Will next day delivery make Target an omnichannel force?
Photo: Target

Will next day delivery make Target an omnichannel force?

Target announced yesterday that it has begun testing a new next-day delivery program involving around 8,000 everyday products such as coffee, granola bars and laundry detergent.

The pilot program, known as Target Restock, is currently limited to selected team members working in the retailer’s headquarters. The chain plans to expand the test with a “dedicated online experience” open to REDcard holders in the Minneapolis area this summer. REDcard holders, just as they do in stores, will receive a five percent discount on the items they buy.

Customers visiting the Target Restock site will be able to order a box filled with multiple items, similar to what Amazon.com does with its Prime Pantry program. Orders placed by 1:30 p.m. will be fulfilled for delivery the next day. Categories not included in the program include fresh, refrigerated or frozen foods. Target has not announced what it plans to charge for the service, but it is likely to be competitively priced to Amazon’s deliveries, which come with a $5.99 fee. Each box will hold up to 45 pounds of merchandise.

“We want to provide more options to shop Target, and we believe many guests will appreciate the ease of shopping all their favorite essentials online and the convenience of next-day delivery,” an unnamed company spokesperson told TechCrunch. “Target can provide industry-leading service and value with Target Restock thanks to our assortment and using stores to deliver orders faster than our rivals.”

Whether Target will be able to provide a greater assortment and deliver products faster to its customers than, say, Amazon or Walmart, both of which offer same-day delivery in some markets, is debatable. The chain also faces competition from retailers such as Costco, Whole Foods and others that are working with third-party services to deliver online orders.

Earlier this year, Target announced it would invest $7 billion over the next three years to remodel stores and lower prices. The announcement followed a fourth quarter in which same-store sales declined 1.5 percent despite traffic ticking up 0.2 percent. The retailer’s online sales, which jumped 34 percent, were not enough to offset lower rings in its physical locations.

At the time, Target CEO Brian Cornell said the results were an indication that sales are shifting from stores to online. Mr. Cornell said that, although Target had made progress, it needed to speed up its response to rapidly changing market conditions. It would appear as though Target Restock is one such response.

BrainTrust

"Same-day delivery is not a differentiator, it is a requirement to stay in the game."

Chris Petersen, PhD.

President, Integrated Marketing Solutions


"This is a good step to stay competitive but like many have said here it is clear that Target is playing catch-up and not leading a race they can win."

Jeff Miller

Director of Marketing, OceanX


"Target needs to take a deep breath, go off on a retreat and figure out how it gets itself back into position leading the parade..."

Ryan Mathews

Founder, CEO, Black Monk Consulting


Discussion Questions

DISCUSSION QUESTIONS: Do you take Target’s test of its Restock next-day delivery program as a sign that the chain is looking to speed up its response to market conditions? Do you see other areas where Target is lagging behind its competition that require attention?

Poll

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Stefan Weitz
6 years ago

This feels, as you report, more like a Prime Pantry response than a true next-day delivery competitor. Amazon will have same-day in the top 50 DMA this year, with next-day in the next 50 for items that are the most likely to be sold in that city stocked in the regional or metropolitan DC. Target having 8,000 items in one city that are mostly focused on home replenishment is a good step, but years and $100 million behind Amazon’s reality.

Target is actually one of the few retailers that is really embracing the tenets of omnichannel: dropship, ship-from-store and pickup in-store, a single customer profile and returns across channel. These are actually very powerful antidotes to Amazon’s hegemony and should not be overlooked.

Brandon Rael
Active Member
Reply to  Stefan Weitz
6 years ago

I certainly agree that Target’s clear entry into the omnichannel fulfillment arena is a breath of fresh air, especially for the brick-and-mortar shopping channel which has struggled significantly against Amazon’s monolithic domination of all things shopping.

I do also agree that while there are encouraging signs Target may find very challenging times ahead, even with these streamlined fulfillment capabilities. It’s virtually impossible to compete with Amazon in terms of sheer volume of assortments. What will save Target and other brick-and-mortar retailers is their ability to create and cultivate personalized experiences in-store and online.

Give the customer a compelling reason to come to the store. It may come in the form of an actual experience or a limited-time exclusive pop up event that Target is famous for. Now that is their key differentiator, not next-day shipping, which has become the normal expectation.

Max Goldberg
6 years ago

The program is definitely a response to market conditions. With this program, Target once again shows that it is a follower, not a retail leader. By the time they roll it out Amazon and Walmart will still be far ahead, having added other features to their delivery programs. Target also lags the market in keeping its stores stocked and in lower pricing, both areas that management claims it will fix with its new $7 billion spending plan. The company lacks a clear vision and risks getting caught in the middle by faster, more nimble, lower-priced competitors.

Charles Dimov
Member
6 years ago

Give shoppers more choices! As such, Target’s idea is a good one.
Walmart is doing a great job at giving customers options. You can do curbside pickup, receive the item same day/next day — get it shipped to home, pick up from locker or pick up from a post office. What I love about this is the choice.

Target, get your customer to pick up from your stores as often as possible. 58 percent of the time they will buy more goods. Then use this as an additional option for customers. Make it easy and convenient and you will start catching up.

With other pickup options, the question will arise as to whether they REALLY need to invest in the infrastructure to compete on same-day or next-day delivery.

Mohamed Amer
Mohamed Amer
Active Member
6 years ago

Target has to close the offering gap between itself and primarily Amazon and Walmart. Target’s Restock is a necessary step in the right direction. The concern here is whether it’s enough in terms of scope and timing/rollout to close the gap with the leaders in the space.

My perspective is that this is a good move, but the learnings that result must be rolled back into more bold initiatives in order to make a dent in this competitive area; otherwise, the gap will widen and there will be another round of hand wringing and finger pointing. As long as there is more behind this move then great. If it’s a solo play then watch out below.

Phil Masiello
Member
6 years ago

What makes Target’s restock process any different than the others that are available to consumers? The problem Target and other retailers have is simple. What does Target sell that cannot be found on other e-commerce sites for less money or faster delivery? That is the fundamental question. If I have auto-replenishment with Amazon or Dash buttons, why would I switch to Target?

Failure to embrace the e-commerce convenience shift is causing most retailers to play catch-up to others already in the game for many years. The competitors have built up loyalty and retention. It is going to be costly if it can be done at all.

Art Suriano
Member
6 years ago

I think Target is very smart to test different concepts that may work for them. I also believe that investing in store redesigns is another good move rather than just open new stores and assuming they’ll do business. The world of retail is changing rapidly mostly because of technology. We don’t know all the “must haves” yet as we are still in the evolution process. There is a market for next-day delivery, faster service and more conveniences. And there is still a large market of customers who prefer shopping in the store. Retailers must recognize all customers and their wants. Eventually we will start to see what works best and what does not from customer response. So I commend Target for being smart, taking some risks and trying different programs.

Gene Detroyer
Noble Member
6 years ago

Whenever Target comes up with something new, I get the feeling they are just flailing. They seem to be looking for the simple magic bullet that will make them competitive. This is a perfect example. “Let’s focus on next-day delivery for a limited number of items and we will win.”

If Target wants to be a force online they better start with the basics. They need a complete system and and the necessary physical and technical infrastructure. It seems that they can’t think that way.

Paula Rosenblum
Noble Member
6 years ago

I wish Target would return to its core competency — cheap chic — but they seem pretty married to food and general merchandise items. I worry that it’s a hyper-competitive market and winning will prove challenging.

So rather than look at where it’s “behind” the competition, I’d like to see it differentiate itself from the competition.

Sterling Hawkins
Reply to  Paula Rosenblum
6 years ago

For sure. Cheap chic can certainly be aligned with more of an omnichannel approach and it would be a killer combination for Target. Channel strategy is simply a delivery mechanism for delivering their brand. Offering next-day delivery is a step in the right direction, but in and of itself will not make Target an omnichannel force.

Chris Petersen, PhD.
Member
6 years ago

Same-day delivery is not a differentiator, it is a requirement to stay in the game.

As Walmart scrambles to match Amazon’s same-day delivery service, the powerful local grocery chains are offering delivery of all kinds of consumable product within hours. The last mile of delivery is incredibly expensive, especially if it is offered within a day or hours. How will Target take on these additional delivery expenses if it also plans to lower prices?

Of the three topics mentioned, stores seem to be the most promising. But it will take more than a “facelift” to create a better in-store experience. To compete in the “new normal” of omnichannel requires a compelling, end-to-end seamless experience that starts online via the customer’s smartphone.

Lyle Bunn (Ph.D. Hon)
Lyle Bunn (Ph.D. Hon)
6 years ago

Closing the gap between in-store and delivered purchases merits attention as an element of omnichannel. Yes each offers advantages, but the disadvantages that have so far defined each approach are impeding the success of brand development. In closing the distance between purchase and fulfillment, retail takes its operations and customer experience to the next level. It is the next step in the omnichannel path.

Mark Price
Member
6 years ago

Target is trying to achieve two objectives simultaneously with their restock program. First, compete with the home delivery segment of the market, which is growing as specific consumer segments grow accustomed to online grocery shopping. Second, Target has struggled with the profitability of their grocery business and this initiative helps increase turns in this poorly performing store section.

The restock program will also provide additional value to the Target credit card.

A parity move to match competition seems to lack the innovation to drive revenue or customer engagement. Perhaps this is a move that will enable Target to build further enhancements on top of next-day delivery, such as same-day delivery, delivery of products that Target does not carry in-store and perhaps replenishment programs.

Shawn Harris
Member
6 years ago

These types of moves are necessary. However Target needs to harness a deeper resolve to be a part of defining retail rather than settling with it being defined for them.

Ed Rosenbaum
Ed Rosenbaum
Member
6 years ago

I keep remembering the fable of the tortoise and the hare. Only in this race the hare is not stopping to take a break. Target is a definite force in the brick-and-mortar world we live in. But online they are simply trying to wave their flag as a reminder to us that they want to be in the game. They have a long way to go and probably are not even close to either Amazon or Walmart when it comes to their e-commerce business.

By the way, I do not care for the “Restock” name they are giving the program. Who wants to buy something that has the connotation of once being purchased and returned?

Richard J. George, Ph.D.
Active Member
6 years ago

Target continues to try things. Unfortunately, most of its “tries” are neither innovative nor a competitive enhancement. However, next-day delivery is now the ante and Target needs to have a seat at this high-stakes table. The one advantage appears to be Target’s focus on center-of-store items. The center of the store represents less of a buying opportunity than a replenishment option. No need to enter the store to purchase any of the 8,000 center-of-store items. So in this regard I applaud Target’s test.

Camille P. Schuster, PhD.
Member
6 years ago

If Target can do this reliably they will be able to compete with Amazon, Walmart and others. It is not a differentiating move; it is just the price of doing business.

Doug Garnett
Active Member
6 years ago

This may be necessary, but playing catch-up isn’t the same as building a strategic advantage. And shipping (especially at Amazon’s money-losing prices) isn’t ever a place to build a long-term advantage.

Of course, this announcement is signalling — trying to tell their investors they are moving forward. What’s very challenging is that, despite the hype about change, I’ve not seen much lately that shows real insight about the future — even from Amazon.

It’s a tough world right now.

Peter Sobotta
6 years ago

Perhaps Target is not flailing or making “me too” attempts to address declining store sales, but rather running iterative experiments before they go all-in on a larger strategy. Notice how Target recently partnered with TechStars to find innovative startups in retail tech. Combined with new approaches and a deeper understanding of customer needs, Target may actually be poised for many years of positive bottom-line growth. That is, once they are ready to scale and fully commit.

Tony Orlando
Member
6 years ago

I realize that I’m in the minority here but it seems like home delivery, according to the experts, is the only way to stay relevant. Maybe so, but the physical store model still is needed for many folks in the rural areas, and even in the cities consumers still like to venture out to shop and spend time with their friends scooping up some good deals in their local marketplaces.

Target and all the rest of the players are a decade behind Amazon and are desperately trying to get into the same-day delivery service, with little or no profit to show for it. They are not built like Amazon, which is a master of logistics, and even Amazon is struggling to make a profit on their delivery service.

Target (along with many others) is trying to grow and is trying anything to gain the attention of the consumer, who has already checked out and moved on to Amazon. Trying to get them back is going to be a tall task and it will cost a lot of promotional dollars to get them to switch, as loyalty is very high for Amazon customers. In my opinion Walmart and Amazon will dominate and the rest are going to struggle big time, but we’ll see what happens.

Lee Peterson
Member
6 years ago

Table stakes. Target is just being their semi-laggard selves and catching up to the hard fact that next day delivery is now simply the cost of doing business. While Walmart innovates and competes mightily (pick up stations, pricing wars, delivery, drone licensing, etc), Target is trying to get up, dust off their clothes and put on some gloves.

Ryan Mathews
Trusted Member
6 years ago

So, leaders lead and followers? Well, followers end up trying to play very expensive catch-up by somebody else’s rules. Of course, they are trying to address market conditions — and that’s the problem. Instead of getting ahead of the market they are falling further and further behind. As to the second part of the question, there are other areas, but they all tie back to a single problem. Rather than designing the future of retail, Target is busy trying to compete in a future designed by others. Longterm, that’s almost always a losing strategy. Target needs to take a deep breath, go off on a retreat and figure out how it gets itself back into position leading the parade instead of continuing to chase it.

James Tenser
Active Member
6 years ago

Necessary, but not sufficient.

Sure, shoppers may appreciate a service that keeps consumable items on hand with less effort. Target needs to offer this option because the bar has been set by others — notably Amazon.

Calling it “Restock” however, betrays the operational mindset behind the offering. If the service were designed around optimizing shopper experience, it would be more likely to become an essential feature in people’s lives. That’s where loyalty comes from. I’d rebrand it immediately — to something like “My Pantry” and put consumer behaviorists in charge.

For example, who cares if a replenishment delivery is “next day” so long as the items arrive comfortably before I run out? Sheer speed is a poor (and expensive) substitute for true timeliness, in my opinion. Smart in-home sensing and an AI engine might make that happen.

Min-Jee Hwang
Member
6 years ago

I feel like Chris hit the nail right on the head: with multiple major players already offering same-day delivery, it simply makes the service expected by consumers. At this point, Target is playing catch-up to Amazon and the other competitors already offering same-day. In this day and age where instant gratification and convenience are king, Target has to rapidly deploy this nationwide to get the jump on Amazon and all the others.

Jeff Miller
6 years ago

This is a good step to stay competitive but like many have said here it is clear that Target is playing catch-up and not leading a race they can win. Target and other retailers have a massive disadvantage in that The Street cares about their quarterly profits and compares them to the past where The Street does give a [hoot] about Amazon’s profits and is willing to finance them to lose money on large investments like same day and next day delivery as long as it keeps them ahead of the curve and keeps them as the leaders and innovators that they have become.

I think this type of delivery for Target is kind of “table stakes” now, but there is no way for them to turn a profit on this so ultimately when viewed in terms of ROI they will have to look at it compared to other investments and make a tough call.

I have said it before, but the main way for Target to compete is to make the in-store experience something so much better than what you can get online, which requires rethinking the size, layout, product assortment and most importantly, hiring — paying and training people to give exceptional customer service.

Patricia Vekich Waldron
Active Member
6 years ago

Same-day delivery is table stakes. However, Target’s large number of stores may help them to do it with less margin erosion than others.

Ken Morris
Trusted Member
6 years ago

Today’s consumers expect everything right now! Amazon and Walmart are raising the bar by continuing to offer faster delivery options – even same day. This move by Target to offer next day delivery is a direct response to competitors’ offerings – they need to do it. Target will also need to add fresh, refrigerated or frozen foods categories to next day delivery to be on par with Amazon and Walmart. Target seems to be playing catch-up and not leap-frog. Perhaps moving to same day within a reasonable proximity of their store locations, adding staffing and allocating product via geographic web movement might be a better strategy.

While this is a good move for Target, competitors are upping the game which will continue to put pressure on Target and others to find ways to offer faster delivery services.

Shep Hyken
Active Member
6 years ago

This is another version of next-day delivery. You can call it any name you want. More and more companies will be offering next day and same day deliver, or they will lose out to their competition. For some customers, delivery options are what keeps them coming back. The tipping point took place recently, so these faster delivery options are now – or at least in the very near future – becoming the norm and not the exception.

Target is not really lagging behind if they act quickly. They are going head to head with their direct competition; Amazon and Walmart. Two years from now they will be playing catch-up in a big way. They still have a little time before customers leave them to go to a retailer with the faster delivery options.

Ricardo Belmar
Active Member
6 years ago

While this is clearly a step in the right direction and a necessary service to build out and stay competitive, in the end Target is still playing catch-up to Amazon and Walmart. There’s nothing innovative in this approach — it’s becoming table stakes. Target, like so many retailers, are knee-jerk reacting to Amazon instead of coming up with innovative ideas based on their core competencies and on what ever makes them differentiated.

Target grew into what it is today based on “cheap chic” (as Paula Rosenblum said here today) and the resulting merchandise they sold that appealed so much to customers. They should be thinking about ways to enhance their store experience around that merchandise in a unique way that Amazon can’t replicate.

gordon arnold
gordon arnold
6 years ago

With a legend of startup failures and the troubled Information Technology department they own, it is doubtful that the venture in this discussion has much of a chance. And then there is the problem of Target.com not always being aligned with the stores. I guess that’s a no vote. As for where they are lagging behind the competition, I guess just about everywhere. Somebody should stick a fork is this mess.