processes that reduce the amount of in-store labor needed to receive inventory and restock shelves.

Fashionable

Broadly speaking, Target is seeing the same inflation-bound shift toward groceries and essentials that rivals such as Walmart mirrored on Tuesday (Aug. 16), along with an increase in shoppers interested in taking advantage of its current increase in promotional activity. .

“While the recent price reduction at the gas pump has been encouraging, customer confidence in their personal finances continues to decline,” said the chief growth officer and 19-year veteran of Target. Christina Hennington said on the call, before pointing out an increase in shoppers purchasing Target’s own-brand products over national-brand products.

“We’ve also seen customer behavior change as they focus on optimizing their personal budgets through increased response to promotions, as well as greater travel consolidation,” she added. , while noting the company’s plans to add more Disney and Ulta Beauty stores. -store locations as a way to increase traffic and store visits.

In summary, the retailer said it was maintaining its current but previously reduced cautious outlook for the second half of the year while moving forward with plans to stock up on frequently purchased items customers want now and by reducing large bulky warehouse items they don’t.

“As we look to the end of the year, the team is focused on convenience, value and joy at a time when our customers face multiple challenges,” Cornell concluded. “While we have taken a cautious stance on our inventory commitments, we will continue to focus on frequency categories where customer demand has been strong and shrinkage risks are very low.”

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