Target looks to elevate its ship-from-store operations
Target is testing a new method of delivery that involves picking up merchandise in stores and sorting them at nearby mini-distribution centers for carriers in order to increase speed and reduce costs. The retailer is also exploring the use of its Shipt delivery service for last-mile drop-offs.
Target’s stores fulfill the majority of digitally-originated sales, which management has said allows improved product availability, faster fulfillment times, reduced shipping costs and supports same-day fulfillment options, such as Order Pickup, Drive Up and Shipt delivery. Target’s e-commerce sales surged 145 percent last year.
Target has staged a new test of the new delivery method in Minneapolis, where a sortation center opened last year to serve most of Minneapolis-St. Paul. Five more centers are planned this year.
Online orders are collected multiple times a day from nearby stores and sent to the sortation center, where proprietary technologies obtained from the acquisitions of Grand Junction and Deliv “determine the most efficient way to sort, route and deliver to local neighborhoods,” according to a company blog post.
The Minneapolis center has served as a central pickup location for multiple carriers but the use of Shipt is a new initiative. Shipt drivers could serve as an alternative to UPS and FedEx as those carriers have been increasing fees or limiting parcels amid surging online demand. Amazon.com and Walmart already use contracted delivery drivers.
John Mulligan, COO, said in a statement, “By adding Shipt to that operation, we’re now testing how we can reach guests even faster with efficient local deliveries.”
Mr. Mulligan told CNBC that the new model helps resolve the problem of packages piling up in stores due to the surge in online orders, while efficiencies at the center makes e-commerce orders more profitable.
“We continue to work on picking better and optimizing our pick and optimizing the batches [of packages] for the team — all of that is really important — but the key to the whole game from our perspective is to improve that ship cost,” he said.
Target has said shipping online orders from stores is 40 percent less expensive than from a warehouse.
- Target’s New Test Makes Package Delivery Faster than Ever – Target
- Target is testing a new approach to get packages to customers’ doors even faster – CNBC
- Target to Acquire Grand Junction to Expand and Improve Delivery Services for Guests – Target
- This is How Acquiring Grand Junction Means Faster, More Efficient Home Deliveries for Target Guests – Target
- This New Tech is Helping Target Explore Faster and More Efficient Delivery – Target
DISCUSSION QUESTIONS: Does Target’s new online order fulfillment test program sound promising to you? What challenges may the model present in tackling last-mile delivery?